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Developing Strategies and Tactics to Increase Employee Retention.
By Kevin Dwyer
Thursday, 11th April 2013
 
Employee retention has been a hot topic in human resource management channels of communication for the past ten years or so.

Much has been written in those ten years about strategies for increasing employee retention. Typical advice, based on research, is to provide employees with:

1. A sense of purpose: People need to feel that their work, in their own opinion, is worthwhile. People with work that gives them a sense of purpose are more likely to stay.

2. A sense of direction: Allied to a sense of individual purpose is the need for people to perceive that the organisation has a sense of purpose.

3. Access to information: People need to have access to information they need to make decisions and the authority to make those decisions.

4. Clear organisational values: There needs to be congruence, or at least the absence of a conflict between their values and that of the organisation. It is also necessary for people to believe that there is congruence between the stated and observed values of the organisation for people to clearly want to stay.

5. Feedback: Positive feedback is a precursor to the feeling of recognition and acts as a spur for people to repeat the behaviour which generated the feedback. Positive feedback creates a positive reinforcing cycle that makes it attractive to come to work each day. Positive feedback adds also to the sense of individual purpose. Constructive feedback may have a positive impact on some people who have performed poorly, however, it almost always has a positive impact on those who perform well to know that there is differentiation between good and poor performance.

6. Development and growth: Research has indicated that development and growth by way of training, more challenging roles, clear levels of decision making authority and opportunities to test themselves in team environments has a positive impact on retention rates - especially when there are a high proportion of younger managers.

7. Good working conditions: General working conditions, if poor in terms of health and safety, do drive people to exit organisations and industries earlier than they would have if conditions were better. Research on the impact on retention of positive working conditions beyond what might be considered the norm is limited.

Advice like this appears quite sound, providing a good basis for developing tactics for employee retention.

Despite the HR fraternity regularly communicating and sharing this good advice over the last ten years, nothing much has changed in 20 years. Australian Bureau of Statistics data indicates that whilst there has been a decrease the percentage of people staying in their jobs for 2-5 years (28% to 24.5%) and an increase of the percentage of people staying in jobs for 20 years or more (8% to 10%), there has been no seismic shift (see Graph 1*).

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Industry employee turnover rates

So what has been missing? If the advice is good, why have we not witnessed the average tenure increase more markedly over twenty years?

Some further research statistics are instructive.

The Australian Bureau of Statistics data on average employee turnover demonstrates the large differences in industry tenure rates (Table 1) ranging from 10.6% in Electricity, waste and water services to 40.3% in Accommodation and food services.

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The implication of the divergent levels of turnover is that there are issues regarding employee retention that are common to an industry, but are not common across industries.

A known example is that in the accommodation segment of the accommodation and food services sector, there are a significant proportion of the businesses that have a seasonal business. Holiday destinations tend to have hotels which have high occupancy in summer and during school holidays and lower occupancy rates in winter and non-holiday times. These businesses adapt to the seasonal nature of their sales income by using a high proportion of casuals.

Typical employment pools for casuals in the accommodation industry come from tertiary institutions. The high proportion of casuals (40-60%) and the pool from which they seek those casuals, means that it is almost inevitable that the segment has a low retention rate. At the other end of the scale, electricity, waste and water services employ a high proportion (as much as 40%) of engineers who may spend ten years becoming knowledgeable and therefore valuable to the industry. By the time that has occurred, a sense of loyalty, obligation and familiarity is created, further reducing the propensity to move on to a new organisation or a new industry.

An obvious implication from these two examples is that the retention targets and the retention strategy need to be different for different industries. This means that our good advice at the start of this article may not be good for all industries.

Further, a 2008 HR Pulse study by the Australian Human Resources Institute (AHRI) revealed that while 76% of respondents wanted to reduce turnover, only 23% of respondents had individual performance targets linked to levels of turnover or staff and only 37% had a plan to reduce turnover. In addition, only 17% of organisations had a budget for retention.

Retention as a part of HR strategy aligned to corporate strategy

The AHRI study also reveals that that there is a divergence of opinion in who is responsible for retention (Graph 2). When there is such a wide divergence as to who is responsible, it means in my experience, that no-one is in fact responsible.

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It is my view that for a retention strategy and accompanying tactics to be successful, it is necessary for the retention strategy to be part of an overall HR strategy that is aligned to the corporate strategy (read our related article: Creating A Human Resources Strategy for the Employee Lifecycle).

My rationale for this is best explained by example.

In 1999, whilst living in the UK, Easyjet was a fledgling company. The founder, Stelios Haji-Ioannou, was often quizzed about his human resource management practices, particularly in Easyjet's call centres. In the call centres, most people were paid piece rates based on selling airline seats.

This was considered poor form and would lead inevitably to high rates of turnover. His response in an interview was something like, "Of course. I don't want people working there who can't or don't want to sell. People who can sell quickly will make very good money, those who can't I don't want working there as I won't be able to sell tickets cheaply." It struck me then as it does now that there is no "Good" advice for retention, there are only appropriate tactics to support the HR strategy to support the corporate strategy.

Measurement and Performance Management

To effectively implement any strategy or set of tactics, both the results of the implementation and key milestones of the implementation must be measured. This is so for retention strategies too. Yet, the AHRI HR Pulse study showed that only 18% of respondents believed that the effectiveness of retention strategies was being measured. In addition, only 22.6% believed that their performance was evaluated against staff engagement or turnover targets.

The study further revealed that employee surveys (65%) and exit interviews (59%) are used to determine the reasons why people leave and only in general and unspecific ways.

Summary

Retention is a hot topic and much advice is published in HR communication channels on how to improve retention. However, the advice is generic and may not be suitable for specific organisations in specific industries.

To improve retention it is necessary to:



  • Develop a HR strategy which is aligned to the corporate strategy through the employee lifecycle
  • Develop a retention strategy and set of tactics which supports the HR strategy
  • Ensure your retention strategy:
    - Has targets which are aligned to the corporate strategy, not popular HR norms
    - Allocates responsibility for the targets to senior managers or HR dependent on the role of HR in the organisation
    - Allocates individual responsibility through the performance management system
    - Measures retention levels against the targets
    - Allocates a budget for executing the retention strategy and tactics
    - Effectively measures specific reasons why people leave
    - Feeds back the reason why people leave into a review of the retention strategy
Source:
* RBA: Bulletin December Quarter 2012-Labour Market Turnover and Mobility. 2013. RBA: Bulletin December Quarter 2012-Labour Market Turnover and Mobility. [ONLINE] Available at:
www.rba.gov.au/publications/bulletin/2012/dec/1.html [Accessed 30 March 2013].

We welcome your comments.
Contact Kevin by email at
kevin.dwyer@changefactory.com.au or via phone on +61 (0)408 508 490

www.changefactory.com.au
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