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SHRM Foundation’s Effective Practice Guidelines Series

Retaining Talent

A Guide to Analyzing and Managing Employee SHRM Foundation’s Effective Practice Guidelines Series

RETAINING A Guide to Analyzing and Managing Employee talent Tur nove r

by David G. Allen, Ph.D., SPHR

i RETAINING talent

This publication is designed to provide accurate and authoritative regarding the subject matter covered. Neither the pub- lisher nor the author is engaged in rendering legal or other professional . If legal or other expert assistance is required, the services of a competent, licensed professional should be sought. Any federal and state laws discussed in this book are subject to frequent revision and interpretation by amendments or judicial revisions that may significantly affect employer or employee rights and obligations. Readers are encouraged to seek legal counsel regarding specific policies and practices in their .

This book is published by the SHRM Foundation, an affiliate of the Society for Human Resource (SHRM©). The interpretations, conclusions and recommendations in this book are those of the author and do not necessarily represent those of the SHRM Foundation.

©2008 SHRM Foundation. All rights reserved. Printed in the United States of America.

This publication may not be reproduced, stored in a retrieval system or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the SHRM Foundation, 1800 Duke Street, Alexandria, VA 22314.

The SHRM Foundation is the 501(c)3 nonprofit affiliate of the Society for Human (SHRM). The SHRM Foundation maximizes the impact of the HR on organizational decision-making and performance by promoting innova- tion, , and the use of research-based . The Foundation is governed by a volunteer , comprising distinguished HR academic and practice leaders. Contributions to the SHRM Foundation are deductible. Visit the Foundation online at www.shrm.org/foundation.

For more information, contact the SHRM Foundation at (703) 535-6020.

ii of Contents

v Foreword RETAINING vii Acknowledgments ix About the Author

1 Retaining Talent

talent 2 What Is Turnover, Exactly? 3 Why Turnover Matters

5 Why Employees Leave

9 Why Employees Stay

10 How to Develop Your Retention Management Plan

21 A Menu of Retention Practices

27 Conclusion

28 References

33 Sources and Suggested Readings

iii

Foreword Dear Colleague:

As a busy human resource professional, you probably find it difficult to keep up with the latest academic research in the field. Yet knowing which HR practices have been shown by research to be effective can help you in your role as an HR professional.

That’s why the SHRM Foundation created the Effective Practice Guidelines series. These reports distill the latest research findings and expert opinion into specific advice on how to conduct effective HR practice. Written in a concise, easy-to-read style, these publications provide practical information to help you do your better.

The Effective Practice Guidelines were created in 2004. The SHRM Foundation publishes new reports annually on different HR topics. Past reports, available online at www.shrm.org/foundation, include , Selection Assessment Methods, and Commitment, Implementing Total Rewards Strategies and Developing Talent. You are now reading the sixth report in the series: Retaining Talent.

For each report, a subject matter expert is chosen to be the author. The report is reviewed by a panel of academics and practitioners to ensure that the material is comprehensive and meets the needs of HR practitioners. An annotated bibliography, “Sources and Suggested Readings” section, is included with each report as a convenient reference tool.

This process ensures that the advice you receive in these reports is useful and based on solid academic research.

Our goal with this series is to present relevant, research-based knowledge in an easy-to-use format. Our vision for the SHRM Foundation is to “maximize the impact of the HR profession on organizational decision-making and performance, by promoting , education, research and the use of research-based knowledge.” In particular, we are strategically focused on initiatives designed to help organizations maximize leadership talent. This includes a focus on the assessment and acquisition of leadership talent, as well as leadership development, retention, and succession.

We are confident that the Effective Practice Guidelines series takes us one step closer to making that vision a reality.

Frederick P. Morgeson, Ph.D. Chair, SHRM Foundation Research Applications Committee of Management, Michigan State v

Acknowledgements

The author gratefully acknowledges the assistance of Phil C. Bryant and James M. Vardaman in the preparation of this report, as well as the helpful comments of Dr. Charles A. Pierce.

The SHRM Foundation is grateful for the assistance of the following individuals in producing this report:

Content Editors Reviewers Herbert G. Heneman III, Ph.D. Meredith Brooks Carpenter, PHR Dickson-Bascom Professor in Inc. University of Wisconsin-Madison Martha R.A. Fields President and CEO Frederick P. Morgeson, Ph.D. Fields Associates, Inc. Professor of Management Eli Broad College of Business John D. Kammeyer-Mueller, Michigan State University Ph.D. Assistant Professor Warrington College of Business Project Manager Administration Beth M. McFarland, CAE University of Florida Manager, Special Projects SHRM Foundation Merry Lee Lison, SPHR , TRC Global Solutions, Inc.

Major funding for the Effective Practice Guidelines series is provided by the Human Resource Certification Institute and the Society for Human Resource Management.

vii

Retaining Talent

About the Author David G. Allen David Allen earned his Ph.D. from the Beebe Institute of Personnel and Relations at Georgia State University. He is currently an Associate Professor of Management in the Fogelman College of Business and at the University of Memphis, and the Director of the Management Ph.D. program. His primary research interests include the flow of people into and out of organizations and the role of in human resource management. His research on these topics has been published in the of Management Journal, Journal of Applied Psychology, Journal of Management, Personnel Psychology, Organizational Research Methods, Human Relations, and other outlets.

Dr. Allen is a 2005-2006 recipient of a Suzanne Downs Palmer Professorship award for research. He teaches undergraduate and graduate courses primarily in the areas of human resource management and , as well as research methods. He does organizational research and consulting on topics such as , retention, and organizational effectiveness. He earned the designation of Senior Professional in Human Resources (SPHR) from the Human Resource Certification Institute. Dr. Allen has worked with organizations such as the Red Cross, Campbell Clinic, Georgia Department of Family and Children Services, Harrah’s Entertainment, Methodist Hospitals, Pfizer, Region’s Bank, and the U.S. Navy.

ix In 2006, 23.7% of American workers voluntarily quit their . -- U.S. Bureau of Labor Retaining Talent

Retaining Talent: A Guide to Analyzing and Managing Employee Turnover by David G. Allen, Ph.D., SPHR

One of the most critical issues facing organizations today is how to retain the employees they want to keep. Yet nearly one quarter of all U.S. workers quit their jobs in 2006, and in some industries the turnover rate is considerably higher. There are more than 1,000 published research articles on turnover and retention. As a busy human resource practitioner, do you have the time to read them all, synthesize their recommendations, and translate them into usable practices to improve retention? If you’re like most HR professionals, you probably do not. That’s why the SHRM Foundation prepared this report—to summarize the latest research findings on employee turnover and retention and offer ideas for putting those findings into action in your .

This report explores several major themes related to retention management:

Why employees leave and why they stay. This presents the major and research findings in this area and explores the practical implications of each. A model is provided depicting how employees make turnover decisions.

How to develop an effective retention management plan. To create a sound plan, you need to determine the extent to which turnover is a problem in your firm, diagnose turnover drivers, and formulate retention strategies. These sections explain how to take these steps and include summaries of research on strategies.

Let’s start by exploring what turnover is and why it is important to manage it.

