Balanced Scorecard: How to Reduce

Balanced Scorecard: How to Reduce Employee Turnover Rates

The modern day employees are the most valuable organizational asset and this role has been attributed not for the individuals' ability to operate machineries and equipments, but for their personal intellectual capital which can be used to create more organizational value. The incremental role played by employees in organizational settings is obvious within firms across all industry sectors, but the most relevant examples are offered by the service sector. Here, the employees are the ones who directly interact with the customers and deliver the desired service. They are then the ones who establish the quality of the service and who generate customer satisfaction and, subsequently, revenues sustainability. Within manufacturing organizations then, the employees ensure organizational efficiency, compliance with product quality standards, adequate functioning of equipments and machinery and so on; all these elements sit at the basis of organizational success.

Given this context, the business society is now confronted with a situation in which economic agents no longer compete just for customers and market shares, but also for the best skilled, talented and trained staff members. One direct impact of this competition between employers is that of incremental employee turnover rates. The United States Bureau of Labor Statistics for instance has found that an average employee will go through nine different jobs by the age of 32 (U.S. Bureau of Labor Statistics).

On the one hand, employee turnover generates a series of advantages, such as knowledge transfer or increased creativity and innovation. However, it also generates a series of disadvantages as well, such as increased financial costs with the replacement of the staff, the disruption of organizational processes and even the potential customer dissatisfaction.

2. Employee retention balanced scorecard

In light of the challenges raised by high rates of employee turnover, modern day managers are presented with the necessity of increasing the levels of employee retention. Loyal employees have an increased ability to generate organizational value when compared to new employees. Older employees -- understood not in terms of their age, but rather in terms of their existence within the firm -- are already familiarized with the organizational processes and do not require training. They are also integrated within the firm's community and culture and do not need time to adjust -- time in which the organizational productivity is negatively impacted.

Loyal employees have formed a long lasting and trustworthy relationship with the customers and this relationship enhances the customer experience and as such the organizational revenues by generating loyal customers. While the list of reasons as to why loyal employees are desired within the entities, it is important to note just one more -- satisfying loyal employees might often prove more financially efficient than attracting new employees, meaning as such that -- aside from their traditional operational benefits -- loyal staff members also support financial stability. All these reasons make it important for managers to develop and implement several employee retention strategies.

A rather comprehensive tool in increasing employee retention is that of integrating the strategies, goals and courses of action within a balanced scorecard. A balanced scorecard is a tool used within business operations and processes and its scope is that of helping managers align their operations and decisions with the company's objectives. In a formal definition issued by the Balanced Scorecard Institute (2010), the concept is forwarded as a "strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals."

More recently, the use of the balanced scorecard has been particularized to support the professional endeavors of various organizational sectors and to address vast organizational problems. Particularly, the balanced scorecard can also be implemented to support entrepreneurial efforts of employee retention. The usage of the balanced scorecard within the human resource endeavors is a relatively novel business strategy, meaning as such that the theoretical support for its application is still under development. Nevertheless, it should be noted that even where models of employee retention balanced scorecards do exist, they should not be adopted as they are. In other words, it is important to distinguish and understand the particular elements which define an organizational context and to develop and implement a scorecard tailored to the specific needs of that respective organizational climate. Examples of elements which could suggests differences in the scorecard include the number of organizational employees, the severity of the turnover as given by the values of the turnover rates, the morale of the staff members, the industry in which the company operates (generically manufacturing or services, but also more specific distinctions), the organizational resources available, the existent time constraints, organizational priorities and so on.

3. Elements of the employee retention balanced scorecard

As it has been previously mentioned, each organizational leader should develop and implement his own employee retention balanced scorecard, in accordance with the particular specifics of the organization he/she runs. However, each scorecard has to be developed starting at a given point. In this order of ideas, a theoretical employee retention balanced scorecard that constitutes a good starting point could be composed of the following elements:

Adequate assessment of the staffing needs -- including not only number, but also type of needed employees -- and hiring in accordance

Integration of the employees within the organizational setting

Training programs, which are both functional as well as motivational

Financial incentives

Leadership -- as opposed to just management

Revealed interest in the future of the employee, such as education or retirement plans

Talent management and promotions

Other non-financial incentives

Other business aspects (customer, internal, innovation and learning and financial).

All of these nine elements of an employee retention balanced scorecard will be briefly presented below. After a few words of explanation, a brief mentioning of three components would be introduced: (1) measurement of the element; (2) source of measurement and (3) ability of element to stimulate motivation and performance.

