Resourcing, Reward and Performance
Employee retention is the ability of any company, firm or organisationorganisation to retain its workers. While the ability of a firm to retain its workers can be examined statistically, others take employee retention as the efforts made by an organisationorganisation to keep its employees. While a retention rate of 70% is taken to mean that a firm has been able to keep about 70% of its personnel, analysts argue that employee retention should not be looked at in terms of numbers but rather the outcome of the retention (Taylor, 2010).
From a business point of view, an employer should do everything possible to decrease the rate of employee turnover. When the rate of employee turnover is decreased, the employer will end up spending less on training costs. The reason why the training costs will go down is that every time new employees join a company, the human resource department spends money and time in inducting and training them (Taylor, 2010). Less employee turnover means less resources spent on training. Again, whenever employees leave a company, the company loses talent, which most of the time goes to the competitors. Recruitment of new employees also costs the company a lot of money and resources.
It is for these reasons that employers are always looking for ways to retain the employees that they have trained and identified as talented. There are certain behaviors and concepts that when adopted by a company will help improve their employee retention rates. This, however, is not the case for all organisations. There are the employers who are only concerned with productivity. As such, they only seek to retain those employees that, in their opinion, perform exceptionally. This means that those employees that are seen to be less useful for the company are not motivated to stay in the company. The result of such approach, however, is that the employee turnover ends up being quite high (Armstrong & Baron, 2005).
There are certain goals of employees that employers must meet if they intend to retain workers. They have to do this without compromising the goals of the organisation. This means that human resource managers have to find a way of balancing the organisation in such way that both parties win. There are theories that were previously used to guide organisations on how to retain their employees. The first theory is the valence theory.
The valence theory refers to the relationship between the rewards that an organisation gives to its employees and the workers` needs that are intended to fulfill by those rewards. A high valence shows that the employees` needs are well aligned with the rewards provided by the company. This also means that a low valence shows that the rewards that an organisation gives are not aligned with the needs of the organisation. A low valence usually leads to low levels of job satisfaction among employees. Low satisfaction levels is one of the factors that normally leads to high employee turnover and, as a result, low retention (Perkins & White, 2008).
The second theory is the expectancy theory. The expectancy theory states that employees` satisfaction is influenced by a number of factors. The expectancy theory argues that the levels of confidence among employees usually decrease the expectancy in organisations. It is, therefore, important that organisations train their employees in order to increase their levels of confidence, as this will make them feel more appreciated in the organisation. These trainings can be in the form of workshops, seminars or in-house training sessions. When workers have been trained and they are more confident about their abilities to serve the organisation effectively, they will be able to perform much better. At the end of the day, the organisations benefit as a result of better service delivery. This is because better service delivery leads to higher customer satisfaction and employee retention.
The other theory of employee retention is Herzberg's Theory. Herzberg's Theory is also known as theMotivator-Hygiene theory. According to experts, job satisfaction usually has nothing to do with poor job satisfaction among employees or with the rate of employee turnover. Herzberg, therefore, attempts to divide the needs of employees into two categories, namely the motivators and hygiene factors (Perkins & White, 2008).
The motivators, as proposed by Herzberg, are similar to those proposed by another theorist, Maslow. According to Maslow’s Hierarchy, these often include bonuses which are unexpected by employees. These unexpected bonuses normally help to instill in employees the drive to perform better. Hygiene factors, on the other hand, include conditions, which are expected by the employees. Because hygiene factors are expected, their absence normally leads to dissatisfaction. These expected conditions include well designed washrooms, proper lighting in the office, and proper equipment required to perform a job with satisfaction.
It is, therefore, important that employers use positive methods of reinforcement in order to keep their employees motivated. At the same time, hygiene factors, which are expected, are still to be maintained in order to increase the levels of employee satisfaction and to retain most employees within the organisation.
Employers are continually positioning themselves as the best employers in the market in an effort to retain as many employees as possible. This will enable them to develop the best workforce and to maintain them within their organisations. This has been done through the recognition of the human capital value within an organisation. Human resource managers in all the countries are rethinking the ways in which they recruit, train, measure and compensate their workforce. This is to ensure that the organisation is able to accomplish its objectives using the available human capital (Brumback, 2003).
As such, it is important that apart from developing and implementing programs of new employees` recruitment and training, companies must also come up with strategies that will ensure that the company functions appropriately. This is not easy considering the competition for talented workers all over the globe. The human resource department in another organisation must find a way of identifying the needs of its employees and find ways of meeting these expectations while still realizing the organisation’s goals and objectives.
The first issue that comes up is that one of payment. Employers have to deal with employees’ quitting in search of greener pastures. These greener pastures usually involve better payment. The challenge that the human resource department has to deal with is how to pay their workers enough without running into losses. As such, the pay that a company gives to workers normally depends on the state of the financial markets in the globe at that particular time. The pay is also influenced by the stiff competition for workers of a particular kind.