Reducing Turnover at American Home Shield

American Home Shield, the major appliance warranty arm of ServiceMaster, is based in Memphis, Tenn. and has about 1,500 employees. A critical department at American Home Shield was experiencing an annual turnover rate of 89%. The estimated the direct financial costs associated with losing employees and hiring and training replacements at over $250,000 annually. Managers also believed that the high turnover rate was eroding and customer loyalty. Using research-based retention management, the department reduced turnover to 35% in about one year.

Source: Phil Bryant, former HR Manager, American Home Shield

1 Retaining Talent

To manage voluntary What Is Turnover, Exactly?

turnover in your Employees leave organizations for all sorts of reasons. Some find a different job, some go back to school, and some follow a spouse who has been transferred organization, you need out of town. Others retire, get angry about something and quit on impulse, or never intended to keep working after earning a certain amount of money. an in-depth understanding Still others get fired or laid off, or they come into money (a lottery win, an inheritance) and decide they no longer need a job.

of why employees leave All of these examples represent turnover, but they don’t all have the same organizational implications. To distinguish their implications, we need to define or stay with organizations types of turnover. Consider Figure 1 Turnover Classification Scheme.1 in general, as well as

strategies for managing Figure 1: Turnover Classification Scheme

turnover among valued Turnover workers in your company.

Voluntary Involuntary

Functional Dysfunctional

Unavoidable Avoidable

As Figure 1 suggests, the first important distinction in turnover is between voluntary and involuntary. Voluntary turnover is initiated by the employee; for example, a worker quits to take another job. Involuntary turnover is initiated by the organization; for instance, a company dismisses an employee due to poor performance or an organizational restructuring. Voluntary and involuntary turnover require markedly different management techniques. This report focuses on voluntary turnover. To manage voluntary turnover in your organization, you need an in-depth understanding of why employees leave or stay with organizations in general, as well as strategies for managing turnover among valued workers in your company.

Another important distinction is between functional and dysfunctional voluntary turnover. Dysfunctional turnover is harmful to the organization and can take numerous forms, including the exit of high performers and employees with hard-to-replace skills, departures of women or minority group members that erode the of your company’s workforce, and turnover rates that

2 Retaining Talent

lead to high replacement costs. By because of problems or a Organizations that systematically contrast, functional turnover does desire to return to school, there may manage retention—in good times not hurt an organization. Examples be little the organization can do to and bad—will stand a greater chance of this type of turnover include the keep them. of weathering such shortages. exit of poor performers or employees The distinction between avoidable Turnover matters for three key whose talents are easy to replace. and unavoidable turnover is reasons: (1) it is costly; (2) it affects This distinction between functional important because it makes little a business’s performance; (3) it may and dysfunctional turnover is sense for a firm to invest heavily become increasingly difficult to relative. What makes an employee in reducing turnover that arises manage. The sections below examine valuable and difficult to replace from largely unavoidable reasons. each of these reasons in greater will vary by job, organization, However, the line between avoidable detail. industry, and other factors. To and unavoidable turnover can be illustrate, a high turnover rate may fuzzy. To illustrate, your company Turnover is costly be more dysfunctional in an industry has no over whether an characterized by skills that are in employee decides to start a family. Employee departures cost a rare supply. Moreover, the question Yet it can elect to offer paid company time, money, and other of whether the benefits of retaining , on-site child care, resources. Research suggests a valued worker are worth the costs and other benefits intended to help that direct replacement costs can may generate a different answer working parents stay with your reach as high as 50%-60% of an in some than in others, organization. employee’s annual , with depending on the organization’s total costs associated with turnover strategy and the current labor ranging from 90% to 200% of Why Turnover 4 market. annual salary. Examples include Matters turnover costs of $102,000 for a Could your organization retain all journeyman machinist, $133,000 for Does turnover matter? Absolutely— its valued employees if it wanted an HR manager at an automotive even during times when the job to? is no. Even if you manufacturer, and $150,000 for an market is tight and people are invested heavily in keeping every professional.5 If these strongly motivated to stay with their key employee on board, some of estimates strike you as high, keep in current employer. At such times, those individuals would still leave. mind that in addition to the obvious it would be shortsighted to ignore This brings up another important direct costs associated with turnover retention management. That’s distinction: Some voluntary turnover (such as accrued and because even high is avoidable and some is unavoidable. replacement expenses), there are rates have little impact on the Avoidable turnover stems from numerous other costs. Consider turnover of top-performing causes that the organization may be Table 1: Voluntary Turnover Costs employees or those with in-demand able to influence. For example, if 6 2 and Benefits. employees are leaving because of low skills. Thus, organizations that , the company could ignore retention may inadvertently Clearly, turnover costs can have improve the situation by redesigning plant the seeds for losing these an alarming impact. One study jobs to offer more challenge or more highly marketable workers. estimated that turnover-related costs opportunities for people to develop Moreover, everywhere represent more than 12% of pre-tax their skills. Unavoidable turnover are facing impending shortages of income for the average company stems from causes over which the overall talent as well as a dearth and nearly 40% for companies at the th 7 organization has little or no control. of employees with the specialized 75 percentile for turnover rate. For instance, if employees leave competencies companies need to However, remember that not all stay ahead of the competition.3 turnover is harmful (dysfunctional)

3 Retaining Talent

for an organization. As noted Turnover affects nurses accounted for 68% of the earlier, some turnover may generate organizational variability in per-bed operating important benefits; for example, performance costs.8 Likewise, reducing turnover the new hire turns out to be more A growing body of research links rates has been shown to improve productive or skilled than the high turnover rates to shortfalls in sales growth and workforce morale. previous employee. To develop an organizational performance. For In addition, high-performance effective retention plan, you need to example, one nationwide study HR practices (including reduction consider both the costs and benefits of nurses at 333 hospitals showed of dysfunctional turnover rates) associated with turnover in your that turnover among registered increase firm profitability and market organization. .9

These relationships become Table 1: Voluntary Turnover Costs and Benefits even more pronounced when

Separation Costs you consider who is leaving. For instance, research shows that Financial high turnover among employees HR staff time (exit , administration, benefits) with extensive social capital Manager’s time (retention attempts, ) can dramatically erode firm Accrued paid time off (vacation, sick pay) performance.10 Thus, a savvy Temporary coverage (contingent employee, for remaining employees) HR manager can make a clear business case for tailoring turnover Other management strategies to the Delays in production and customer service; decreases in product or service quality types of employees departing the clients organization. Clients not acquired that would have been acquired if employee had stayed Stiffer competition as employee moves to a rival company or forms own business Retention may become more Contagion (other employees decide to leave; for example, to join defector at his/her challenging new organization) Disruptions to team-based work Are you ready for a talent crunch? Opinions abound regarding Loss of workforce diversity whether demographic and labor market trends signal an impending Replacement Costs shortage of overall labor supply. New hire’s compensation For example, according to Hiring inducements (signing bonus, reimbursement of relocation expenses, perks) Manpower, Inc., “Demographic Hiring manager and unit/department employee time shifts (aging populations, declining program time and materials birthrates, economic migration), HR staff induction costs (payroll, benefits enrollment) social evolution, inadequate educational programs, globalization, Training Costs and entrepreneurial practices Formal training (trainee and instruction time, materials, equipment) (outsourcing, off-shoring, on- On-the-job training ( and employee time) demand employment) are . . . Mentoring (mentor’s time) causing [labor] shortages, not only Socialization (other employees’ time, travel) in the overall availability of talent Productivity loss until replacement has mastered job but also—and more significantly—in

