“Retention – companies should invest the bulk of their effort in commitment based strategies that promote voluntary long term commitment. “
Big picture – what are we talking about...?
Why the focus on RETENTION?
The business case for retention
THE AVERAGE ONE-YEAR ESTIMATED REPLACEMENT COST
OF FINDING AN EXECUTIVE IS $750 000 (Corporate Leadership Council, 2011)
COSTS ASSOCIATED WTIH RECRUITING, TRAINING AND REPLACING EMPLOYEES RANGE BETWEEN 93-200% (Johnson, 1995)
IN THE AUSTRALIAN HOSPITALITY INDUSTRY, WHERE TURNOVER RANGES
BETWEEN 40-60% THE TURNOVER OF A SUPERVISOR HAS CALCULATED TO
COST A 5-STAR HOTEL $130 000 (DEERY AND IVERSON, 1996)
Any reduction in cost can make a major
contribution to profitability.
Knowledge-based organisations need to implement
HR management strategies that will enhace internal
competitiveness and competitive advantage.
Organisations that create an environment where all employees
can thrive should gain a competitive cost advantage over
non-responsive or slowly responsive companies (Cox and Blake, 1991)
Competition for scarce human resources means that
if companies want to maintain competitive advantage
they need to find ways to attract and retain talent.
The development of resources is hard to imitate (Bartlett and Goshal, 2002)
“Control approaches aim to increase efficiency and reduce direct labour costs and rely on strict work rules and procedures and base rewards on outputs.
Rules, sanctions, rewards, and monitoring regulate employee behaviour.”
Control based strategies are not
the most effective way to manage
people in modern knowledge based
organisations.
“Commitment approaches aim to increase effectiveness and productivity and rely on conditions that encourage employees to identify with the goals of the organization and work hard to accomplish those goals.”
Control vs Commitment Work Systems (Walton, 1985)
- Tight job description
- Adversarial labour relationships
- Close supervision
- Limited Career Development & Employee voice
- Strive to minimise labour costs
- Jobs are broader in scope and are dynamic
- Career opportunities
- Transparent about business drivers and performance
- Organisational Structures are Flatter
- Job security is offered by transportable skills
HIGH PERFORMANCE
WORK PRACTICES
HPWP's:
- labor-management participation teams
- profit-sharing, gain-sharing plans
- training
- ‘quality of work life’ programs
- formal information sharing program
- internal hiring
- promotion based on merit (not seniority)
- regular attitude surveys
THESE ARE BASED ON COMMITMENT STRATEGIES
Huselid, M.A. 1995 study
-SAMPLE SIZE: 3.452 publicly held US firms
(100+ employees)
A system of HPWPs will:
- Diminish employee turnover
- Increase productivity and corporate financial performance
HIGHER RETENTION
Firms that had all 13 HPWP's in place had a 40% decrease in turnover
compared to those that had none
Three
Components of Organisational Commitment
Allen and Meyer 1996: review of research – 16,000 employees, wide variety of organisations and occupations
COMMITMENT based strategies
lead to RETENTION, control strategies
DON'T
Additional benefits of affective commitment
Not Convinced?
Case study: Molson Coors Brewing Company
2002
Engaged Employees
- 5x less likely to have a safety incident
- 7x less likely to have a lost-time safety incident
- average cost of a safety incident: $63 vs $392
- high-engagement teams: improved sales performance, decreased costs
By strengthening employee engagement,
the company saved $1,721,760 in safety
costs during 2002.
Launched ‘Our Brew’ Jan 2009
aim: achieve specific growth and profit targets by ensuring all employees understand and are committed to their platforms for growth
Invest around £1m annually in the UK on learning and development
Employees are encouraged to
- Challenge the expected
- Take ownership for the personal contribution they can make to bring the strategy to life
- Focus on people development : technical training, career development workshops, leadership development
Employee participation encouraged: employees presented with 70 innovations the management team had developed – the most popular are being taken forward
TODAY
Kirsty Derry HR director:
“We want to be a leader in people development
and engagement because we recognise that
engaged people are the foundation
of our success”
Still Not Convinced?
MORE BUSINESS CASES
McKinsey's maintains that its in-depth approach to development is one of the main reasons why people join the group - and why they stay
(More MBAs worldwide seek employment with McKinsey than any other employer
BP invested in technologies that allowed managers to talk freely with other managers.
They called this 'Peer Assist'
Peer Assist was such a successful program that they went on to develop
PEER CHALLENGE. The highest performers were responsible for turning around the lower performers.
This is what leading companies are doing...
Valuing diversity in the workplace, they have developed
more family friendly policies.
