Employee retention
Encyclopedia
Employee retention refers to the ability of an organization to retain its employees. Employee retention can be represented by a simple statistic (for example, a retention rate of 80% usually indicates that an organisation kept 80% of its employees in a given period). However, many consider employee retention as relating to the efforts by which employers attempt to retain employees in their workforce. In this sense, retention becomes the strategies rather than the outcome.
In a Business
setting, the goal of employers is usually to decrease [Turnover (employment)|employee turnover], thereby decreasing training costs, recruitment costs and loss of talent and organisational knowledge. By implementing lessons learned from key organizational behavior
concepts employers can improve retention rates and decrease the associated costs of high turnover. However, this isn't always the case. Employers can seek "positive turnover" whereby they aim to maintain only those employees who they consider to be high performers.
Valence
is the degree to which the rewards offered by an organization align with the needs employees seek to fulfill. High valence indicates that the needs of employees are aligned well with the rewards system an organization offers. Conversely, low valence is a poor alignment of needs with rewards and can lead to low job satisfaction
and thereby increase turnover and decrease retention.
Expectancy theory
details has several factors that can lead to high job satisfaction and high retention rates for organizations. Increasing expectancy in an organization can be done by training employees and thereby making them more confident in their abilities. Increasing instrumentality within an organization will be part of implementing an effective rewards system for attainment of specific goals and accomplishments.
However, while these theories may be valid they provide little practical assistant for business managers or human resource practitioners. More modern studies relating to employee engagement
demonstrate that by developing a range of strategies that address various drivers of engagement, many positive outcomes can be achieved. These outcomes include higher profitability, improved customer satisfaction, lower absenteeism and lower accident rates as well as higher employee retention.
Each of the five tiers of Maslow’s hierarchy
of needs relates to optimal retention strategy. Since Maslow’s introduction of his motivation model, organizations have been employing strategies attempting to stimulate each of the five humanitarian needs described above to optimize retention rates. When applied to the organizational model, meeting the self-actualization and esteem needs of an employee tend to correlate to better retention. Physiological, safety, and social needs are important as well, however, and must be addressed to better the work environment.
While implementing a retention strategy is ideal, successful satisfying all five needs of employees is not only difficult, but also expensive. That being said, managers who attempt to maximize employee need coverage tend to be more concerned with employee satisfaction.
(Herzberg’s) theory. The theories have overlap, but the fundamental nature of each model differs. While Maslow’s Hierarchy implies the addition or removal of the same need stimuli will enhance or detract from the employee’s satisfaction, Herzberg’s findings indicate that factors garnering job satisfaction are separate from factors leading to poor job satisfaction and employee turnover.
Herzberg’s system of needs is segmented into motivators and hygiene factors. Like Maslow’s Hierarchy, motivators are often unexpected bonuses that foster the desire to excel. Hygiene factors include expected conditions that if missing will create dissatisfaction. Examples of hygiene factors include bathrooms, lighting, and the appropriate tools for a given job.
Employers must utilize positive reinforcement methods while maintaining expected hygiene factors to maximize employee satisfaction and minimize retention.
realizes the humanitarian concern with fairness and equality. While one party may be given motivational rewards and opportunities, the individual will assess the work-reward ratio based on similar, external positions. If the individual feels the rewards and motivators do not meet the standard, the employee will either lose motivation, request more compensation, or leave their current position in search of more favorable benefits.
Because of this, firms must not only recognize internal obligations, but also attempt to equalize or outperform competition in meeting employee needs.
In a Business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
setting, the goal of employers is usually to decrease [Turnover (employment)|employee turnover], thereby decreasing training costs, recruitment costs and loss of talent and organisational knowledge. By implementing lessons learned from key organizational behavior
Positive organizational behavior
Positive Organizational Behavior is defined as "the study and application of positively oriented human resource strengths and psychological capacities that can be measured, developed, and effectively managed for performance improvement in today’s workplace" .For a positive psychological capacity...
concepts employers can improve retention rates and decrease the associated costs of high turnover. However, this isn't always the case. Employers can seek "positive turnover" whereby they aim to maintain only those employees who they consider to be high performers.
