In today’s highly competitive employment market, employee retention
has become an integral part in most of the organizations across all industries.
The term “Employee Retention” is not new to today’s fast growing economic
world. It has gained momentum in the
last decade. Many organizations today employ various processes and measures to
retain employees so as to encourage employees to stay in the organization for a
longer period.
There is a possibility that organization’s – small, medium
or big; maintain a provisional fund which could be spent on retaining
performing employees. Employee retaining
efforts may include benefits such as ESOPS (Employee Stock Options – issue of shares at less than market rate), yearly
bonus, extra pay for additional efforts, paid vacations for the employee and
his or her family, awards, rewards, recognition, cultural activities, flexible
work hours, work from home facility, perks and host of other benefits.
Companies today are well aware of the fact that there are
plenty of opportunities available for the talented people. Companies are always in search of such people
and would ensure to take necessary steps to hire and retain them.
On the other side, talented employees who feel lack of satisfaction
level in their current organization may start searching for options. In such
cases that company may lose its talent pool to a competitor.
There are a couple of theories on retention and motivation
which may be in use or followed at major corporations across the world for e.g.
(1) by Abraham Maslow and
(2) by Frederick Herzberg.
Now let’s try to understand the other side of retaining
employees. Major organizations today, have adopted a strategy of retaining
instead of hiring or adding new candidates to their employee strength. They
take steps to improve themselves on retaining performing and employees who have
been with the company for a longer duration. Organizations off lately have come
to realize that the cost involved in pre-screening, interviewing and hiring of
candidates was found to be more as compared to amount spent on miscellaneous
activities on existing employees.
Moreover, there are other costs involved in hiring a new
candidate or candidates which companies have to bear. These expenses may be
termed as additional overheads for an organization. These indirect expenses can
be classified under - telephone and internet usage, use of electricity, man
hours spent by human resources department, admin department, and other related
departments. Moreover, there are direct expenses such as advertising and
recruiting, orientation and training of the new employee and subsequently
decreased productivity till the time the new employee is trained.
As Beverly Kaye and Sharon Jordan Evans stated in
Training and Development: "Studies have found that the cost of replacing
lost talent is 70 to 200 percent of that employee's annual salary. There are
advertising and recruiting expenses, orientation and training of the new
employee, decreased productivity until the new employee is up to speed, and
loss of customers who were loyal to the departing employee. Finding,
recruiting, and training the best employees represents a major investment.
Once a company has captured talented people, the return on investment
requires closing the back door to prevent them from walking out."
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Additionally, many organizations are known to hire
consultants to provide them candidates for filling in the vacancies they have.
Of course, consultants would never offer their services for free. Companies may
or may not form a contract with placement consultants to provide a regular flow
of candidates. Companies do have to pay consultants a pre-decided amount also
known as percentage of the annual package of the hired individual(s). The
percentage ratio ranges from 8% to 30% of the annual package.
It is observed across many industries that corporations
have initiated measures to encourage older employees to continue with them for
a longer duration. While doing this they have also ensured cutting costs and
maintaining employee satisfaction.
It is wide known fact that initiation of any measure or
process has its advantages and disadvantages, so does employee retention measures
have its own share of positives and negatives.
Now let’s take a look at few of the pros and cons of
employee retention.
Advantages:
Ø Avoids and or reduces hiring
costs.
Ø Retaining employees reduces
training costs.
Ø It builds a team of skilled and
experienced employees.
Ø Retaining experienced staff creates
a positive impact on customer services.
Ø Retention activity fosters loyalty
towards the organization amongst employees.
Ø Encourages friendly environment
and fosters bonding amongst employees.
Ø It facilitates smooth workflow of
internal processes.
Ø It increases the quantity of work
delivered.
Ø It enhances the quality of the
work produced.
Ø It increases revenue for the
organization.
Disadvantages:
Ø It promotes groupism amongst old
employees which creates an insecure environment for
new employees.
Ø Improper mixing of staff affects
productivity and ensures poor quality of work.
Ø Excessive liberty to staff just to
maintain work flow affects quantity and quality both.
Ø Flexible work timings rarely
justify the work delivered.
Ø Retaining non-delivering staff
kills the productivity and creativity of knowledgeable
employees.
Ø Retaining spoon-fed and
complaining employees add to the cost of the organization.
Ø Affluent employees who do not
require a job, rarely add value to the employee strength.
These are just a few examples of advantages and
disadvantages related to employee retention. There is always a chance there can
be more relevant examples.
Corporations today are working toward increasing their
profit margins, reduce costs and are employing latest measures to sustain
competition and employee retention is one of the most important tools to ensure
stability in the market. Directors, Senior Management, and Consultants would advice
or suggest various techniques to reach results but, it is the middle management
which is solely responsible to achieve desired goals.
Reference:
(1) and (2) Wikipedia, (3) Answers.com