These include: flexible hours; parental leave;
packaging child=care costs and career planning in respect to
family commitments
They estimate that its sick child-care programs ALONE
saved the company US $45 000 OVER AND ABOVE the costs
in the first 9 months of operation. (Johnson, 1995)
That demonstrate the VALUE they place on developing
COMMITMENT BASED retention strategies
GE
GE openly ties leadership development to succession planning.
Senior managers spend most of their resources developing
their best and brightest and GE holds a negative variable in
Performance Reviews for managers who hold back top talent.
The development of internal talent has allowed GE a reliable
ongoing source.
RESULT? - COMPETITIVE ADVANTAGE
These are all measures to promote voluntary
long-term employee commitment to an organisation.
- Allowing too much peer into managerial decisions
- Underplay the role of first-line supervisors as a link to the chain of command
- Overemphasising learning of new skills and flexibility at the expense of mastering in critical operations
In the changing marketplace,
a sustainable competitive advantage
lies in employees
“Retention – companies should invest the bulk of their effort in commitment based strategies that promote voluntary long term commitment. “
Only commitment based strategies lead to effective retention!
Commitment based strategies
retain the
RIGHT EMPLOYEES
- Abbott, J., de Cieri, H., & Iverson, D. (n.d.). Costing Turnover: Implications of Work/Family Conflict at Management Level. Asia Pacific Journal of Human Resources.
- Allen, N.J. and Meyer, J.P. (1996) Affective, continuance, and normative commitment to the organization: an examination of construct validity. Journal of Vocational Behavior. 49:252-276.
- Harter, J.K., Schmidt, F.L., & Hayes, T.L. (2002) Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: a meta-analysis. Journal of Applied Psychology. 87: 268-279.
- Iaffaldano, M.T., & Muchinsky, P.M. (1985). Job satisfaction and job performance: A meta-analysis. Psychological Bulletin, 97: 251–273.
- Judge, T. A., Thoresen, C. J., Bono, J. E., & Patton, G. K. (2001). The job satisfaction–job performance relationship: A qualitative and quantitative review. Psychological Bulletin, 127: 376–407.
- Allen, N.J. and Meyer, J.P. (1990) The measurement and antecedents of affective, continuance and normative commitment to the organization. Journal of Occupational Psychology. 63: 1-18.
- Bartlett, C., & Ghoshal, S. (2002). Building Competitive Advantage Through People. MIT Sloan Management Review, 34-41.
- Corporate Leadership Council. (2001). The Business Case for Succession Planning. Retrieved from www.CorporateLeadershipCouncil.com
- Huselid, M.A. 1995. The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38, 635-672.
- Arthur, J. B. (1994). Effects of human resource systems on manufacturing performance and turnover. Academy of Management Journal, 37, 670–687.
- Wood, S., & de Menezes, L. (1998). High commitment management in the U.K.: evidence from the Workplace Industrial Relations Survey and Employers’ Manpower and Skills Practices Survey. Human Relations, 51, 485–515.
Employee engagement today (2010) Case study: Molson Coors. Employee engagement today. vol 3.3 summer p20-22 http://www.involve.co.uk/wp-content/uploads/2010/09/Molson-Coors.pdf
- Vance, R.J. 2006 Employee engagement and commitment: a guide to understanding, measuring and increasing engagement in your organisation. SHRM Foundation, Alexandria.
- Walton, R.E. (March 1985) From Control to Commitment in the Workplace, Harvard Business Review, vol 63 (2) p77-84
Commitment based strategies
Affective
Control based strategies
Continuance
Normative
McKinsey changed their slogan from:
"To Serve Clients Superbly Well"
TO
"To Help Our Clients Make Distinctive, Substantial and Lasting Improvements in their Performance and to Attract, Develop,
Excite and Retain Exceptional People
Source: Arthur, 1994; Wood & de Menezes, 1998
Huselid, 1995
Employee Engagement Today
« Overreaching » Commitment
HONEYWELL
Turnover intention and voluntary turnover
Consistent negative
correlation
Affective
Continuance
Inconsistent results, generally small
negative correlation in 6/11 studies
COMMITMENT
vs
CONTROL
(Employee Engagement Today, 2010).
CITIZENSHIP/EXTRA
ROLE BEHAVIOUR
positive relationship
Affective
negative/unrelated
Continuance
JOB DEFINITION
Employees define their jobs more broadly
Affective
REFERENCES
RESPONSE TO
DISSATISFACTION AT WORK
Willingness to suggest improvement and accept things as they are
Affective
Continuance
Passive withdrawal from the dissatisfying situation (neglect response)
PERFORMANCE, POTENTIAL FOR PROMOTION
(rated by supervisor)
positive relationship
Affective
negative relationship
Continuance
ABSENTEEISM
Negative correlation with total days absent over 12 months
Affective
Continuance
No significant relationship
Source: Arthur, 1994; Wood & de Menezes, 1998