Companies in the public sector have to revise their payment plans to adopt aggressive policies about payment as a way of remaining competitive and being able to attract the best employees available in the market. Human resource managers have realized that they must have compensation packages that are high enough if they will receive applications from strong applicants who are well qualified. The proper package will also allow these organisations to retain talented employees who are sought after. A good compensation package also results in an enhanced morale among employees. When employees know they are paid well, they usually work harder and provide better results. The salary grades that an organisation adopts should reflect the value of a particular position in the market (Brumback, 2003).
Many organisations link the amount of money that an employee is paid to his/her level of performance. This is done through giving incentive pay where an employee receives a pay raise only when he/she has performed better. Remuneration may also be based on goals that are measurable and are pre-determined. Such pre-determined variables include an employee`s skills, competences, and not just the position that an employee holds.
The way a company compensates and rewards its workers determines, to a large extent, the values and cultures of that company. It is, therefore, important for a company to customise and classify its system of compensation in such way that creates an impression that it has a good culture that will attract talented workers. A company that is reputed to mistreat its employees will probably never receive applications from gifted individuals as these are always in demand.
As such, a number of factors should determine the classification of salaries; such factors should include the fact that the wages of employees who do the same kind of work should receive compensation that is comparable so that a section of employees does not feel like they are less appreciated. This means that if the payment is to vary then valid reasons should be given. The difference can be based on the fact that a particular employee has more skills and abilities. The workforce should feel that the salary classification is fair and worth the position held. This will lessen the number of grievances concerning salary grades. The human resource department also needs to establish a solid basis upon which performances are evaluated.
If employees discover that there are differences in their payments despite the fact that they do the same job, grievances are bound to arise. The workers who earn less may feel demotivated and eventually they may quit. An employee who feels unappreciated starts to produce less and skip work from time to time. While it is not possible to eliminate the feelings of inequalities, human resource managers must find a way of lessening the disquiet as much as possible.
In responding to grievances about the employees` salaries, employers sometimes resort to short-term solutions that only fix the problems in the short term. As such, a lot of flexibility is needed in the policies that govern the classification of salaries. Job classes can then be broadened so that higher maximums can be reached within a particular job group (IDS, 2003).
In many organisations, it is the employer who decides when an employee should retire. Primarily, they take such decisions based on the rules that govern pension schemes. In addition, employers prefer to have discretion over when employees should retire so that they may have control in the way they plan the workforce. Again, human resource managers link productivity with an employee` age. Older employees are believed to produce less when compared to younger active employees. There are analysts who believe, however, that there is no connection between productivity and age of the workforce. They say that mandatory retirement should not be allowed to continue.
There are many reasons why employees are retired. The pension that an employee receives at the end of his or her term in office is often not synonymous with the end of work. Normally, the timing of the receipt of funds from pension has nothing to do with the timing of when an individual should retire from work. There are those who draw funds from their pension schemes and continue working. There are those workers who choose to retire even before they retire. The normal retirement age for most, both men and women, is about 65. Research has shown, however, that workers in most developed nations retire voluntarily before they reach the required retirement age. Even when people do not retire and instead switch jobs, they rarely work beyond the age of 65 years
Many people in their 40s or 50s often look forward to retirement. Sometimes people in this age group look forward to retirement more than the old people who are actually forced into retirement. People who look forward to retirement see it is as something that they have earned by working so hard almost all their lives. Some workers decide to go into self-employment when they retire and still draw their pension. The number of workers who do not particularly look forward to retirement is very small. Most of these people are self-employed. Research has shown, however, that many people would choose to keep working for the same employer even beyond the retirement age if the working conditions were better. Good working conditions would include working hours that are more flexible and better remuneration.
The debate about whether employers should continue to have the power to determine when workers should go for retirement continues among analysts. It is known to have an effect on the quality of work offered by various employees in different job groups. It is common for workers not to work beyond the retirement age preferred by their employers. There is, however, a particular group of people who may choose to work beyond their retirement age. One of such employees would be the one with higher qualifications. Such person is in a position to secure a well-paying job that is not as stressful. As such, he or she chooses to stay at work because that job has its benefits and allows him or her to take time out to relax. Another individual who may choose to stay at work beyond his or her retirement age is the poor worker who still has dependants. For such a person, the salary received from work allows him or her to help those who depend on him/her. Poor workers will keep working despite the unfavourable working conditions.
Many employers argue that job performance has a lot to do with an employee`s age. The quality of an employee`s work is believed to deteriorate when they begin to grow older. Many organisations choose to release their employees once they reach 70 years because they believe that individual can no longer perform according to the required standards. As much as there are no proven scientific records that older workers are less effective, older people have been known to perform with less vigour. This is especially true for jobs that require physical strength and rapid reactions. Some older workers, however, have been known to perform better than younger employees. But due to their age, they sometimes learn relatively slowly and get tired quicker than their younger counterparts.
Usually employers initiate employees` retirement based on a person`s age and if this person has become redundant. Very few workers actually retire because they have reached the retirement age. Many researches show that most of these people would retire anyway at around the same time or a little later. Macro economists argue that mandatory retirement should be done away with because its impacts are likely to be very minimal. When the employment rate of older citizens is increased, the quality of people`s life in this age group will increase.