3.1. Staffing needs

Organizations often make the mistake of selecting employees based on the technical specifics of the position, while they do not place a real emphasis on the personal features of the employee. For instance, a highly skilled newly employed individual could be arrogant and create internal tensions, which would eventually lead to internal conflicts and reduction of organizational productivity. This virtually means that companies must pay attention to the type of individuals they need and will hire within the entity, which subsequently implies the need for adequate processes of staffing needs assessment, selection and hiring. Firms that implement a superficial selection process would be frowned upon by candidates and stand the change of creating a non-unified and non-integrated working climate, which would eventually materialize in high levels of employee turnover rates.

(1) Measurement of the element -- questionnaires and interviews

(2) Source of element measurements -- current employees, past employees, candidates

(3) Ability of the element to stimulate motivation and performance -- through the creation and consolidation of a stimulating working environment.

3.2. Employee integration

The integration of the newly employed individual/s within the organizational context will -- from that point on- impact the entire relationship between the employee and the company. It is as such crucial for the management to enforce a strong organizational culture which centers on the main organizational goals -- such as complete customer satisfaction and the creation of value for the shareholders -- and directs the activities of the employees in the respective direction.

(1) Measurement of the element -- discussions and performance levels

(2) Source of element measurements -- newly employed individuals; older employees who interact with the new staff members

(3) Ability of the element to stimulate motivation and performance -- through the integration of the newly employed individual within the organizational climate; by making him feel an integrant party of the organizational family.

3.3. Employee training

The training of the staff members has a dual advantage. On the one hand, it increases the professional skills of the staff members and this materializes in the higher levels of organizational productivity. On the other hand, it professionally forms the employees and offers them a sense of future security, even if the current job is no longer a viable option as they would possess sufficient skills to find other positions. In terms of the organizational setting, the situation would materialize in increased operational performances.

(1) Measurement of the element -- productivity and performances

(2) Source of element measurements -- the company

(3) Ability of the element to stimulate motivation and performance -- through professional formation.

3.4. Financial incentives

These generically refer to salaries, premiums and bonuses and they should be established to reflect the work of the individual and his performances. Too often, employers make the mistake of not setting financial rewards based on efforts, which leads to employee dissatisfactions. Additionally, it is important for the incentives to be competitive in the industry.

(1) Measurement of the element -- organizational performances, employee satisfaction and industry comparisons

(2) Source of element measurements -- the organization, the employees and the industry

(3) Ability of the element to stimulate motivation and performance -- through the offering of financial stability and financial rewards for the work completed.

3.5. Leadership

Too often, managers will have the tendency to be technical, well organized, clear and succinct. While this approach is indubitably important, it should also be recognized that people do not only need to be managed, but they also need to be led. The transformational leadership style is gaining in popularity due to its focus on empowering employees and directing them in the sense of positive and beneficial change (Changing Minds).

(1) Measurement of the element -- questionnaires and interviews, performance assessments

(2) Source of element measurements -- organizational documents, employees and managers

(3) Ability of the element to stimulate motivation and performance -- through motivation and stimulation of involvement

3.6. Future of the employee

Employees will increase their loyalty to the firm when they feel that their future is secured by the entity. Two examples of how this could be achieved include training programs -- previously mentioned -- and retirement plans. Both show the employee that the employer invests in their future.

(1) Measurement of the element -- company documents and statistics, employee satisfaction levels

(2) Source of element measurements -- company records, employees

(3) Ability of the element to stimulate motivation and performance -- through the insurance of future stability for the employee

3.7. Talent management and promotions

Promotions represent one particular non-financial incentive and it can stimulate employee loyalty through the recognition of the employee's worth and efforts. Talent management is a particular dimension of training in the meaning that special emphasis is placed on employees with special skills. In times of economic crises, managers are presented with an increased opportunity of hiring the specialists which were otherwise unavailable (Talent Management). As such, contrary to traditional belief, human resource investments should not be ceased during times of economic recession, but readjusted to new features.

(1) Measurement of the element -- promotions, employee discussions

(2) Source of element measurements -- company records, employees

(3) Ability of the element to stimulate motivation and performance -- through the recognition of the employee's merits.

3.8. Other non-financial incentives

While it can rarely be argued that financial incentives do not apply to all staff members, the same can however be said about the non-financial incentives. In a society which forwards uniqueness and individuality, organizational staff members are presented with incremental possibilities of requesting that certain benefits be offered to them. In other words, managers cannot expect to implement a certain type of non-financial incentive and use it to satisfy the entire employee community. Some individuals are motivated by the recognition of their efforts, while others are motivated by the ability to best balance professional and personal life through flexible working schedules.