Market-Driven-Approach4

Market Driven Approach to Retention

By Garima Saxena, 3EA
Market Driven Approach to Retention

Any organization which has to adopt the new strategy of market driven approach to retention, has to first accept the new reality: the market and not the organization, will ultimately determines the movement of employees. An organization can be as pleasant and rewarding a place to work in as possible, but the organization can't counter the pull of the market. The organization can never shield its employees from attractive opportunities and aggressive recruiters. The old goal of HR management was to minimize overall employee turnover. This needs to be replaced by a new goal: to influence who leaves and when. If in the past employee retention was similar to tending a dam that keeps a reservoir in place, it is more like managing a river today. The objective is not to prevent water from flowing out but to control its direction and its speed.

The most popular retention mechanism is compensation. While most of the companies try to retain their most treasured employees with "golden handcuffs", the problem with pay based incentives is that they're easy for outsiders to match. The recruiters are smart enough to buy out golden hand cuffs with providing signing incentives known as "golden hellos." Retention incentives end up becoming just another element of compensation, contributing more to wage inflation than to long-term retention. But compensation can help shape who leaves and when. Some companies now pay special "hot skills" premiums to employees whose expertise is crucial and in short supply. The payments are an effective way to keep talent in place for critical periods.

Moreover, organizations also opt for Job Tailoring as an effective tool for retention. This mechanism shouldn't be limited to particular categories of employees, but the organizations can also tailor them to the needs of individuals. This provides employees with a variety of tools to help them assess their own interests, values, and skills, and it encourages managers to tailor rewards, benefits, and assignments to individual requirements. A part-time arrangement might satisfy one employee's desire to pursue interests in sports or literature, while tuition reimbursement might be the key to keeping other employee happy.

Retention is also determined by loyalty to the organisation. Loyalty to an organization may be disappearing, but loyalty to colleagues is not. The organizations which encourage the growth of social ties among key employees, significantly reduce turnover among employees whose skills are in high demand. Carl Glaeser, general manager of Ingage Solutions, a Phoenix-based division of AG Communication Systems, has held the turnover of software engineers to 7%, mainly by developing programs that create a social community in the workplace. Cricket leagues, investment clubs, and dance squads create social ties and bind employees to their current jobs. The employee has the impression that leaving the company would mean leaving the social network of company-sponsored activities.

Measures to create community within an organization have one big potential shortcoming: they make the ordeal of any eventual restructuring all the more extreme. Creating strong social ties is hence unsuitable for employees who are likely to become less important to a company in the near future. But the organization can achieve a similar bonding effect, minus the long-term complications, with teams. By creating closely knit teams to carry out particular projects, organizations can increase the likelihood that the teams will remain intact for the length of the initiatives. People who would hardly think twice about leaving a company find it very difficult to walk out on their teammates. Our research suggests that working in a team increases employee's commitment to their work by 30%.

Our HR experts helped an organization in banking domain by developing "Building Management Capacity" program, which integrates recruiting, retention, and training efforts and is geared toward an increasingly mobile workforce. The program is anchored by a sophisticated planning model that projects talent requirements and attrition rates. The model enables managers to develop extremely targeted retention programs and create cost-effective exigency plans for filling potential gaps in skills. The model also provides a tool for constantly measuring the impact of human resources decisions, a capability crucial to handling people in this rapidly shifting labor market. The organization did what most companies avoid: making a truly honest assessment of how long the organization would like employees to stay on board.

The implementation of program revealed that different groups of employees warrant very different retention efforts. There will always be some people a company will want to keep indefinitely. Another set of people will be important to retain for shorter, well defined periods and finally there will be people for whom investments in retention don't make sense. Once you know which employees the organization need to retain and for how long, the organization can use a number of mechanisms to encourage them to stay. The key is to resist the temptation to use the mechanisms across the board. The organization should tailor programs to retention requirements for various employees and to the level of demand for them in the marketplace.

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Article by: Garima Saxena, 3EA