Source: Herbert G. Heneman, III and Timothy A. Judge, Staffing Organizations (5e), Middleton, WI: Mendota House, 2006; p 675. the specific skills and competencies Reprinted with permission. required.”11

4 Retaining Talent

More and more observers agree that as the inducements it offers (such a talent scarcity is looming—and as satisfactory pay, good working Spotlight: Turnover Is Tougher that this shortage will make finding conditions, and developmental on Small Organizations and keeping the right people opportunities) are equal to or The loss of key employees can with the right skills increasingly greater than the contributions (time, have a particularly damaging challenging for organizations. In a effort) required of the person by impact on small organizations: SHRM of HR professionals, the organization. Moreover, these 62% of the respondents reported judgments are affected by both • Departing workers are more already having difficulty hiring the individual’s desire to leave the likely to be the only ones workers with the skills essential for organization and the ease with which possessing a particular skill or a 21st century workforce.12 Many he or she could depart. knowledge set. business leaders worry that this Clearly, turnover is a complex process. problem will worsen with important • A small company’s That is, although some individuals demographic shifts (such as waves of suffers a more serious blow may quit a job on impulse, most among aging workers). when an essential person leaves. people who leave spend time initially Inadequate educational systems, evaluating their current job against • There is a smaller internal pool increasingly mobile employees, possible alternatives, developing of workers to cover the lost and even generational differences intentions about what to do, and employee’s work and provide a in about the engaging in various types of job- replacement. of work and will all likely search behavior.14 aggravate matters further. HR • The organization may have fewer professionals who take time now Figure 2: Comprehensive Voluntary resources available to cover to create strategies for dealing with Turnover Model captures this replacement costs. these developments will put their process. The research shows that organizations at a competitive specific turnover drivers affect key advantage. job attitudes such as satisfaction with one’s role and commitment to the organization. Low satisfaction Why Employees Leave and commitment can initiate the withdrawal process, which Much research on talent retention includes thoughts of quitting, job has centered on understanding the searching, comparison of alternative Managing the Inducements- varied reasons behind employees’ opportunities, and the intention Contributions Balance decisions to leave organizations, to leave. This process may lead to as well as the processes by which turnover if the organization fails Organizations can actively people make such choices. By to manage it effectively. Turnover manage employees’ turnover understanding why people leave, drivers may also produce other work decisions by influencing the organizations can also gain a better behaviors that suggest withdrawal, inducements-contributions idea of why people stay and can learn such as , lateness, and balance. how to influence these decisions. poor performance, any of which To manage this balance, make may end in a departure without The of organizational changes affecting how intensely 13 the person going through a job equilibrium can shed valuable employees want to leave as well search, of alternatives, or light on these matters. According as how easy it is for them to extended consideration of quitting. to this theory, an individual will leave. stay with an organization as long The lesson? To proactively manage

5 Retaining Talent

retention, organizations must especially with highly valued workers Spotlight: Intervening in the monitor and adjust key aspects of in high-demand positions. the work environment that influence Turnover Process With limited resources, employees’ desire to stay or leave. There are multiple points in organizations may choose to focus the turnover process where As we’ve seen, the ease with which on target populations rather than organizations can intervene to the individual can leave an employer trying to retain every employee influence turnover decisions. plays a role in the person’s choices. indefinitely. (See the bottom of Key attitudes—job satisfaction When someone has numerous Figure 2.) Depending on what’s and organizational commitment— alternatives that are more attractive going on in the labor market, are especially critical during the than his or her current role, the businesses may want to focus their turnover process and therefore decision to leave grows that much retention efforts on particular are worth paying special easier. Retention-savvy managers employees or groups of employees, attention to. thus keep tabs on alternate such as new hires, star performers, opportunities, so they can ensure workers with high-demand or hard- In the withdrawal phase of the that positions remain competitive. to-replace skills, or members of turnover process, the intention Also, in Figure 2, notice the particular demographic groups. to leave is generally the most feedback arrow from the withdrawal powerful predictor of turnover. process to key attitudes. When Predicting turnover Thus measuring it is vital. attractive alternatives are plentiful, people tend to evaluate their current Can you predict an employee’s work environment against a higher decision to leave? Extensive studies standard than when options are have looked into this question and few. It may become more difficult many drivers of turnover have been for their employer to keep them identified. Figure 3 summarizes the 15 satisfied—which is a challenge of this research. The figure

Figure 2: Comprehensive Voluntary Turnover Model

On-Boarding Realistic Embeddedness Shocks/Scripts Previews Socialization

Turnover Drivers Withdrawal Process Key Attitudes Job Characteristics Thinking of Quitting Job Satisfaction Leadership Job Search Turnover Relationships Organizational Alternatives Commitment Work Environment Turnover Intentions Individual Characteristics

Work Behaviors Absenteeism Lateness Target Populations: e.g., new hires, high performers, high-demand skills, demographic groups Performance

6 Retaining Talent

lists predictors in order—from those this list is a useful overall guide. with the strongest relationship to Spotlight: Decreasing Figure 3 below reveals some turnover at the top, to those with Turnover at Cendant interesting information. For the weakest relationships at the example, most of the strongest Cendant decreased annual bottom. Though the strength of predictors are related to the turnover from about 30% to these predictors may vary somewhat withdrawal part of the turnover less than 10% by adding to across job types, companies, process, suggesting that managers the inducements side of the industries, and individual situations, equation.16 Specifically, it implemented a flexible working Figure 3: Turnover Predictor and work/life balance program after an employee Turnover Intentions (+) survey revealed workers’ desire Thoughts of Quitting (+) for greater balance between their Search Intentions (+) Search Behaviors (+) professional and personal lives. Weighted Application Blank (+) The program is managed at the Organizational Commitment (-)

Stronger department level and offers daily Relationship with Supervisor (-) flexible start and end times as Role Clarity (-) Tenure (-) well as an option to work four Job Satisfaction (-) long days each week and take (+) the fifth day off. Cendant also Absenteeism (+) Work Satisfaction (-) now offers wellness programs Comparison of Alternatives to Present Job or Company (+) for employees, such as on-site Satisfaction of Expectations of Job or Company (-) mammograms, blood pressure (-) Stress (+) and vision tests, flu shots, and Promotion Opportunities (-) seminars on topics such as Children (-) single parenting and smoking Alternative Job Opportunities (+) cessation. Job Scope (-) Quality of in Organization (-) Work-Group Cohesion (-) Co-worker Satisfaction (-) Participation in Decision Making (-) Satisfaction with Supervisor (-) Role Overload (+) Job Involvement (-) Age (-) Pay (-) Outcome Fairness (-) Degree of Routinization of Job Responsibilities (+) Family Responsibilities (-) Training (-) Pay Satisfaction (-) Lateness (+) Education (+)

Weaker Marital Status (-) Sex Cognitive Ability (+) Race

Note: a plus (+) indicates that the predictor is positively related to turnover. (As the predictor increases, so does turnover.) A minus (-) indicates that the predictor is negatively related to turnover. (As the predictor increases, turnover decreases.)

