Literature Review: Employee Retention
Employee retention is also referred to as employee turnover. This topic is of great importance because it is an issue that affects virtually all organizations in different fields. The turnover cost greatly adds to organizational expenses. Loss of company knowledge is another point worth noting. Employees who leave an organization leave with knowledge concerning the organization, its customers, past history and even the organization’s current projects. Therefore employee retention is of great importance. Employers are always determined to find out some of the reasons why employees leave or quit their jobs. The major reason is so that they can employ or find effective strategies to increase employee retention. Losing talented employees negatively affects an organization in terms of costs and performance. Information presented in this paper was sourced from e-books and academic journals. The search was mainly restricted to employee retention, causes of employee turnover and the strategies that can be employed to increase employee retention rate. Therefore, a literature review on employee retention will be presented below.
Overview of Employee Retention
Employee retention can be defined as the ability of an organization to retain its employees, especially the most talented ones. Employee retention has become a significant concern issue. Some shocking statistics confronting every employer are presented in workforce demographics. More than 13% of employees in the
Porter (2011) notes that employee turnover can cost an organization significant amount of money in terms of recruiting, interviewing, downtimes, training, orientation and ramp-up time. An entry –level position can cost a company from fifty to one hundred percent of the employee’s salary. While cost is certainly not a vital factor to take into consideration while evaluating employee turnover, there are other business factors that are crucial. Turnover can negatively affect quality and customer service (Curtis & Wright, 2001). When customer service and quality fails, competitive advantage can be compromised. Consequently, possibilities of contracts in janitorial industry and customer relationships are affected.
According to Armstrong (2006), turnover is essential for organizational growth. While in some cases, turnover may be positive, it may be negative in other cases. For instance, a positive impact may be caused when a non-productive employee quits. In this case, the risk of terminating does not exist. The change could also aggravate opportunities for other employees and open up a position for existing employees.
Causes of Employee Turnover
Prior to putting in place measures to improve employee-retention record, it is essential for organizations to know why people are leaving. There are several reasons that might prompt employees to quit their jobs. However, there is a tendency for some reasons to be more significant compared to others and in specific organizations. Additionally, there are different forms of departures, occurring in different patterns depending on the prevailing organizational culture, circumstances, competitive position and management orientation. Employees who are given fewer reasons for feel insecure, uncommitted or dissatisfied have a less likelihood of quitting their jobs. The extent of attractive alternative job opportunities is another major variable that need to be taken into consideration. A greater number of alternatives mean that employees are more likely to quit their jobs and take up the alternatives (Hutton, 2009).
According to Wiley (2011), it is essential for managers who wish to increase the rates of employee retention to take adequate time in understanding the actual turnover drivers in different parts of their organizations. This will ensure that effective and targeted interventions are developed. These interventions are also likely to succeed. Hutton (2009) identified different tools that can be used to identify the real causes of employee turnover. Majority or organizations either do not keep a record of why people leave or do so in an unsophisticated manner and hence fail to provide a significant platform for building strong employee retention practices. A typical approach that employers can use is talking formally and briefly to their departing employees to find out why they are leaving and if possible, identify their new employer. This strategy is often referred to as the use of exit interviews.
The first category is the pull-type factor which arises when positive attraction of alternative employment is the major cause of employee turnover. Although employees might be filly content and happy with their existing job, they may choose to move on in an effort to look for better opportunities. Where the major causes of employee turnover are pull factors, an organization that employs job satisfaction enhancement as a means of reducing the rate of departures would gain little. The best strategy to adopt would entail fining out what employees really value and what they look for in their careers. In this way, it will be possible for the organization to fully meet the needs of employees and increase the retention rates (Jones & George, 2003).
Push factors represent the second category. In this case, the perception that something is wrong with the existing employer is the major underlying cause of resignations. Examples of push factors that can be identified include disapproval of changed structured, dislike of prevailing organizational structure and personality clashes with colleagues. It is therefore clear that resistance to organizational change can be classified as a push factor for employee turnover (Porter, 2011). Organizational response to push factors is addressing the root causes or reasons underlying dissatisfaction. This may entail careful selection of supervisors, better training and effective appraisal with respect to their supervisory skills. Employees should be given a voice. This means that they should be given a chance to air out their grievances, which should be addressed effectively (Jones, 2003).
Unavoidable turnover is the third category. This category entails reasons that are beyond organizational control. In this case employees do not resign because of dissatisfaction or alternative options. Instead, they reasons because of reasons that are not directly connected to work. Retirement is the most common reason, which affects virtually every employee at some point. Another reason is illness, where an employee or a close relative who needs caring is incapacitated. Maternity is another reason, where women prefer not to return to the same job after taking a leave. Relocation is another reason worth noting. In this case, an employee quits job so as to follow a partner or spouse. The desire to take a career break is yet another reason. In this case, an employee may choose to quit job in order to pursue some other interest, re-enter full-time education or travel (Savage, 2010).
Often, organizations come to a conclusion that there is nothing that can be done to minimize this category of turnover. This is partly true since in most situations the employee quitting a job for unavoidable reason may choose to go on working in the same job if they want. People choose to take a career break, choose not to return after taking a maternity leave and choose to retire. This may imply that such employees may choose to stay if the job was more attractive and valued. On a similar note, when tow people decide to set up a home together in a specific location, a choice should be made on the partner who is going to relocate. Practically, the decision is mostly based on work-related factors. The partner who quits the job and relocates is usually the one who is least satisfied with their job (Porter, 2011).