Retention Strategies
In order to retain employees and reduce turnover managers must meet the goals of employees without losing sight of the organization's goals, thereby creating a "win-win" situation. Valance and expectancy theories provided some of the earlier guidance for retaining employees.Valence
Valence (psychology)
Valence, as used in psychology, especially in discussing emotions, means the intrinsic attractiveness or aversiveness of an event, object, or situation. However, the term is also used to characterize and categorize specific emotions. For example, the emotions popularly referred to as "negative",...
is the degree to which the rewards offered by an organization align with the needs employees seek to fulfill. High valence indicates that the needs of employees are aligned well with the rewards system an organization offers. Conversely, low valence is a poor alignment of needs with rewards and can lead to low job satisfaction
Job satisfaction
Job satisfaction describes how content an individual is with his /her job. The happier people are within their job, the more satisfied they are said to be. Job satisfaction is not the same as motivation or aptitude, although it is clearly linked...
and thereby increase turnover and decrease retention.
Expectancy theory
Expectancy theory
Expectancy Theory proposes that a person will decide to behave or act in a certain way because they are motivated to select a specific behavior over other behaviors due to what they expect the result of that selected behavior will be. In essence, the motivation of the behavior selection is...
details has several factors that can lead to high job satisfaction and high retention rates for organizations. Increasing expectancy in an organization can be done by training employees and thereby making them more confident in their abilities. Increasing instrumentality within an organization will be part of implementing an effective rewards system for attainment of specific goals and accomplishments.
However, while these theories may be valid they provide little practical assistant for business managers or human resource practitioners. More modern studies relating to employee engagement
Employee engagement
Employee engagement, also called worker engagement, is a business management concept. An "engaged employee" is one who is fully involved in, and enthusiastic about their work, and thus will act in a way that furthers their organization's interests...
demonstrate that by developing a range of strategies that address various drivers of engagement, many positive outcomes can be achieved. These outcomes include higher profitability, improved customer satisfaction, lower absenteeism and lower accident rates as well as higher employee retention.
Retention and Motivation Theory
Retention has a direct and causal relationship with employee needs and motivation. Applying a motivation theory model, such as Maslow’s Hierarchy of Needs, is an effective way of identifying effective retention protocol.Each of the five tiers of Maslow’s hierarchy
Maslow's hierarchy of needs
Maslow's hierarchy of needs is a theory in psychology, proposed by Abraham Maslow in his 1943 paper A Theory of Human Motivation. Maslow subsequently extended the idea to include his observations of humans' innate curiosity...
of needs relates to optimal retention strategy. Since Maslow’s introduction of his motivation model, organizations have been employing strategies attempting to stimulate each of the five humanitarian needs described above to optimize retention rates. When applied to the organizational model, meeting the self-actualization and esteem needs of an employee tend to correlate to better retention. Physiological, safety, and social needs are important as well, however, and must be addressed to better the work environment.
While implementing a retention strategy is ideal, successful satisfying all five needs of employees is not only difficult, but also expensive. That being said, managers who attempt to maximize employee need coverage tend to be more concerned with employee satisfaction.
Herzberg's Theory
An alternative motivation theory to Maslow’s Hierarchy of Needs is the Motivator-HygieneTwo-factor theory
The states that there are certain factors in the workplace that cause job satisfaction, while a separate set of factors cause dissatisfaction...
(Herzberg’s) theory. The theories have overlap, but the fundamental nature of each model differs. While Maslow’s Hierarchy implies the addition or removal of the same need stimuli will enhance or detract from the employee’s satisfaction, Herzberg’s findings indicate that factors garnering job satisfaction are separate from factors leading to poor job satisfaction and employee turnover.
Herzberg’s system of needs is segmented into motivators and hygiene factors. Like Maslow’s Hierarchy, motivators are often unexpected bonuses that foster the desire to excel. Hygiene factors include expected conditions that if missing will create dissatisfaction. Examples of hygiene factors include bathrooms, lighting, and the appropriate tools for a given job.
Employers must utilize positive reinforcement methods while maintaining expected hygiene factors to maximize employee satisfaction and minimize retention.
Equity Theory
Equity TheoryEquity theory
Equity theory is a theory that attempts to explain relational satisfaction in terms of perceptions of fair/unfair distributions of resources within interpersonal relationships...
realizes the humanitarian concern with fairness and equality. While one party may be given motivational rewards and opportunities, the individual will assess the work-reward ratio based on similar, external positions. If the individual feels the rewards and motivators do not meet the standard, the employee will either lose motivation, request more compensation, or leave their current position in search of more favorable benefits.
Because of this, firms must not only recognize internal obligations, but also attempt to equalize or outperform competition in meeting employee needs.