7 Retaining Talent

Spotlight: Managing Turnover Paths 17

Through surveys and exit , the work environment. Be prepared to minimize prevalent negative organizations can identify the percent to deal with external offers for valued shocks (such as harassment or of people leaving who follow each employees. perceptions of unfair treatment). Give of the four primary paths to turnover. employees realistic previews and clear • Plans: It may be difficult to counter Each path has different implications communication to minimize unexpected these directly. Increasing rewards tied for the company’s retention strategies: shocks. Provide support mechanisms to tenure may alter some employees’ to help employees deal with shocks (for • Dissatisfaction: Attack this with plans. Determining which plans are instance, grievance procedures, flexible traditional retention strategies such common in your workforce may help work arrangements, and employee as monitoring attitudes you develop a tailored response; for assistance programs). and managing the drivers of turnover example, more generous maternity and identified earlier. family-friendly policies if you discover Example: UPS has countered of numerous family-related plans. better job alternatives by providing well- • Better alternatives: Ensure that above-market , ample vacation time, your organization is competitive in • No plan: Analyze the types and free health , and a highly competitive terms of rewards, developmental frequencies of shocks that are driving pension plan.This approach has resulted in an opportunities, and the quality of employees to leave. Provide training unusually low annual turnover rate of 1.8%.18

must monitor these variables employees’ decisions to leave. (perhaps through ). Thus, offering pay increases or Additional predictors that merit bonuses to keep people at your careful attention include: organization may not be the most efficient way to address retention. In • Key attitudes of organizational addition, demographics (education, commitment and job satisfaction marital status, sex, and race) are • The quality of the relationship also relatively weak predictors of between an employee and his or turnover. her immediate supervisor

• Role clarity (including definition, Other paths to turnover Shock n 1. Any event that leads communication, and reinforcing of The research findings we’ve been someone to consider quitting performance expectations) examining can help you identify and his or her job. Shocks can be manage the turnover predictors most expected (e.g., completing • Job (including job scope, important in your organization. a degree) or unexpected promotion opportunities, and However, research has also (discovering that a spouse has to opportunities to participate in recognized that not every employee relocate). They can also be job- decision-making) follows the above-described path related (a negative performance toward the decision to leave a job. appraisal) or non-job-related • Workgroup cohesion The unfolding model of turnover (pregnancy). Finally, they can The figure also suggests that pay identifies four different paths to be positive (winning the lottery), might not matter as much as you turnover: (1) leaving an unsatisfying neutral (a merger), or negative think in turnover decisions, as job, (2) leaving for something ().19 compensation and pay satisfaction better, (3) following a plan, and (4) are relatively weak predictors of leaving without a plan.20

8 Retaining Talent

Leaving an unsatisfying job mechanisms to help employees Spotlight: Managing Turnover resembles the typical turnover recover from a shock. Predictors at Running Pony process discussed above. Leaving for something better entails leaving for Research has not systematically determined differences in turnover an attractive alternative, and may Why Employees Stay or may not involve dissatisfaction. predictors’ strength based on That is, some people who are quite A great deal of turnover research organization size. Nevertheless, satisfied with their current jobs still focuses on people who leave, on the managers in small organizations leave when presented with an even assumption that understanding why should leverage well-established more appealing alternative. These people depart will help organizations predictors they may be in a decisions may be initiated by a determine how to retain them. particularly good position to “shock,” such as an unsolicited job Of course, it is also valuable to offer, such as building positive offer that the individual can’t resist. understand why employees stay. work-group , providing Some recent studies have examined employees with challenging jobs, Following a plan refers to leaving a the ways in which employees and making each worker feel job in response to a script or plan become embedded in their jobs and valued. Other strategies, including already in place. Examples may their communities.21 As employees offering well-defined paths include employees who intend to participate in their professional and or above-market rewards, may be quit if they or their spouse becomes community life, they develop a web more difficult for smaller companies. pregnant, if they get accepted of connections and relationships on Running Pony22 understands that into a particular degree program, and off the job. Leaving a job would matter in after they earn a certain amount require severing or rearranging people’s decisions about staying or of money or complete a particular these connections. Employees who leaving an organization. Founded in training program, or after receiving have many connections are more 1994, Running Pony is a multiple a retention bonus. Again, these embedded, and thus have numerous Emmy Award-winning freelance decisions may have little or nothing reasons to stay in an organization. production company. In business for to do with job dissatisfaction. There are three types of connections 13 years and currently employing Further, there may be little or that foster embeddedness: (1) 17 people, the company has had nothing organizations can do to “links,” (2) “fit,” and (3) “sacrifice.” 100% retention since its inception. influence these decisions. Each of these types may be related to How has it achieved this feat? the organization or the surrounding Leaving without a plan is all about Managers have strived to build a community. impulsive action, typically in supportive and cohesive culture. As response to negative shocks such as Links are connections with other co-founder and managing partner being passed over for a promotion people, groups, or organizations. Jonathan Epstein puts it, “We were or having a family member suffer Examples include relationships with trying to build a team of people who a catastrophic illness requiring co-workers, work groups, mentors, knew each other, who liked each extensive care. Once more, these friends, relatives, church groups, and other, who worked well together departures may or may not be so forth. Employees with numerous and complemented each other.” associated with dissatisfaction before links to others in their organization Rod Starnes, also a co-founder and the shock. In addition, organizations and community are more embedded managing partner, adds that the can manage these decisions by and would find it more difficult to company’s biggest achievement minimizing certain types of negative leave. is “creating an environment where shocks in the workplace (such as creative and talented people are sexual harassment). Companies can comfortable.” also consider providing support

9 Retaining Talent

Fit represents the extent to tenure, a positive work environment, Spotlight: Strengthening which employees see themselves promotional opportunities, status Community Ties at Paragon as compatible with their job, in the community, and so forth. National Bank organization, and community. For Employees who would have to example, an employee who relishes sacrifice more are more embedded Paragon National Bank, outdoor activities and lives in a and therefore more likely to stay. in western Tennessee, community that offers excellent has embraced the idea of outdoor opportunities would find encouraging employees to it more difficult to leave his or her build ties with the community. How to Develop job if doing so required moving to For example, the bank has Your Retention another community that did not “adopted” a local second- provide such opportunities. Management Plan class, has invited employees to participate in Habitat for Sacrifice represents forms of value The above-described suggestions for Humanity home-building a person would have to give up managing turnover predictors and projects, and encourages if he or she left a job. Sacrifices employees’ embeddedness are useful workers’ participation in the include financial rewards based on for any HR practitioner seeking to annual Susan G. Komen Race for the Cure events, among other local projects. The Table 2: Embedding Your Employees Memphis Business Journal named Paragon National Bank In your organization In the surrounding community the winner of its 2006 Best To build and strengthen • Provide mentors. Encourage and support community Place to Work in Memphis links . . . • Design work in teams. involvement; for example, through • Foster team cohesiveness. community service organizations and contest among organizations • Encourage employee referrals. recreational leagues. with 51-150 employees.23 To build and strengthen • Provide realistic information • Recruit locally when feasible. fit . . . about the job and company • Provide relocating employees during recruitment. extensive information about the • Incorporate job and community during recruitment and organizational fit into employee selection. selection. • Build ties between your company • Provide clear socialization and the community (e.g., by and communication about the sponsoring local events). enterprise’s values and culture.

