1. Part 6: Staffing System and Retention Management
Chapter 14: Retention Management
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Staffing Organizations Model
Mission
Goals and Objectives
Organization Strategy
HR and Staffing Strategy
Staffing Policies and Programs
Support Activities
Core Staffing Activities
Legal compliance
Recruitment: External, internal
Planning
Selection: Measurement, external, internal
Job analysis
Employment: Decision making, final match
Staffing System and Retention Management
14-2

3. Chapter Outline Turnover and Its Causes Analysis of Turnover
Nature of Problem
Types of Turnover
Causes of Turnover
Analysis of Turnover
Measurement
Reasons for Leaving
Costs and Benefits
Retention Initiatives: Voluntary Turnover
Current Practices and Deciding to Act
Desirability of Leaving
Ease of Leaving
Alternatives
Retention Initiatives: Discharge
Performance Management
Progressive Discipline
Retention Initiatives: Downsizing
Weighing Advantages and Disadvantages
Staffing Levels and Quality
Alternatives to Downsizing
Employees Who Remain
Legal Issues
Separation Laws and Regulations
Performance Appraisal

4. Learning Objectives for This Chapter
Be able to differentiate among the types and causes of employee turnover
Recognize the different reasons employees leave their jobs
Evaluate the costs and benefits of turnover
Learn about the variety of techniques companies use to limit turnover
See how performance management and progressive discipline limit discharge turnover
Understand how companies manage downsizing
Recognize a variety of legal issues that affect separation policies and practices

5. Discussion Questions for This Chapter
For the three primary causes of voluntary turnover (desirability of leaving, ease of leaving, alternatives), might their relative importance depend on the type of employee or type of job? Explain.
Which of the costs and benefits of voluntary turnover are most likely to vary according to type of job? Give examples.
If a person says to you, “It’s easy to reduce turnover, just pay people more money,” what is your response?
Why should an organization seek to retain employees with performance or discipline problems? Why not just fire them?
Discuss some potential problems with downsizing as an organization’s first response to a need to cut labor costs.

6. Turnover and Its Causes
Nature of problem
Types of turnover
Causes of turnover

7. Nature of the Problem
Employee retention can contribute to organizational effectiveness
Turnover is not only costly but may be beneficial
Focus of retention strategies
Number of employees retained and
Who is retained
Turnover is inevitable
Approach to retention management
Gather and analyze employees’ reasons for leaving

8. Types of Turnover Exhibit 14.1: Types of Employee Turnover Voluntary
Avoidable - Could be prevented
Try to prevent for high value employees
Do not try to prevent for low value employees
Unavoidable - Could not be prevented
Involuntary
Discharge
Downsizing

9. Exhibit 14.1: Types of Employee Turnover - Voluntary -- Employee Initiated

10. Exhibit 14.1: Types of Employee Turnover - Involuntary -- Organization Initiated

11. Causes of Turnover: Voluntary
Exhibit 14.2: Causes of Voluntary Turnover
Behavior of leaving preceded by intention to quit
Factors affecting intention to quit
Perceived desirability of leaving
Often results from a poor person/job or
Person/organization match
Perceived ease of leaving
Represents lack of barriers to leaving and
Of being able to likely find a new job
Available alternatives
Depends on other job options both within and outside organization

12. Exhibit 14.2: Causes of Voluntary Turnover

13. Causes of Turnover: Discharge and Downsizing
Discharge turnover
Mismatch between job requirements and KSAOs
Employee fails to follow rules and procedures
Unacceptable job performance
Downsizing turnover
Mismatch in staffing levels which leads to an overstaffing situation
Factors related to overstaffing
Lack of forecasting and planning
Inaccuracies in forecasting and planning
Unanticipated changes in labor demand and/or supply

14. Analysis of Turnover Measurement Reasons for leaving
Costs and benefits

15. Measurement of Turnover: Formula
Turnover rate
Number of employees leaving  average number of employees x 100
Data and decisions
Identify time period of interest
Determine type of employees that count
Determine method to calculate average number of employees over the time period

16. Measurement of Turnover: Breakouts and Benchmarks
Analysis of turnover data aided by deciding on categories of data
Type of turnover
Type of employee
Job category
Geographic location
Benchmarks
Internal - Trend analysis
External - Compare internal data with external data
Exh. 14.3: Data from job openings and labor turnover survey

17. Measurement of Turnover: Reasons for Leaving
Important to ascertain, record, and track reasons why employees leave
Tools
Exit interviews
Formal, planned interviews with departing employees
Postexit surveys
Surveys sent to employees soon after their last day
Employee satisfaction surveys
Surveys of current employees to discover sources of dissatisfaction which may become reasons for leaving
Results can provide information to pre-empt turnover
Require substantial resources

18. Guidelines: Conducting Exit Interviews
Interviewer should be a neutral person who has been trained in how to conduct exit interviews
Training issues
How to put employee at ease and explain purpose
How to follow structured interview format and take notes
How to end interview on positive note
Structured interview format should contain questions about unavoidable and avoidable reasons for leaving
Exh. 14.4: Examples of Exit Interview Questions
Interviewer should prepare by reviewing interview format and interviewee’s personnel file
Interview should be conducted in private, before employee’s last day
Interviewee should be told interview is confidential

19. Measurement of Turnover: Costs and Benefits
Costs and benefits can be estimated for each of the three turnover types
Types of costs
Financial
Nonfinancial
Some costs and benefits can be estimated financially
Nonfinancial costs and benefits may outweigh financial ones in importance and impact

20. Major Turnover Costs and Benefits
Costs of turnover
Separation costs
Staff time and loss of productivity
Replacement costs
Recruiting and selecting new employee
Training costs
Teaching new employees the job
Benefits of turnover
Potentially better new employees
Short term labor cost savings
Opportunities to restructure work units

21. Costs and Benefits for Types of Turnover
Voluntary turnover
Exh. 14.5: Voluntary Turnover: Costs and Benefits
Exh. 14.6: Example of Financial Cost Estimates for One Voluntary Turnover
Discharge
Exh. 14.7: Discharge: Costs and Benefits
Downsizing
Exh. 14.8: Downsizing: Costs and Benefits

22. Ex. 14.9 Most and Least Effective Retention Initiatives

23. Exh. 14.11: Decision Process for Retention Initiatives
Do We Think Turnover Is a Problem?
How Might We Attack the Problem?
What Do We Need to Decide?
Should We Proceed?
How Should We Evaluate the Initiatives?