Workforce planning is the other issue that surrounds retirement and pension plans. The younger people within most organisations often feel that if older employees were to retire they would have more opportunities for growth. It is, therefore, important that human resource managers provide younger employees with opportunities for career progression. This is why trade unions that tend to fight for the rights of younger employees often fight for mandatory retirement so that younger people are given an opportunity to grow and proceed with their career. In many organisations, mandatory retirement is seen as a way of allowing for succession where older employees give the younger ones a chance to lead the organisation. This allows planning of the workforce appropriately (Guest, 1997).
There are those analysts who feel that the argument for workforce planning does not hold water, especially when applied to large organisations.. This is because there are those employees who choose to retire on their own volition and this cannot be included in the workforce planning process. This is because voluntary retirement is quite unpredictable and employers cannot plan around it. Again, rarely workers who choose to work beyond their required retirement age can be found.
There are those companies, however, that decide to hire employees that are already above the retirement age that is set by the organisation. These companies in doing so end up in trouble with rules that govern pension schemes, and even with insurance providers. This is because pension schemes and insurance companies normally have an age limit between 65 and 70 years. This does not mean, however, that exceptions cannot be made. Many large companies that employ workers who are already above the set retirement age give them contracts not exceeding one year. Sometimes they are also given employment, which is permanent but part time in nature (Armstrong, 2007).
From back in the 80s and 90s, various changes have been made in the way public and private companies are managed and run. Various adjustments have occurred in the fundamental structures and processes in organisations. The functions, roles, and structures of human resource management have changed to high degree within the last couple of decades. These changes have been necessitated by improvements in information and communication technologies (Armstrong, 2007).
These changes in information and communication technologies have occurred in three main stages. Firstly, organisations that used to be very large have been divided and broken up into numerous operations, which are decentralized. These decentralized businesses are semi-autonomous and operate just like the parent company. Large companies are, therefore, split into organisations that are separate and are responsible for the expansion of a product within their jurisdiction (Armstrong and Murlis, 2007).
The other change that has occurred in the management of human resource capital is the devolution of the budget. Resources are, therefore, planned in a way that suits the needs of the organisation, especially concerning human resources. Thirdly, there has been the creation of internal markets. The purchasers and providers of services nowadays have their responsibilities clearly cut out. They are, therefore, required to respond well to the needs of each party. These three factors have changed the way human resources are managed in organisations all over the world.
For many businesses across the world, the search for better performance has led them to adopt new methods of doing things. In order to facilitate this new way of doing things, organisations have customized their human resource practices by promoting those employee behaviours that are good for the image of the company. They have, therefore, come up with ways of organizing, measuring and reviewing the performance of employees within the organisation in order to get the best outputs from individual employees (Torrington, et el., 2011)
The main feature that defines an organisation that is performing well is whether or not it meets its set objectives. In a company that manages its workforce properly, every employee is given clearly defined targets, which he or she is expected to achieve. These objectives are focused on improving the employees’ standard of living, developing his or her career, motivating and rewarding the employee. The human resource department defines performance, sets targets and appraises performance. Good performance is reinforced and individuals who need counselling or encouragement in order to perform well enough are identified. Through these appraisals, the HR department identifies the needs of the individuals and allocates rewards for those employees who have performed exceptionally.
Organisations have also been able to evaluate the effectiveness of the human resource departments in order to establish how well they are functioning. Many employees have cited job security as the number one reason why employees would choose to stay with an employer or to leave an organisation. Employees need to feel confident that their employer has their best interest at heart and that their jobs are well secured. The success of a business is loosely linked to the effectiveness of its human resource management department (Torrington, Hall, Taylor and Atkinson, 2011).
The introduction of the human resource department was a significant factor in the development of the management of human capital in organisations. The human resource management department in any organisation has the duty of ensuring that the objectives of the organisation are met by hiring the right people for the job. The human resource department in any organisation strengthens the relationship between workers and the management of the organisation. This relationship can only be strengthened through open dialogue and accountability both from the employee and the employer.
The other development, occurred in the management of human capital, is the outsourcing of human capital. This means that the human resource department instead of hiring workers to perform certain duties outsources jobs to another company. This has been found to be a cheaper way for organisations who do not want to go through the process of advertising, shortlisting, interviewing and recruiting workers. This process can be tedious and costly. This is especially true for small companies that do not have the space for more employees or do not require workers for long-term projects (Beardwell and Claydon, 2010).
In conclusion, the practice of human resource management in most countries is affected by various macro-economic policies, which are put in place by the government. The forces of the international economy also influence them. This is because multinational companies continue to affect economies in all countries where they operate. There are global forces that determine the supply and demand of labour which, in turn, determine the amount of money that a person in a particular job group earns. These forces also determine the amount of time required for recruitment of workers, their training and whether or not the organisation retains the new employees. As such, firms have been required to adjust their management of human capital in order to respond to the informational and technological changes.