To build and strengthen • Tie financial incentives to tenure. • Encourage home ownership (for sacrifice. . . instance, by providing home-buying • Provide unique incentives that assistance). might be hard to find elsewhere (such as ). • Develop career paths that do not require relocation.

Table 2: Embedding Your Employees24 shows strategies for building and strengthening links, fit, and sacrifice in your organization.

10 Retaining Talent

help his or her organization retain job types, geographic locations, and talent. But they’re not enough in even individuals. Thus, one-size-fits- Ongoing Retention themselves. That’s because simple all retention initiatives may backfire. Management at American one-shot retention efforts (for How, then, should you approach Home Shield example, a single employee attitude the task of developing the right survey, a one-time bonus, or a American Home Shield retention management plan for your once-offered management training recognized that to retain company? program) are unlikely to exert much its most valued employees, impact over the long run. Figure 4: Developing a Retention managers first had to To manage retention most Management Plan26 on page 12 understand why some effectively, you need to engage in an shows the important steps in this employees leave and ongoing diagnosis of the nature and process. In the sections below, we others stay. To capture this causes of turnover, as well as develop examine each of these steps more information, an employee (and constantly hone) the right mix closely. turnover project team of retention initiatives. surveyed a of employees who had already That calls for thinking about Step 1: Is Turnover a Problem left the organization. It also retention before employees are for Us? implemented an ongoing hired, while they’re working at your procedure to survey people As we noted earlier, not all company, and after they leave. As an who left the organization after voluntary turnover is harmful for HR professional, you have a critical the initial survey. In addition, it an organization. Turnover among role to play in this process. Indeed, surveyed remaining employees underperformers, turnover that many organizations are integrating on a quarterly basis throughout enables your company to tap their retention efforts into a broader the project to determine which fresh perspectives and skill sets or strategy. Talent aspects of their jobs made lowers labor costs are all examples management comprises workforce them stay and which caused of functional turnover. Moreover, planning, hiring, development, them to consider leaving. and retention to ensure that the in most cases, it’s impossible to organization has access to the prevent every employee from leaving The team found that supervisor quality and quantity of talent it a company. However, turnover availability, job training, and job- needs to compete now and in the becomes dysfunctional when the requirement future. A recent study concluded wrong people are leaving, or when were the most important, yet that 53% of organizations have a the turnover rate becomes so high most dissatisfying, aspects of talent management initiative in that the accompanying costs and working at American Home place, and 76% of these enterprises instability outweigh the benefits. Shield. identify talent management as a top To determine whether turnover is organizational priority.25 problematic in your enterprise, you need to conduct a turnover . But keep in mind that each organization is unique, operates in Turnover analysis its own idiosyncratic environment, and has its own An effective turnover analysis strategies and challenges. Even examines three questions: (1) How within a single organization, many people are leaving (turnover retention goals and challenges may rate)? (2) Who is leaving? (3) What differ across departments, divisions, are the relative costs and benefits of

11 Retaining Talent

Figure 4: Developing a Retention Management Plan

STEP 1: STEP 2: STEPS 3 and 4: Is Turnover a Problem for Us? How Should We Proceed? Implementation and Evaluation

Benchmarking External Internal Why People Quit or Stay in Your Organization Exit Interviews; Post-Exit Surveys Stayer Focus Groups Employee Surveys

Turnover Analysis Targeted How Many Are Leaving? Develop Strategies Implementation Evaluation Who Is Leaving? Retention Goals Costs and Benefits? Broad based Strategies

Data Collection Why People Quit or Stay in General Retention Research Needs Assessment Best Practices External Internal Benchmarking Surveys

our current turnover? Let’s look at performance level of departing schedules are an effective retention each of these in turn. workers). These breakout data help strategy, and are more likely to you identify “turnover hotspots” to cite a relocating spouse, child care How many are leaving? focus on. issues, conflict with co-workers, Use the equation on page 13 to and difficulty balancing work and calculate turnover rate over a certain Who is leaving? personal life as reasons for leaving 28 time period (e.g., monthly The question of who is leaving is organizations. Owing to these and 27 or yearly). crucial for assessing the extent to other differences, you should track which turnover is functional or breakout data on the performance Also track types of turnover (such levels, skills (especially high-demand as voluntary vs. involuntary and dysfunctional, because not every employee is of equal value to or hard-to-replace skills), tenure, and avoidable vs. unavoidable), type of membership in underrepresented employee (part-time or full-time), your organization. Furthermore, some employees may leave for groups (e.g., minorities, females) job category, job level, geographic of individuals who leave. This location, and other categorizations different reasons than others. For example, a SHRM survey found information will give you a more that may be important in your complete picture of the extent to organization (for instance, that women are more likely than men to report that flexible work which turnover is a problem in your

12 Retaining Talent

Average number of employees Turnover Rate = X 100 Number of employees leaving company, and will help you develop manufacturing organization, Another source of external more effective retention strategies. this rate is absolutely too high. benchmarking data could be private That’s because such organizations organizations such as the Attrition What are the relative costs and typically experience much lower Consortium. This group of 25 benefits of our current turnover? levels of turnover. But for hourly Fortune 500 companies provides employees in a retail or food-service quit-rate statistics to a third-party Most retention strategies require environment, it almost certainly organization that compiles the data investments of time, money, or is not, because these types of and circulates benchmark statistics.30 other resources. To design strategies organizations often experience much Through internal benchmarking, that yield acceptable returns on higher turnover. Benchmarking you track your organization’s those investments, you need a and needs assessment can give turnover rates over time. If the clear idea of how much the costs you additional information for rate is increasing, overall or among associated with turnover in your determining whether turnover is a particular groups or locations, that company outweigh the benefits problem in your organization. associated with turnover. Using this could be a red flag. information, you can calculate total Through external benchmarking, turnover costs as well as costs per you compare your organization’s Needs assessment incident of turnover. The formulae turnover rates against industry and Through a needs assessment, you use may vary based on factors competitor rates. If your rates are you evaluate the implications of such as job type or level, employee significantly higher than those of turnover for your organization in the type, or employee performance level. rival companies, your firm may context of future labor demand and A variety of resources are available be at a competitive disadvantage. availability. to help you develop cost-benefit Alternatively, relatively low rates formulae and metrics, including in your company could provide Using an external needs assessment, the SHRM Retention Toolkit an edge over rivals. One source of you consider trends in the industry available at www.shrm.org.29 In external benchmarking data is the and larger labor market that may practice, your turnover-cost metrics U.S. government. For instance, affect supply and demand of need not be “perfect.” It’s more the Department of Labor (DoL) human capital. Some trends (such important that you arrive at an publishes the Job Openings and as industry growth) may increase internal consensus on appropriate Labor Turnover Survey (JOLTS; demand for employees valued by measures, so that the analysis, www.bls.gov/jlt). Table 3: JOLTS your organization. Others (such as conclusions, and recommendations 2006 Quit Rates on page 14 shows retirements of ) may are seen as credible by others in your an example. These data represent worsen already shrinking supplies of organization. annual and monthly quit rates as a labor. percentage of total employment for all non-farm employment across the Through an internal needs Benchmarking United States. On the DoL’s web assessment, you evaluate your Is a 15% annual turnover rate too site, you can find breakdowns by organization’s future strategic high? This question is impossible to industry, geographic region, public- direction and that direction’s answer in isolation. For managerial private, and government sector. implications for your labor employees in a stable, mature requirements. Some strategies

