Strategies to Improve Retention Rates at a Consulting Firm

Executive Summary
Although the precise causes differ from organization to organization, the high costs that are associated with unplanned turnover are well documented. In fact, in some professions, replacement costs for employees can easily equal their annual salary or even more, so identifying strategies to reduce turnover rates represents a valuable and timely enterprise. To this end, the purpose of this proposal is to provide a description of the problems of interest and what can be done to mitigate these issues. A description of the implications of implementing the career management program is followed by the key recommendation that emerged from the research. These recommendations include providing employees with a career management plan that motivates them to acquire additional education and training as well as instilling an enhanced sense of organizational loyalty to reduce turnover levels. In addition, a secondary recommendation concerns the need to encourage employees to develop their knowledge and expertise in successfully navigating their career ladder In order to achieve their full professional potential. Finally, a summary of the proposal and key findings that emerged from the research are presented in the conclusion.
Career Management/Development Proposal
This proposal sets forth relevant recommendations for ABC HR Consulting together with the corresponding rationale in support of their approval. In addition, the background, history and the symptoms and causes of the problems discussed herein as well as the implications of the adoption of these recommendations with respect to their cost, legal consideration and effects on organizational relationships. In addition, a discussion concerning the timing of the implementation and evaluation of these recommendations is followed by a description of comparable practices in other companies. Finally, a summary of this proposal and the key findings that emerged from the research are provided in the conclusion
Recommendations
Based on an analysis of the problem situation at ABC HR Consulting (hereinafter alternatively “ABC” or “the company”), the following recommendations are provided:
· Recommendation #1: Immediately eliminate the practice of using sign-on bonuses as an incentive for recruitment;
· Recommendation #2: Immediately begin conducting exit interviews with employees that announce their intention to quit in order to identify underlying causation; and,
· Recommendation #3: Provide all lower-level employees and staff members of ABC with on-the-job training concerning their respective career management planning and optimal strategies for advancing on the company’s career ladder (see Figure 1 in the background section below).
Justification
The above-listed recommendations are based on the following respective rationale as identified in the relevant peer-reviewed and scholarly literature:
Recommendation #1: Immediately eliminate the practice of using sign-on bonuses as an incentive for recruitment
Although the antecedents of unplanned turnover differ depending on a number of factors including the type of industry and the availability of alternative employment opportunities, one recruitment and retention strategy that has demonstrated ineffectiveness is the use of sign-on bonuses (Hansen, 2009). In this regard, Hansen (2009) emphasizes that, “Signing bonuses generate job hopping, damage morale among existing employees and exacerbate financial pressures. Although sign-on bonuses are common, we find that the practice can almost encourage job hopping from bonus to bonus” (p. 2). Moreover, sign-on bonuses are only a stop-gap measure to truly effective recruiting and retention practices and they add significantly to the overall costs that are associated with turnover (Dobbs, 2009).
Recommendation #2: Conduct exit interviews with employees that announce their intention to quit in order to identify underlying causation:
As noted above, the precise reasons for employees leaving their job differ from person to person, but there may be some commonalities involved that can be identified through the use of exit interviews (Christie, 2014). In this regard, Johns and Gorrick (2016) report that, “Exit interviews are a practice used to monitor and analyze employee turnover with a view to improving overall organizational effectiveness” (p. 26). In sum, exit interviews represent a highly cost-effective strategy for identifying the underlying causes of turnover, especially since these interviews can be conducted in person, telephonically or by email (Christine, 2014).
Recommendation #3: Provide all employees of ABC with on-the-job training concerning their respective career management planning and optimal strategies for advancing on the company’s career ladder
A career ladder can appear extremely steep when viewed from the bottom rung, and it is probable that at least some percentage of ABC’s employees have left the company due to their inability to understand how they can advance in their career paths. While the company can provide employees with the tools and information they need for this purpose, it will also be important to emphasize that it is incumbent upon employees to learn how to navigate a career ladder. For instance, according to Tatham (2008), “A key driver for strengthening career development learning is the importance of well prepared and flexible [employees] with [the] capacity to manage their employability by learning effective career management skills” (p. 7). In other words, the rationale in support of this recommendation is a two-way street that involves effort on the part of the company as well as targeted employees for the reasons discussed further below.
Background
The research showed that the company has experienced a sustained average unplanned turnover rate for all divisions of more than 32% for the past 6 years, and the high costs that have been incurred as a result have adversely affected ABC’s ability to invest in the types of innovative technologies that will help it achieve its organizational objectives. Some divisions, though, have suffered from especially high levels of turnover as shown in Table 1 followed by a graphic depiction of their respective career ladders in Figure 1 below.
As can be readily discerned from the breakdown of turnover rates at ABC in Table 1 above, the internship division has experienced the highest average level of turnover at 72.5% over the past 6 years versus 57.5% for staff members, 29.5% for advance staff, 21.5% for management, and 14% for senior management. Although turnover rates vary significantly based on the type of industry that is involved (for example, the hospitality industry experiences an average of a 300% annual turnover rate), the average turnover rate for all types of American small businesses is about 17.8% per year and just 11.4% for companies such as ABC that compete in the services industries (Turnover rates by industry, 2019).
These averages mean that the company’s turnover rates for all categories of employees except for senior management and partners is higher than the national averages, and in some instances such as interns and staff, the turnover rates are far higher. Although senior staff members and partners are heavily invested in the company in terms of tenure and are therefore far less likely to quit, it is apparent that lower-level employees do not possess this sense of organizational investment and are consequently more likely to contemplate better employment opportunities elsewhere.
