The management of contemporary organizations

Management of Contemporary Organizations

Cover Letter

CDE Apparel is medium size American company facing a high employee turnover rate. This places them in rather difficult and unpleasant situations, and to overcome them, the management must find ways to retain their staff.

The current business society is primary focused on incorporating two major changes which reside in increased focus onto the customer and also an increased focus onto the employee. In this sense, the customer has turned from the force buying whatever the company produced into the force demanding what the company is to produce. And the employee has turned from the force operating the machines into the company's most valuable asset. But in order to ensure a successful business outcome, organizations must simultaneously integrate both changes.

CDE Apparel is an American-based company founded in 1989 and activating in the clothing industry. While they have understood the need for a customer based approach to business, they have failed to value their employees. This consequently led to a high rate of employee turnover, which negatively impacts the quality of the company's products and services. Subsequently, the company's ability to meet its final objectives of registering profits and sustaining growth and development is negatively impacted. In order to identify a solution to the posed problem of increased employee turnover, the causes must be identified. These generally refer to corporate culture and reduced focus on the workers' on the job satisfaction, all forces which generate voluntary turnover. From the multitude of solutions offered by the specialized literature, the management at CDE Apparel has to chose that course of action which best applies to the unique needs of the organization and their personnel.

3. Background Information

CDE Apparel has been present onto the America market for nearly two decades now. The organization is medium sized registering about $1 million in revenue before taxes. The company activates in the clothing industry and they basically produce clothes and accessories, such as purses or belts. The manufactured items are then sold throughout the company's own two stores. The company's management promotes a customer-oriented culture in the meaning that they want to address and fully satisfy the clients' needs. And while doing this, the ultimate goal is that of registering profits.

4. Problem Definition

The contemporaneous business community is now centred on two major trends - that of fully satisfying the customers' needs, and that of increasing the employees' on the job satisfaction. The customers' satisfaction is vital for the ultimate success of the business as it ensures the organization with future customers and the guarantee of a profit. The employees' satisfaction is also a crucial part of the business process as it directly impacts the financial outcome of CDE. To better explain, the personnel at the apparel company are those that first of all make the products and who are responsible for a high quality, desired by the clientele. Then, the staff is the one that interacts with the customers, helping the client form an opinion of the organization. In other words, the employee represents the company's image in its relating to the customer. And in order for this interaction to be successful and retrieve the desired outcome (satisfied and returning customer), the employee has to be satisfied with his job.

But in their excessive focus on the customer, CDE Apparel has tended to neglect the employee. This resulted in unsatisfied workers who either do a poor job, either leave the company after a short period since hiring. Currently, the apparel manufacturer and retailer is facing the problem of increased employee turnover. This basically means that a large number of employees are leaving their jobs and the company has to replace them - a process that generates major inconveniences and increases costs. In other words, "employee turnover is a ratio comparison of the number of employees a company must replace in a given time period to the average number of total employees" (Wise Geek, 2003-2008). The management at the apparel organization has denied the existence of the problem, continuing to replace the leaving staff with new employees. However, turning a blind eye is no longer a viable solution, moreover since the severity of the problem is affecting the quality of the products and the satisfaction of the customers, negatively impacting the company as a whole.

5. Problem Analysis

The high rate of employee turnover represents a major problem within CDE Apparel because of the negative effects it generates. It could also be said that employee turnover is a natural process of replacing the staff, and it also generates benefits, such as adding new value or bringing in new people with innovative ideas. However, a high rate of employee turnover is not for the overall benefit of CDE Apparel.

The most common side effect of an increased employee turnover refers to the company's inability to sustain its growth and development. This basically means that the organization is incapable of manufacturing high quality products. Then, it is also incapable of properly serving the clientele as the quality of the services will also decrease significantly. This will finally imply the company's inability to register profits, placing them in serious difficult situations, not excluding bankruptcy.

Another major side effect of increased employee turnover is the reduction in the company's social capital. This can easily be explained through the tacit knowledge lost by the organization every time an employee leaves the firm (Droege and Hoobler, 2003). In other words, with every employee leaving, the company becomes poorer in skills and knowledge. Consequently, the organization will have to recruit and hire new staff, processes which will take more time and money. "In general, reducing employee turnover saves money. Money saved from not having to find and train replacement workers can be used elsewhere, including the bottom line of the company's profit statement. The U.S. Department of Labor estimates that it costs about 33% of a new recruit's salary to replace a lost employee. In other words, it could cost $11,000 in direct training expenses and lost productivity to replace an experienced employee making $33,000. Private industry estimates for highly skilled jobs peg turnover losses at a much higher level, up to 150% of the position's annual salary" (Johnson, 2006).