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(such as expansion of a business) the board. For example, “Decrease Spotlight: Tracking will increase demand and may annual turnover in our company by Turnover Rates at Harrah’s make turnover more problematic 7%.” Targeted strategies are designed Entertainment than strategies likely to decrease for organization-specific turnover demand (including outsourcing drivers and are intended to address Harrah’s Entertainment or contraction). Some strategic organization-specific issues. Often, tracks overall turnover rates plans may require a more nuanced these strategies are also used to as well as turnover rates by approach to managing turnover. For influence turnover among certain property (location) and by example, if your company needs to employee populations. For instance, division/department. The decrease the size of its workforce and “Increase the retention rate of company also codes each decides to do so by offering early female engineers by 10%.” termination as voluntary or or severance packages, involuntary and controllable or Figure 5: Adapting Your Retention you may also want to simultaneously uncontrollable. Within these Strategies provides guidance for how work on retaining certain other key broader categories, it breaks to proceed based on the criteria of employees. the data down into almost 30 turnover costs, turnover rates, and more specific subcategories who is leaving. (such as voluntary-controllable- STEP 2: How should we dissatisfied with pay; proceed? As Figure 5 suggests, when turnover costs are tolerable, turnover involuntary-policy violation). Taken together, turnover analysis, rates acceptable, and turnover These data enable Harrah’s to benchmarking, and needs assessment is considered functional, then track turnover rates and types enable you to determine the extent turnover is not a significant current across business units and to which turnover is problematic issue. Thus, your organization identify patterns that warrant in your organization. These data can focus on monitoring the attention. will help you develop appropriate situation and maintaining the responses and set your retention status quo. When costs are goals. If you’ve decided that tolerable, but employee departures turnover is not a problem, you may are considered dysfunctional, want to simply maintain the status consider low-investment strategies quo while still monitoring turnover targeted at people who leave, for in your organization. example creating more flexible If you’ve determined that turnover work arrangements. When costs does present a problem, you might are tolerable, but turnover rate want to consider broad-based or is problematic, you may want to targeted retention strategies (or a try low-investment but broad- combination of both), depending based strategies. When both the on your company’s unique situation. turnover rate and who is leaving Broad-based strategies are based are problematic, you’ll need both on general principles of retention targeted and broad-based strategies. management and are intended to When turnover costs are deemed help reduce turnover rates across intolerably high, look for strategies

Table 3: JOLTS 2006 Quit Rates

Annual Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 23.7% 1.8% 1.6% 1.9% 1.8% 2.1% 2.2% 2.1% 2.7% 2.1% 1.9% 1.7% 1.7%

14 Retaining Talent

that provide a positive cost-benefit organization or at large subsystems, In addition, you’ll want to learn ratio, even if they require extensive and are intended to address overall from best practices—the strategies resources. Finally, when neither retention rates.31 Examples might that other organizations are the rate nor who is leaving is include providing across-the-board doing and are finding effective problematic but turnover costs are market-based salary increases, or ineffective. For example, a high, seek to streamline and reduce changing your company’s hiring WorldatWork survey of HR the costs associated with each person process to incorporate retention- professionals found the following who quits. related criteria, and improving the top ten retention initiatives in use:32 work environment. The data to help Note that broad-based and targeted you proceed can come from several strategies don’t have to be mutually 62% Market adjustment/base sources, including (1) retention exclusive. Indeed, general retention salary increase research, (2) best practices, and (3) best practices can help you keep benchmarking surveys. 60% Hiring bonus specific employees on board and determine which organization- Retention research can shed valuable 49% Work environment (e.g., specific turnover drivers to measure. light on the primary drivers of flexible schedules, casual dress, At the same time, data that you turnover in organizations. Earlier ) collect on those organization- in this report, you saw a summary specific drivers can help you reduce of the predictors most consistently 28% Retention bonus overall turnover rates. Still, you’ll related to turnover and the relative 27% Promotion and career- get the best returns on your strengths of those relationships. development opportunities retention investments if you use data The Annotated Bibliography at collection and retention strategies of this report describes 24% Above-market pay that are tailored to your particular additional useful resources. You may 22% Special training and turnover problem. Let’s take a closer also want to attend conferences of educational opportunities look at the differences between certain professional associations to broad-based and targeted strategies. gain access to the latest research on 22% Individual spot bonuses turnover and retention; for example, 19% Stock programs Broad-based strategies the Academy of Management and the Society for Industrial and 15% Project milestone/completion As we’ve seen, broad-based retention Organizational Psychology. bonuses strategies are directed at the entire

Figure 5: Adapting Your Retention Strategies

Turnover Costs Tolerable Intolerable

Turnover Rates Acceptable Acceptable High or High or Acceptable Acceptable High or High or Increasing Increasing Increasing Increasing

Who is Leaving Functional Dysfunctional Functional Dysfunctional Functional Dysfunctional Functional Dysfunctional

Response Maintain Low- Low- Low- Streamline Targeted Broad-Based Broad-Based Status Quo Investment Investment Investment Costs Strategies Strategies and Targeted and Monitor Targeted Broad-Based Broad-Based Strategies Strategies Strategies and Targeted Strategies

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Professional associations such as SHRM can also be useful sources Implications for Small Organizations of best practices data. The SHRM web site (www.shrm.org) offers Organization size can be a factor in determining the extent to which a wealth of survey data, research turnover is a problem, as well as appropriate retention goals. Smaller reports, toolkits, white papers, and organizations may be more sensitive to high turnover rates and to the loss other resources related to retention of key employees. If an excellent HR manager leaves a large organization, practices. For example, Table 4: it may hurt, but the organization has the human capital and other resources Retention Initiative Effectiveness33 to move on. If the excellent (and only) HR manager leaves a small is drawn from a SHRM retention organization, it can be devastating. Small organizations may also have practices survey. different thresholds for evaluating what represents a high cost and what represents a reasonable investment in retention strategies. Finally, benchmarking surveys can also provide useful data for developing broad-based above example) is a targeted strategy. to cite negative aspects of the retention strategies. For example, To develop a targeted strategy, you organization that have contributed organizations regularly conduct can gather data from several sources, to their decision to leave (such as compensation and salary reviews to including (1) exit interviews, (2) dissatisfaction with their supervisor). know where they stand in terms of post-exit surveys, (3) current- In addition, they tend to cite tangible rewards relative to those employee focus groups, (4) linkage positive external factors that lie offered by other companies. This research, (5) predictive turnover outside the organization’s control kind information can be invaluable studies, and (6) qualitative studies. (for example, better opportunities as you consider system-wide changes elsewhere) as causes for their or new reward structures intended to departure. influence overall retention. You can Exit interviews

also collect benchmarking data on Exit interviews are used to collect In one study of exit interviews, retention initiatives from consortia data on why employees are leaving 38% of employees reported leaving that conduct such studies. an organization. In a SHRM survey because of salary and 4%, because of HR professionals on the use of of dissatisfactory supervision. In Targeted strategies routine organizational practices a posed to these related to talent management, 61% At times, HR practitioners need to same individuals 18 months later, of the respondents reported that determine more specific drivers of only 12% reported leaving because they used this type of interview.34 turnover in their organization. For of salary, whereas 24% cited Exit interviews are popular because 35 example, a research project in the supervision as the cause. Why the they generate immediate data on gaming industry found that one distortion? People may want to why an employee is leaving. They of the best predictors of turnover avoid doing anything that might can also help an organization salvage among new hires was whether the end the employment relationship a valued employee. Moreover, shift they were told they would work on a negative note, especially if they they can serve a public-relations during recruitment matched the shift believe they may need references function by ending the employment actually assigned to them once they from the company in the future. relationship on a positive note. were on the job. Communicating They may also find it easier to give realistic information during Despite their popularity, exit the impression that there is little the recruitment is a useful broad-based interviews have raised some concerns organization could have done. That strategy for lowering turnover rates. about the data they uncover. way, the interviewer will be less likely But communicating accurate shift Research suggests that many to try to retain them. information to new hires (as in the departing employees are reluctant

