Employee Retention and Motivation in High-Tech Companies

Introduction: Retention Challenges in the Technology Sector

Over the past decade, labor markets have tightened and the cost of filling job vacancies has risen rapidly. An effective response that can help workforce managers address this problem is developing a fully integrated retention policy. An integrated retention policy shapes retention initiatives that are focused using information relevant to the problem (Steel, Griffeth, & Hom, 2002). To determine the success of efforts made by technology companies to gain new and valuable capabilities, retaining certain types of human capital is critical. Status, commitment, and autonomy have all been shown to positively affect employee retention (Ranft & Lord, 2000).

High-technology companies operate in unpredictable markets and experience increasing rates of growth and change. High-technology professionals are highly educated, prefer to remain independent, and possess a large share of the organization's intellectual capital (Murphy & Mateyaschuk, 2000). Employers work hard to maintain relationships with high-technology employees because experienced candidates are generally scarce and because competitors actively recruit them (Dockel, Basson, & Coetzee, 2006).

Best Practices for Employee Retention Within the Technology Industry

Compensation: Money has remained the primary incentive through which professionals in the high-technology industry are attracted. Although high salaries are not strictly necessary, salaries perceived as "good" and "fair" are directly related to employees' intention to stay. This suggests that once compensation is competitive, rewards are not the primary driver of retention. Ledford and Kochanski (2001) support this, noting that what employees are actually paid matters less than their feelings about how pay increases are determined and administered. Employees are concerned with how the payment system works and what they can do to increase their earnings.

Development opportunities and training: High-technology professionals have become increasingly scarce. Many companies have come to recognize that proactive measures are needed to build and maintain an organizational knowledge base (Dockel et al., 2006). Training is essential for any worker in the information technology industry to remain employable. Organizations must ensure that their employees are well equipped to keep pace with the latest technologies. Employees tend to remain with companies where career opportunities are promoted through learning and where they can apply newly acquired skills in a creative environment (Jiang & Klein, 1999). An increase in the level of self-worth and perceived importance is the primary mechanism through which training is expected to strengthen organizational commitment (Dockel et al., 2006).

Job characteristics: Employees with high-technology skills prefer to work on interesting projects that draw on their talents while challenging them. They are put off by repetitive work, limited work experience, and a lack of individual discretion (Kochanski & Ledford, 2001). Research indicates that the work content of high-technology professionals significantly influences workforce stability. When professionals find their work challenging and rich in learning opportunities and information exchange, they are more likely to stay. Engineers, for example, report higher job satisfaction and stronger organizational commitment than employees in non-technical fields (Dockel et al., 2006).

Career opportunities: Trends in the information technology labor market have continuously generated increased job openings for high-technology professionals, while simultaneously creating hiring and retention challenges for their employers. Ledford and Kochanski's (2001) survey found that job opportunities are more important retention predictors than any other type of reward, followed by training opportunities and the employee–supervisor relationship. Employees' perceptions of an organization's commitment to career-related practices — such as internal promotions, training and development opportunities, and employment security — positively affect organizational commitment.

Supervisor support: Supervisor support, in this context, refers to supervisory behaviors such as recognition and reward that encourage and sustain the innovative spirit of high-technology employees. Most high-technology employees are valuable staff who possess important innovation skills and deep knowledge of key products and services. Much of their work is tacit and difficult to measure. According to Ledford and Kochanski (2001), feedback from supervisors is particularly valuable to high-technology professionals. Providing employees with meaningful performance feedback promotes positive attitudes and helps prevent early intentions to leave the organization. High-technology employees value feedback from both their coworkers and their supervisors.

Methods of Assessing Compensation Amounts

Compensation is closely tied to financial performance. Milkovich and Gerhart (1990) note that firms with strong sales growth, high accounting profits, and growth in shareholder wealth tend to pay their chief executive officers more. However, the magnitude of these relationships is sometimes modest. According to Jensen, Murphy, and Baker (1988), the performance of technical roles often has a larger impact on a firm's success, and replacing technical employees is more expensive and difficult than replacing other workers. The effects of salary growth on turnover are most significant for high performers: high salary growth predicts low turnover, while low salary growth predicts extremely high turnover among this group. When salary growth was controlled for, promotions were found to positively predict turnover, with poor performers being most strongly affected.

Once an adequate level of pay is reached, intangible factors — such as supervisor support, career development, and work-life balance — become more important. DeYoung (2000) supports the view that retention benefits are personal and environmental in nature. Examples of perks include luxury vehicles for employees who exceed targets, permission to bring pets to the office, on-site gyms to help employees manage stress, and quiet rooms or collaborative spaces designed to improve teamwork.

Organizational size — measured by number of employees and sales volume — also has a positive effect on pay levels (Gerhart & Milkovich, 1990). Large firms need employees who produce high-quality work and have a greater ability to pay than smaller firms. Wage theories note, for example, that shirking is a particular problem in large firms, where monitoring every employee's performance is difficult (Gerhart & Milkovich, 1990).

Conclusion

High-technology companies are not only interested in retaining employees but also in creating a mutually beneficial interdependence with them (Murphy, 2000). The retention factors identified throughout this paper may serve as demonstrations of the organization's support and commitment to its employees, thereby cultivating a similar attitude and sense of attachment in return. Employees' organizational commitment is connected to their belief that these retention factors reflect a genuine desire on the part of the company to keep good employees and to treat all staff fairly (Dockel et al., 2006).

There is intense competition among companies to retain key employees. Executives and HR departments invest considerable time, money, and effort in finding effective retention strategies (Mitchell, Holtom, & Lee, 2001). A retention policy is a critical component of any workforce-management program. Like many effective organizational interventions, creating a successful retention policy requires a complex framework (Steel et al., 2002) that includes systematic data collection, thorough data analysis, and a well-considered strategy for responding to identified problems. When implemented effectively, these policies increase the likelihood of retaining the best employees while conserving institutional resources (Steel et al., 2002).

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