The final category is involuntary turnover. These are departures that are initiated by the organization and involuntary. In this case, the employee is required or asked to leave the organization. Examples of causes that fall under this category include ending of fixed-term contracts, short-term layoffs, redundancies and other forms of dismissals. Despite the fact that such turnover can at times be grouped as functional and not dysfunctional, there are costs involved, and should therefore be avoided if possible. Preventing situations which cause it to happen from arising in the first place should be the main aim. Measures can be taken to minimize the incidence of involuntary turnover, except in the case of some dismissals on the grounds of illness. These measures mainly emphasize on selection and recruitment practices, with the major aim being to make sure that there is a large pool of potential candidates as well as avoidance of poor decisions when recruiting candidates (Curtis, 2001).
Job embeddedness and employee turnover
Job embeddedness is a term that is used to describe the links of employees, their fit as well as the sacrifice they would make to leave their jobs. The links of employees to their colleagues or co-workers involve external activities, or shared values and experiences. Employees may share a passion for travel, outdoors, or sports teams. Hence, the links may be financial, psychological and social. Employees’ fit refer to their perceived comfort or compatibility with an organization. A better fit means that the employee has a higher likelihood of feeling personally and professionally connected to an organization. The community dimension, which entails cultural opportunities and outdoor activities, should also fit in order to promote job embeddedness (Wiley, 2011).
Sacrifice refers to the psychological or material benefit that an employee may forfeit by quitting a job. Although compensation is included in the benefits, job embeddedness also tries to take into consideration the intangible benefits. Such benefits may include expected advancement, job stability, opportunities for interesting subjects, status among peers, sabbaticals and many other advantages. In situations where an employee has to relocate, community sacrifices are also included (Jones, 2003).
Mitchell, Holtom, Lee, Sablynski, and Erez (2001) showed a negative relationship between job embeddedness and the intent to leave. After other factors such as job satisfaction and commitment were controlled, the relationships remained significant, but small in effect. Lee, Mitchell, Sablynski,
The likelihood of employees responding adaptively to adverse events at work might be increased by job embeddedness. According to
Generally, limited job embeddedness resulted to an inverse relationship between musing about leaving after adverse events and organizational citizenship behavior and job performance. Contrary elevated job embeddedness meant a positive relationship between musings about leaving after adverse events and organizational citizenship behavior and job performance. (Lee, at al, 2004) agreed with the finding by noting that employees feeling embedded in a job might initially pose questions as to why they should maintain loyalty. They usually decide to stay because they feel embedded. Such employees may try as much as possible to avoid occurrence of adverse events. Enhancement of performance is one way that they can use to avoid the adverse events. They employees might also choose to increase their organizational commitment, which may eventually lead to escalation of positive features of the organization.
Strategies for reducing employee turnover
Employee retention is greatly enhanced by effective training. This is especially the case when employees learn what they require in order to succeed in their jobs. Data certification is an example of a training program that can be employed in order to increase employee retention. In addition to training Savage (2010) emphasizes on the essence of effective motivational factors as companies attempt to overcome harsh economic times. Many companies experience employee lay offs and freezing of salaries during slow economic times. Pay and benefits are not the most essential motivational factors for employees, although employees may not be pleased about not receiving a pay rise on an annual basis. More important factors as ranked by employees include praise for a job well done, appreciation and desire to work in a close-knit team (Savage, 2010). A strategy that can be used to reduce employee turnover during difficult times include implementation of incentives that serve in keeping employees interested in the organization instead of feeling stagnated in their positions.
Gawali (2009) gives some of the ideas that can help in keeping employee turnover low and increasing motivation. Among the major ideas is considering the future. For example, employers can ask their employees the training and skills that they might have interest in so as to meet the short-term goals and eventually help in meeting the long-term goals. Another essential idea is promoting a positive work environment. Employees tend to emulate positive behavior. Hence, managers who are good leaders and portray positive behavior are likely to have low turnover rate and increased employee motivation. Team activities can also go a long way in lowering turnover and increasing employee motivation. Managers are encouraged to schedule company picnics and employee appreciation events as examples.
Armstrong (2006) adds that team leaders and managers play a fundamental role in employee retention. Team leaders and managers can reduce employee turnover rate by developing a motivating team culture as well as improving relationships among and with members of the team. Some of the strategies that they can employ include focusing on future careers of their employees, providing coaching, and standing up for the entire team, delegation and creation of a motivational environment. This clearly shows that managers and organizational leaders have a vital role to play in ensuring that top talent is retained in the organization.
It is therefore evident that employee turnover is a major concern issues. Some of the causes of employee turnover include pull factors such as better alternatives, push factors such as job dissatisfaction, unavoidable factors such as retirements and factors that are beyond organizational control. It is essential for employers to identify the root causes of employee departure so that they can effectively address them. The common strategies used to reduced turnover include increasing employee motivation by providing them with incentives and organizing team activities. Increasing employee retention can go a long way in increasing organizational performance, productivity and profitability.
Armstrong, M. (2006) A handbook of human resource management (10th Ed),
Curtis, S., & Wright, D. (2001) Retaining employees- the fast track to commitment. Management Research News, 24(8/9), 56-60
Gawali, V. (2009) Effectiveness of employee cross-training as a motivational technique. ASBM Journal of Management, 2(2), 138-146
Hutton, P. (2009) How to generate more valuable employee feedback, Strategic Communication Management, 13(92), 32-35
Jones, G. & George, J. (2003) Contemporary Management (3rd Ed),
Lee, T., Mitchell, T. Sablynski, C.,
Mitchell, T., Holtom, B., Lee, T., Sablynski, C., & Erez, M. (2001) Why people stay: Using Job embeddedness to predict voluntary turnover.
Porter, J. (2011) Attract and Retain Top Talent. Strategic Finance, 92(12), 56-60
Savage, R. (2010) No raises this year? Secrets to employee retention in difficult times. Supervision, 71(7), 25-26
Wiley, S. (2011) Building morale: the key to firm growth, CPA Management Forum, 7(2), 12, 19