16 Retaining Talent

To get the most from exit in what’s causing employees to stay may have considered leaving your interviews:36 at your organization. Interviews or organization, why they have opted focus groups with current employees to stay, and the factors they consider • Use neutral interviewers (such as can be valuable additional sources most important for remaining with someone from HR or an external of information for developing the company in the future. ). targeted retention strategies. In You can get the most from current- • Train interviewers. particular, these methods can shed employee focus groups by paying light on the reasons employees • Use a format. particular attention to the input of

• Emphasize confidentiality to the extent possible. (Certain legal Table 4: Retention Initiative Effectiveness issues, such as allegations of illegal harassment or discrimination, Initiative Effectiveness Offer the Initiative? cannot be guaranteed yes no Plan To Health care benefits 1.96 94% 3% -- confidentiality.) Competitive 2.02 83% 8% 5% • Cross-check results with other data Competitive salary increases 2.05 75% 15% 6% Competitive vacation/holiday benefits 2.09 92% 4% 1% sources such as employee surveys. Regular salary reviews 2.11 89% 6% 4% • Use the information gained from Defined contribution retirement 2.21 73% 21% 2% Paid personal time off 2.21 75% 20% 2% the interview to make positive Flexible work schedules 2.25 60% 32% 4% changes and let managers know Training and development opportunities 2.26 88% 4% 4% how the information is being used. Open-door policy 2.32 93% 3% 2% New-hire orientation 2.32 92% 2% 3% Defined benefit plan 2.32 52% 41% 2% Post-exit surveys Child care paid or on-site 2.40 3% 89% 5% Early eligibility for benefits 2.41 40% 54% 2% Exit interviews are conducted just Workplace location 2.41 59% 23% -- before or just as employees are Tuition reimbursement 2.42 77% 17% 3% leaving. At these times, employees Retention bonuses 2.43 22% 71% 4% may find it most difficult to be Child care subsidies 2.46 8% 84% 4% objective and candid. For this Spot cash 2.48 43% 47% 6% Stock options 2.53 27% 66% 3% reason, consider using post- Succession planning 2.54 32% 46% 16% exit surveys to collect similar Non-cash or low-cash rewards 2.56 63% 25% 8% information some time after an Casual dress 2.59 76% 18% 1% employee has left your organization. 360-degree feedback 2.60 31% 51% 14% Typically, you would gather this On-site parking 2.64 86% 10% 1% Domestic-partner benefits 2.66 12% 74% 4% data through a telephone survey. Elder care subsidies 2.66 4% 89% 2% As you would during an exit Attitude surveys/focus groups 2.67 46% 41% 10% interview, use a neutral source and Alternative dispute resolution 2.67 31% 60% 5% structured format, and emphasize Transportation subsidies 2.74 16% 75% 4% confidentiality. Fitness facilities 2.75 26% 62% 8% 2.77 56% 38% 1% Sabbaticals 2.78 12% 82% 2% Current-employee focus groups Telecommuting 2.79 26% 64% 7% Non-compete agreements 2.84 46% 48% -- Exit and post-exit data collections Concierge services 2.92 5% 87% 4% focus on why employees have left. You need to be equally interested Scale: 1=very effective; 5=not effective at all

17 Retaining Talent

employees whom your organization individual survey responses and that may underlie employee is most interested in retaining (such individual turnover decisions. departures. These methods typically as high performers or individuals Employees complete attitude and require more resources. However, in high-turnover jobs). As with the opinion surveys (often developed they can sometimes reveal patterns other methods discussed, be sure in the same manner as described or relationships that surveys don’t to use trained neutral parties and above). Then, after some period of capture. a structured format, emphasize time (typically six months or one Qualitative studies may include confidentiality to the extent possible, year), you track who leaves and repeated interviews with and provide a clear mechanism for who stays. The goal is to statistically representatives of key employee using the information generated. examine the relationships between groups as well as analysis of diaries in survey responses and subsequent which workers record their thoughts retention patterns. Linkage research about the employment relationship. Through linkage research, you Predictive surveys provide clear data These studies may also take the form measure employee attitudes and on the strength of the relationships of experience methods, in opinions through anonymous between specific predictors and which workers respond to repeated surveys, aggregate the responses actual turnover decisions in your measures of their employment to the business-unit level, and organization–valuable information relationship at a particular point statistically correlate the aggregated for determining how to craft in time. For instance, you might responses with your company’s targeted retention strategies. provide specific individuals with a turnover rates and other important However, this method requires personal digital assistant and ask business outcomes (such as customer employees to identify themselves them to report their job satisfaction satisfaction, sales, and profitability). so that you can link their survey at random times. This technique can give you a clear responses to subsequent turnover picture of the drivers of business- decisions. Without the comfort that Targeting specific employee groups unit turnover rates. comes with anonymity, employees may be unwilling to give candid After collecting data through one How do you decide what to measure responses during the surveys. Thus, or several of the above-described with a linkage survey? Draw from you’ll need to take special care to means, you may discover that some retention research and best practices, protect confidentiality and reassure groups or types of employees leave exit interviews, and focus group data participants that their supervisor will for different reasons than others. from those who stay. Also look to not see their responses. The use of For example, suppose the data show your own hypotheses about what outside researchers or that a particular division or location may be causing turnover in your can help make employees feel more has higher and more dysfunctional organization. University researchers comfortable. turnover than others. Moreover, and outside consultants can further employees of that division or help you design and administer location report lower job satisfaction the surveys as well as analyze and Qualitative studies and less positive relationships interpret the results. Finally, it may be worthwhile to with than workers in conduct more in-depth qualitative other divisions or locations, and Predictive turnover studies studies. Instead of focusing on these differences are related to quantifying relationships between the differences in turnover rates. Whereas linkage surveys look for turnover and other factors, These findings may prompt you to connections between trends at the qualitative studies attempt to develop a retention strategy (such as business-unit level and turnover uncover the complex, harder-to- supervisor training) targeted at that rates, predictive surveys examine measure decision-making processes particular division or location. direct relationships between