24. Guidelines for Increasing Job Satisfaction and Retention
Extrinsic rewards
Rewards must be meaningful and unique
Rewards must match individual preferences
Link rewards to retention behaviors
Link rewards to performance
Intrinsic rewards
Assign employees to jobs that meet their needs
Provide clear communication
Design fair reward allocation systems
Ensure supervisors provide a positive environment
Provide programs to enhance work-life balance

25. Ease of Leaving Two points of attack
Provide organization-specific training
Should organization invest in training to provide general or organization-specific KSAOs?
Combine training strategy with a selection strategy focused on assessing and selecting general KSAOs
Increase cost of leaving by providing
Above-market pay and benefits
Deferred compensation
Retention bonuses
Desirable location of company’s facilities

26. Alternatives
Approaches to make internal alternatives more desirable than outside alternatives
Internal staffing
Encourage employees to seek internal job opportunities
Provide attractive internal options outside of traditional internal staffing system
Responding to external job offers entails developing appropriate policies
Decide whether to provide counteroffers or not
Determine types of employees to provide counteroffers
Decide who will develop counteroffer and nature of approval process

27. Discussion Questions for This Chapter
For the three primary causes of voluntary turnover (desirability of leaving, ease of leaving, alternatives), might their relative importance depend on the type of employee or type of job? Explain.
Which of the costs and benefits of voluntary turnover are most likely to vary according to type of job? Give examples.
If a person says to you, “It’s easy to reduce turnover, just pay people more money,” what is your response?

28. Exh. 14.13: Performance Management Process

29. Retention Initiatives: Discharge
Ex : Performance Counseling and Disciplinary Process
Identify performance problems
Assess causes
Develop corrective actions
Develop and discuss clear consequences for failure to improve
Document incident, corrective actions, and consequences for continued problems
Termination if problem is not resolved

30. Retention Initiatives: Discharge
Progressive discipline
Five requirements of a progressive discipline system
Give employees notice of the rules of conduct and misconduct
Give employees notice of the consequences of violation of the rules
Provide equal treatment for all employees
Allow for full investigation of the alleged misconduct and defense by the employee
Provide employees the right to appeal a decision

31. Retention Initiatives: Downsizing
Weigh advantages and disadvantages
See Exh. 14.8
Staffing levels and quality
View retention in two ways
Balance a financial quick fix against unlikely return of downsized employees if economic conditions improve
Approach reductions in selective or targeted terms, rather than across the board
Determine who should be retained, if cuts are made
Retain most senior employees
Make performance-based decisions
Retain “high-value employees” and layoff “low-value employees”

32. Retention Initiatives: Downsizing (continued)
Alternatives to downsizing
No layoff or guaranteed employment policy
Layoff minimization programs
Exh : Layoff Minimization Examples
Employees who remain
Potential results of ignoring survivors
Increased stress levels
Critical appraisals of downsizing process
Examples of “survivor sickness”
Provide programs to meet needs of survivors
Enhanced communication programs
Morale-boosting events
Promotion of EAPs
Stress-related training

33. Discussion Questions for This Chapter
Why should an organization seek to retain employees with performance or discipline problems? Why not just fire them?
Discuss some potential problems with downsizing as an organization’s first response to a need to cut labor costs.

34. Legal Issues: Separation
Basic tenet of employee separation
Fair and consistent treatment of employees
Laws and regulations governing separation process
Public policy restrictions on employment-at-will
Employment discrimination laws and regulations
Affirmative action requirements
Employment contract principles
Labor contract provisions
Civil service laws and regulations
Negligent supervision and retention
Advanced warning about plant closings

35. Legal Issues: Suggestions for Performance Appraisal Systems
Appraisal criteria should be job-related, specific, and communicated in advance
Manager/rater should receive training in overall performance appraisal process and how to avoid rating errors
Manager should be familiar with employee’s job description and actual performance
Agreement should exist among different raters in evaluating an employee’s performance
Evaluations should be in writing
Employee should be able to review evaluation and make comments before it becomes final
Employee should receive timely feedback about the evaluation and an explanation for any outcome decision
Provide upward review of employee’s appraisal
Provide appeal system for employees dissatisfied with their evaluations

36. Ethical Issues
Issue 1
Consider a circumstance where your organization is doing exit interviews and has promised confidentiality to all who respond. Your supervisor has asked you to give the name of each respondent so she can assess the information in conjunction with the person’s supervisor. What obligation to corporate HR employees have to keep information confidential in such circumstances?

37. Ethical Issues
Issue 2
There are numerous negative organizational consequences to firing employees, including the discomfort of the supervisor who delivers the termination information, conflict or sabotage from the departing employee, and the potential for a lawsuit. In response, many supervisors provide problem employees unpleasant work tasks, reduced working hours, or otherwise negatively modify their jobs in hopes that the problem employees will simply quit. What are the ethical issues raised by this strategy?