Employee retention strategies and workplace supervisor relationships

Employee retention is usually defined as an organized effort by the employer to generate and encourage a working situation that assists its current employees to remain with the organization by providing policy and practices that fit employees' different needs. Loss of an employee can cost a company one to two times that employee's annual salary. It can also lead to loss of morale, lost customers, and significant lost time spent accomplishing all of these rehiring activities. And there is a possibility that the replacement may not be a satisfactory employee.

Past and Present

Consider that during the 1950's, employee tenure averaged 23+ years, and in the 1990's, that figure had dropped to 4+ years. The major reason people leave jobs today is not money, but rather their relationship and unhappiness with their immediate supervisor. That translates to a lack of communication, or trust, or fairness, or, more often than not, the perceived (or real) lack of appreciation of the employee's efforts and accomplishments. Fifty years ago, a pat on the back was not as important as bread on the table. Priorities have changed over time.

In the 1950's, 60% of the workforce was unskilled vs. 15% in the year 2000. If fair pay for a fair day's work was part of the bargain, the more unskilled workforce remained somewhat content with their situation. Today, with four times as many skilled workers, management is more complex; workers have to be trained and then retrained as technology changes; and knowledge and abilities must be topnotch to be competitive (Employee Retention).

The term "employee retention" didn't really appear on the business scene until the 1970's and early 1980's. During this time period, job mobility and voluntary job changes became more prevalent, and not looked down upon as an aberration. The 1950's model of lifelong tenure faded into the past as employers had a whole new phenomenon to worry about -- employee turnover. And, employers responded to this with a new management tool -- employee retention.

During the early phases of this newly developing mobile workforce, management's response was to ask what they could do to stop employees from leaving their workforce. The power, for many decades, had been with management, so, at first, it was an assumption that there was something they could do to put a stop to this nonsense. But, they didn't realize or didn't want to understand that society was changing; there was not one simple cause of this employee turnover.

And, emphatically, the most significant event they could not grasp was that the power was shifting from management to employee. Try as they might, nothing could return them to the old, "paternalistic" pattern of status-quo. They realized they were actually going to have to do something to respond to this societal change (McKeown, 2002).

First, employers attacked the known entities such as compensation, benefits, and the physical environment (health and safety, bathroom breaks, etc.) -- the easy-to-see, easy-to-fix stuff that their "old" paternalistic thinking focused on. They were set on fixing those basic things that caused employee dissatisfaction, but were not ready to imagine that they had to go beyond that to policies and procedures that caused employees to "want" to stay.

By the mid to late 1980s, the realization struck that "higher" needs must be met in order to retain employees. Enter, Abraham Maslow and his hierarchy of needs. Maaslow, considered the founder of humanistic psychology during the mid-1900s, declared a pyramid of needs that all humans experience. The most basic level is food, water, oxygen to breathe, etc. The next level is safety and security, then the social needs of belonging, friendship, and love. Above that are ego needs such as respect, esteem and recognition, and the top level contains such needs as self-actualization, fulfillment, and self-development -- each level attained in order (McKeown, 2002).

By the 1980's this hierarchy had become widely accepted in many aspects of society, and became the watchword of a newly developing phenomenon called "human resources" (HR) in business. The implications for a real process of retaining employees were huge.

If we stop and look back at the past 20 years of HR, we can see in Maslow's hierarchy all the things that employees have been asking their employers for and that management has been responding with to achieve a successful program of employee retention. Maslow's need for acceptance has been met by employer's offering orientation programs and events like company retreats; suggestion programs, diversity programs, and corporate visions and values have been offered to attempt to meet an employee's need for respect; need for status met with job titles, executive perks, corner offices, and authority to delegate; and, finally, management is offering lifelong learning programs, funded education programs and sabbaticals to meet the employee's needs for fulfillment and self-development (McKeown, 2002).

Today, as mentioned before, employees leave supervisors and managers -- usually much more often than they leave companies. The quality of supervision and the level to which Maslow's hierarchy of needs is met between supervisor and employee, is critical to any employee retention program. And in a quality-managed company, that knowledge comes from the top down. If the CEO and management team are not emphasizing this key factor, then it will not happen and any attempt at programs, policies, and procedures will fail.

Employees leave supervisors who do not: provide clarity about expectations, provide clarity about career development and earning potential, give regular feedback about performance, hold scheduled meetings, and provide a framework within which the employee perceives that he or she can succeed (Heathfield, n.d.).

But more needs to be said about the current business economy. At the moment, employee layoffs are at an all-time high. Employee retention right now is not such a concern as it is during even a normal economy. But the economy and business will rebound, and, according to experts, probably by the end of 2009 or early 2010 (?).

Different incentives per different industry/how do they compare?

It is a widely known fact that if we look at two different companies in the same industry that make the same product or provide the same service, they will each see employee retention from entirely different perspectives. That is because one management team has a different set of values, visions and styles and different past experiences than the other. Compensation levels differ, of course, between industries, as do retention programs, their aims and goals.

What Works Best?

We discussed this in "The Future" above, but other studies show curious results as well.

Bucklin and Dickinson (2001) indicated that most of the common variations in incentive plans make no difference in performance. One of her studies showed that performance did not differ significantly whether the amount to be earned as an incentive was three percent or 100% of total pay. As her work seems to indicate, any incentive plan, regardless of its structure, is better than none at all. Three suggestions: consider non-cash incentives to offer on top of competitive compensation; customized individual incentives are more effective than group incentives; and make sure that every employee's day-to-day manager or supervisor is positive. Remember, employees leave supervisors more often than they leave companies.

American vs. European

American workers, on average, have less job security than European workers. When faced

with a need to reduce their workforce, U.S. companies typically resort to layoffs much more than do their European counterparts. European companies rely more on alternatives to layoff, including work sharing and attrition as employee retention programs.

A recent study in the UK revealed similar results to the Dickinson research. That is that it cast doubt, though did not disprove arguments, that incentive pay is likely to crowd out the intrinsic satisfaction of work. In other words, it's those non-cash incentives and programs, and meeting that hierarchy of needs that actually increase employee satisfaction and retention.