1. 14-1 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. CHAPTER FOURTEEN Retention Management Screen graphics created by: Jana F. Kuzmicki, PhD Troy State University-Florida and Western Region

2. 14-2 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Organization Strategy HR and Staffing Strategy Staffing Policies and Programs Staffing System and Retention Management Support Activities Legal compliance Planning Job analysis Core Staffing Activities Recruitment: External, internal Selection: Measurement, external, internal Employment: Decision making, final match Organization Vision and Mission Goals and Objectives Staffing Organizations Model

3. 14-3 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Outline Turnover and Its Causes  Nature of Problem  Types of Turnover  Causes of Turnover Analysis of Turnover  Measurement  Reasons for Leaving  Costs and Benefits Retention Initiatives: Voluntary Turnover Retention Initiatives: Discharge Retention Initiatives: Downsizing Legal Issues

4. 14-4 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Turnover and Its Causes Nature of problem Types of turnover Causes of turnover

5. 14-5 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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

6. 14-6 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Types of Turnover Exhibit 14.1: Types of Employee Turnover Voluntary  Avoidable - Could be prevented  Try to prevent  Do not try to prevent  Unavoidable - Could not be prevented Involuntary  Discharge  Downsizing

7. 14-7 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit 14.1: Types of Employee Turnover - Voluntary -- Employee Initiated Try to Prevent: High-Value Employees High performance Strong KSAOs Valued intellectual capital High promotion potential High training investment High experience Difficult to find replacement High performance Strong KSAOs Valued intellectual capital High promotion potential High training investment High experience Difficult to find replacement Do not Prevent: Low-Value Employees Low performance Weak KSAOs Little intellectual capital Low promotion potential Low training investment Low experience Easy to find replacement Low performance Weak KSAOs Little intellectual capital Low promotion potential Low training investment Low experience Easy to find replacement No attempt to Prevent: Regardless of Value Retirement Dual career New career Health Child care or pregnancy Elder care Return to school Leave country Take a break Retirement Dual career New career Health Child care or pregnancy Elder care Return to school Leave country Take a break Avoidable (could prevent) Unavoidable (could not prevent)

8. 14-8 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit 14.1: Types of Employee Turnover - Involuntary -- Organization Initiated Permanent layoff Temporary layoff Site or plant closing, relocation Redundancy due to merger or acquisition Permanent layoff Temporary layoff Site or plant closing, relocation Redundancy due to merger or acquisition Downsizing Discipline Poor performance Discipline Poor performance Discharge

9. 14-9 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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

10. 14-10 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Exhibit 14.2: Causes of Voluntary Turnover Quit Alternatives Internal: New job possibilities External: Job offers Alternatives Internal: New job possibilities External: Job offers + Desirability of Leaving Low job satisfaction Shocks to employee Personal (nonjob) reasons Desirability of Leaving Low job satisfaction Shocks to employee Personal (nonjob) reasons + Ease of Leaving Favorable labor market conditions General, transferable KSAOs Low cost of leaving Ease of Leaving Favorable labor market conditions General, transferable KSAOs Low cost of leaving + Intention to Quit +

11. 14-11 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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

12. 14-12 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Analysis of Turnover Measurement Reasons for leavings Costs and benefits

13. 14-13 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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

14. 14-14 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Breakouts  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: Sample Annual Separation (Turnover) Data Measurement of Turnover: Breakouts and Benchmarks

15. 14-15 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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 Measurement of Turnover: Reasons for Leaving

16. 14-16 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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 Guidelines: Conducting Exit Interviews

17. 14-17 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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

18. 14-18 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. CostsBenefits 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

19. 14-19 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Retention Initiatives: Voluntary Turnover Current practices and deciding to act  What do organizations do?  Exh. 14.9: Retention Initiatives: Usage and Effectiveness  Decision process  Exh. 14.10: Decision Process for Retention Initiatives Desirability of leaving  Exh. 14.11: Guidelines for Increasing Job Satisfaction and Retention Ease of leaving Alternatives

20. 14-20 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Exh. 14.10: 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?

21. 14-21 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Exh. 14.11: Guidelines for Increasing Job Satisfaction and Retention Match rewards to employee preferences Make rewards unique Rewards must be meaningful Link rewards to retention behaviors Deliver on rewards that are promised Reward permanency is important Remember intrinsic rewards Fairness and justice are key Communicate continuously The manager matters

22. 14-22 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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

23. 14-23 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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

24. 14-24 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Performance management  Exh. 14.12: Performance Management Process  Manager training and rewards Progressive discipline  Five requirements of a progressive discipline system - P. 701  Actions to take  Exh. 14.13: Progressive Discipline Examples: Misconduct and Penalties Retention Initiatives: Discharge

25. 14-25 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Exh. 14.12: Performance Management Process Organization Strategy Work-Unit Plans (1) Performance Planning Goals Competencies Goals Competencies (2) Performance Execution Resources Coaching Feedback Resources Coaching Feedback (3) Performance Appraisal Goal attainment Competency ratings Written comments Feedback Goal attainment Competency ratings Written comments Feedback (4) Decisions Pay Training/career plans Performance problems Retention Pay Training/career plans Performance problems Retention

26. 14-26 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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” Retention Initiatives: Downsizing

27. 14-27 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Alternatives to downsizing  No layoff or guaranteed employment policy  Layoff minimization programs  Exh. 14.14: 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 Retention Initiatives: Downsizing (continued)

28. 14-28 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Legal Issues Separation laws and regulations Performance appraisal

29. 14-29 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Legal Issues: Separation 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

30. 14-30 McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Legal Issues: Suggestions for Performance Appraisal Systems 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