History
The use of sign-on bonuses began in 2012 when the company was experiencing a severe shortage of qualified candidates for its several HR divisions. It was during this period that turnover rates at the company began to accelerate, but the process was allowed to continue unabated with no meaningful effort on the part of the company to identify causation.
Symptoms vs. Causes:
While it is reasonable to posit that lower-level employees at ABC left the company during the past 6 years due to factors other than the use of sign-on bonuses for new hires, it is likewise reasonable to suggest that their use adversely affected job satisfaction, morale levels and organizational loyalty among most existing employees who watched new hires receive substantial sums while they languished in compensation limbo. In addition, there appears to be a lack of understanding among lower-level employees concerning how they can advance along the company’s career ladder.
Cost Implications:
The elimination of sign-on bonuses will provide the company with an immediate monetary benefit that can be used to provide lower-level employees with a corresponding amount in the form of raises and additional perquisites. This means that there will be a neutral net impact on the company’s annual HR budget for this initiative. There will be some additional costs that will be incurred when exit interviews are conducted by management in terms of time spent; however, since these interviews will be performed by salaried employees who would be paid regardless of their day-to-day responsibilities, the net impact on the company’s budget for this initiative is once again also neutral.
Legal implications:
Provided that the company continues to conform to the provisions of Title VII of the Civil Rights Act and the regulations administered by the Equal Employment Opportunity Commission with respect to its recruiting and hiring practices, there will be no legal implications involved in any of the recommendations outlined above.
Relationship implications:
On the one hand, an informal survey of interns as well as staff and advanced staff members indicated that the elimination of sign-on bonuses was universally regarded as a positive step in leveling the compensation playing field for all ABC employees. Because the excessively high rates of turnover at the company have adversely affected its profitability in recent years, there has been less money available for raises for senior staff members and dividend payments to partner. Therefore, it is likely that the company’s top leadership will readily embrace these recommendations since they represent a viable strategy for reducing the company’s costs that are associated with turnover while simultaneously improving employee morale and job satisfaction levels.
On the other hand, though, the implementation of the above-listed recommendations will likely affect the ability of the company to attract new candidates who may be primarily interested in sign-on bonuses as a way to increase their earnings by simply quitting after the last bonus payment is made and then moving on to another company that offers such bonuses (Hansen, 2009). Notwithstanding this constraint, the company’s ability to retain qualified candidates will be significantly enhanced by the elimination of sign-on bonuses since individuals who accept employment with the company under these circumstances will likely be more focused on long-term success than short-term gains.
Timing:
The implementation of the first two of the above-listed recommendations should begin immediately. In fact, any delays in the implementation of these two recommendations will likely allow the inordinately high levels of turnover that are being experienced by the company to continue to the detriment of its profitability as well as overall organizational performance due to diminished job satisfaction and morale levels among lower-level employees. The third recommendation concerning in-house training for all employees concerning strategies to successfully navigate the company’s career ladder will begin one month following acceptance of the recommendations set forth herein.
A specific timeline for implementation and administration of the three above-listed recommendations using the existing 32.5% turnover rate as a benchmark is provided in Table 2 below.
Other companies’ practices:
Other companies in different industries have recognized the counter-productivity using sign-on bonuses to attract qualified candidates, even during periods of labor shortages (Hansen, 2009). Likewise, a growing number of companies of all sizes and types are using exit interviews as a strategy to reduce their unplanned turnover rates (Christie, 2014). In addition, a growing number of companies have also recognized the need to provide employees with the training and tools they need to successfully navigate their career ladders (Ohunakin & Adeniji, 2018; Tatham, 2008).
Re-evaluation:
The re-evaluation of the effectiveness of the three recommendations outlined above will be performed as indicated in Table 2 above.
Conclusion
Today, ABC HR Consulting is at a critical juncture it its organizational history. The research was consistent in showing that this company has sustained an inordinately high level of turnover for the past 6 years and little or nothing has been done to address this costly issue in response. The research also showed that the precise antecedents of turnover vary dramatically from industry to industry as well as from individual to individual, by some of the most common issues that are involved in compelling employees to search for better employment opportunities elsewhere include diminished levels of job satisfaction and morale, both of which are adversely affected by the use of sign-on bonuses for new hires. In addition, other causes of turnover at ABC include the inability of current employees to successfully navigate the company’s career ladder. Fortunately, there are highly cost-effective solutions that are available for each of these problems and it is recommended that the guidance in this proposal be approved and implemented at the earliest opportunity.
References
Christie, J. (2014, September). Cochrane review brief: Exit interviews to reduce turnover amongst healthcare professionals. Online Journal of Issues in Nursing. 19(3), 7-11.
Dobbs, K. (2009, April). Knowing how to keep your best and brightest. Workforce, 80(4), 56-60.
Hansen, F. (2009, March 27). Refining signing bonuses. Workforce Management, 85(6), 1-3.
Johns, R. & Gorrick, J. (2016, April). Exploring the behavioral options of exit and voice in the exit interview process. International Journal of Employment Studies, 24(1), 25-29.
Ohunakin, F. & Adeniji, A. (2018, March). Perception of frontline employees towards career growth opportunities: Implications on turnover untention. Business: Theory and Practice, 19(1), 278-283.
Tatham, P. (2008, Spring). At my desk. Australian Journal of Career Development, 17(3), 6-9.
Turnover rates by industry. (2019). Compensation Force. Retrieved from https://www.compensationforce.com/2017/04/2016-turnover-rates-by-industry.html.