High employee turnover rates also negatively impact the business relations with customers and partners, who lose trust and interest in the company. Potential investors are also more precautious when a company meets with high employee turnover; and this reduces the company's access to financial resources and investment opportunities.

In addition, the high employee turnover not only affects the company in the meaning that they lose staff, it also negatively impacts the remaining personnel, increasing furthermore their levels of dissatisfaction. They generally have to cope with increased amounts of work. Also, seeing the others leave, they feel insecure on the job. All these negatively impact the job attitude and the performances of the employees who stay (Sheehan and Hockett, 1988).

The gravity of the situation is undisputable and major decisions must be made to resolve it. But to make the best informed decisions and reduce the employee turnover, the causes that generate it must first be identified.

A most relevant factor declared by the leaving employees was that of reduced wage in comparison to other organizations in the industry. In other words, the workers at CDE Apparel left because they knew they could earn more money in other companies, doing similar jobs. And however this reason was forwarded by employees at all levels, including manufacturing, sales as well as administrative, the most common such responses came from the workers in manufacturing. These individuals are the backbone of the organization as they produce the items at the core of the company. However, since they are generally unskilled and do mass production, they are paid the lowest salaries. Furthermore, the job is rather difficult and challenging, as large and heavy machines have to be operated. In other words, it can easily be said that the characteristics of the job generated increased employee turnover (Sigma Assessment Systems Inc., 2005-2007).

Then, another reason was that the staff did not feel valued, respected and appreciated. In other words, the corporate culture at CDE Apparel was increasingly focused on customers, in the detriment of the human resource. These procedures most relevantly materialized in reduced employee benefits. For instance, the workers at CDE were only partially medically insured, whereas other companies offer extended medical coverage which includes the close family of the employee (spouse and children).

Also, the general working environment was a rather tense one, in which the employee was expected to increase its performances, but was neither encouraged nor motivated to do this. The management was rather autocratic and placed reduced emphasis on satisfying the employees' needs. All in all, the causes of employee turnover are various and include both financial and non-financial justifications. "There is considerable evidence that money is often not the root cause of turnover, even when it is a factor in an employee's decision to quit. Rather, some experts believe that high turnover persists in certain jobs and companies because they have an atmosphere in which employees look for reasons to leave, and money is a convenient and sometimes compelling justification" (Johnson, 2006).

All identified causes within CDE Apparel indicate that the high employee turnover is due to voluntary reasons, rather than involuntary. In other words, the staff does not leave because they are forced to, due to restructuring, firing or retirement, but rather because they choose to (Adorno).

6. Alternative Courses of Action

The solution to the current problems facing CDE Apparel resides in reducing the employee turnover. And this can theoretically be done through the implementation of a wide array of managerial strategies, such as employee selection programs, outsourcing, corporate culture or motivational forces, briefly presented below:

Employee selection programs encompass numerous strategies and measures implemented by the employer in the hiring process and can be used to efficiently reduce turnover (Adorno). This basically means that the manager at CDE will select those candidates which are best skilled to do the job and which perfectly integrate within the corporate culture, whichever that is. In other words, in the current context at CDE Apparel, the new employees will have to be less pretentious and will have to place reduced emphasis on motivational forces. This could simply result in outsourcing.

Outsourcing basically means that the new employees will be hired from foreign countries and they will forward reduced demands as they will work for lower wages. In addition, the workforce in developing or less developed countries is less pretentious and only cares about the wages. Aside from fewer demands and lower wages, the foreign employees can also bring in additional skills. However, the matter of outsourcing is sometimes frowned upon as it is has numerous negative effects upon the American economy, such as an increase in the unemployment rate among the local population.

Most companies find that employee turnover is reduced when they address issues that affect overall company morale" (Wise Geek, 2003-2008). In other words, since the corporate culture is a primary cause of increased employee turnover, addressing corporate issues and orienting them in the direction desired by the employee could aid to reduce turnover.

Offering incentives is yet another effective strategy to reduce turnover. By being presented with more benefits, increased wages and a wide array of non-financial benefits, the employee will feel better appreciated and will tend to increase its performances, all to the overall benefit of the organization.