18 Retaining Talent

Alternatively, suppose the data performers, your organization may Fostering a pro-diversity work reveal that employees with high- be particularly concerned about climate can help mitigate turnover demand and hard-to-replace retaining women and minorities; related to unsupportive co-workers skills (for example, engineers) are for example, if the company views or performance pressures stemming generating particularly high and workforce diversity as a means of from, say, being the only woman in costly turnover. In addition, you’ve gaining a competitive advantage. a division staffed by men. Recent found that departing engineers Though research shows a weak research has shown that the diversity are especially unhappy with their correlation between sex or race and climate in an organization is related compensation. You may develop a individual turnover decisions, data to turnover intentions, especially targeted retention strategy that calls suggests that in the labor market as among African-.40 for changing their compensation to a whole, women and minorities may Finally, you may want to consider reflect the labor market. be somewhat more likely than men retention strategies based on and members of majority groups to In both of these cases, a targeted generational differences. Although depart an organization.38 strategy will be far more cost- research shows that the likelihood effective than a system-wide one. If you want to develop targeted of turnover generally declines strategies for retaining women and with age, many organizations are You can likewise use turnover minorities, take care to understand finding that different generations of data to craft targeted strategies for the unique drivers behind their employees look for different things retaining high-value employees, employment decisions. For from their professional lives. For such as (1) star performers, (2) example, women may be more instance, as baby boomers (those women and minorities, and (3) new likely to report leaving because born between 1946 and 1964) generations entering the workforce. of family or relationship issues. A approach retirement age, they may Any turnover among high performers recent summary of potential causes value schedules that allow them to may be exceptionally dysfunctional of turnover among women and transition to part-time work and for some organizations. The research minorities included seven drivers:39 then full-time retirement. Their highlights three primary conclusions employers must decide how to retain for how organizations can best retain • Supervisor their knowledge and experience these workers:37 • Pay inequity while making room for the next • Performance-based rewards can generation of leaders. Meanwhile, • Less interesting jobs increase retention among high members of (born performers (and may increase • Performance pressures 1965 to the late 1970s) experienced turnover among low performers). the breakdown of the lifetime • Blocked careers employment and bring • Top performers in jobs or • Unsupportive co-workers to the workplace an emphasis on occupations with extensive market-based rewards, personal visibility or easily documented • Sexual harassment and performance accomplishments are opportunities, work-life balance, more at risk for turnover. and use of technology. Members Many of these drivers can be of Generation Y (born early 1980s • The ability of well-designed pay- addressed with training (such as to 2000) are now entering the for-performance plans to reduce workshops on avoiding sexual workforce, expect to be changing harmful turnover can more than harassment or prejudice) or with jobs frequently, and have been wired offset these plans’ increased costs. HR practices (for example, equitable to technology since childhood. Some compensation schemes and career In addition to developing sources feel these employees will be development opportunities). retention strategies targeted at star extraordinarily technologically savvy,

19 Retaining Talent

at ease with global business and your new strategy and be prepared what return your company is getting diversity, and skilled multi-taskers. to answer those concerns. on its investment in the strategies. Nevertheless, other observers believe Do these results support your After implementing your plan, it will they have less of a than company’s retention goals? If not, be important to evaluate the results. older employees, have unrealistic are some of those goals unrealistic, Retention efforts may require expectations regarding career and do they need to be modified? substantial investments, so you’ll advancement, and lack the ability to Do unsatisfactory results suggest want to assess their impact relative make independent decisions.41 the need to gather new kinds of to the cost. For example, consider data or to develop a more effective So far, research suggests that how many employees are leaving, implementation approach? Exploring generational differences may which employees are leaving, and be overstated as drivers of job satisfaction and turnover.42 Still, considering generational differences Implementing and Evaluating Retention Strategies at American in employees’ reasons for leaving Home Shield may be helpful for developing targeted retention strategies. For Armed with an understanding of why some of their employees were example, some indicates leaving, the American Home Shield retention management team was ready that younger employees may place to develop and implement a plan. The plan included both broad-based and higher value on work-life balance targeted strategies, and was organized around the three job characteristics and advancement opportunities than the team had identified as particularly problematic: job training, supervisor older employees.43 availability, and job requirement communications. The team included several solutions in their plan as well as a management “” it would use on an ongoing basis to ensure that all solutions continued to STEPS 3 and 4: Implementing deliver as promised. Your Plan and Evaluating the Results Several solutions implemented by American Home Shield were based The third phase of retention directly on the data the team had collected: management is implementation • Reorganize the training schedule so that it matched the typical learning of your plan, while the fourth is curve of the specific job. evaluating the plan’s results. Let’s consider implementation first. • Increase the authority of front-line employees to free up supervisors to handle higher-level issues. The actions you take to implement your plan will depend on the • Streamline the procedure for communicating job-requirement changes by strategies you are pursuing and (a) giving only department managers the authority to make job-requirement the unique circumstances of changes and (b) giving department employees e-mail accounts through your organization. With any which all job-requirement changes would be communicated. organizational change, you’ll want American Home Shield also implemented a solution suggested by research to get top management support the team had reviewed: improve hiring procedures. This solution consisted and buy-in for your strategy. It of structured interviews of job candidates using a trained interview team will also be important to develop a asking pre-screened behavioral questions. The purpose of this solution communications plan to ensure that was to increase the reliability and of the selection process and the managers understand the changes likelihood of hiring employees who would be a good fit for the job and the and are prepared to implement new organization. policies and procedures. Try to anticipate any possible objections to

20 Retaining Talent

these questions can help you tease work environment. However, they out the causes behind less-than- can also reduce applicant pools, as How to create a Realistic Job ideal outcomes. This allows you to some applicants decide that the job Preview (RJP): 46 objectively assess your retention or organization is not for them. strategies and make the changes Thus, RJPs are most appropriate for 1) Interview incumbents about needed to improve the results. positions in which retention is an their job duties and work issue but for which the organization experiences. does not have great difficulty finding A Menu of enough qualified applicants. 2) Identify common themes Retention Practices and descriptors. Research shows that certain HR Selection 3) Validate that the resulting practices can be especially powerful How managers at your organization statements portray a in enabling an organization to handle the selection process can relatively common work achieve its retention goals. These also influence turnover. Using experience. practices include (1) recruitment, biographical data (biodata) during 4) Develop the RJP in booklet, (2) selection, (3) socialization, selection is one especially effective brochure, or electronic (4) training and development, (5) technique. Biodata empirically form. Oral presentations compensation and rewards, (6) identifies life experiences that tend can be particularly supervision, and (7) employee to differentiate those who stay with effective.47 engagement. The sections below an organization from those who summarize findings from that quit. Life experiences associated 5) Use the RJP with a literature regarding these practices. with people who stay may include group of applicants while They also explore the findings’ significant tenure on previous jobs, maintaining a control group implications for how you might education experiences, involvement of applicants who are not approach retention management in and leadership in career-related exposed to the RJP. clubs and organizations, and early your organization. 6) Revise and update the work experiences. In considering RJP as needed based on which kinds of biodata to use, avoid Recruitment findings from the previous Evidence suggests that recruitment step. practices strongly influence In addition to using RJPs, Providing Realistic Job turnover. Considerable research consider encouraging Previews at AIMCO shows that presenting applicants employee referrals during with a realistic job preview (RJP) AIMCO, an apartment management recruitment. Research during the recruitment process and investment company, found consistently shows that has a positive effect on retention that people were leaving the individuals hired through 44 of those new hires. An RJP organization because their jobs employee referrals tend to stay presents accurate information were not what they had expected. with the organization longer about the positive characteristics By providing realistic job previews than those hired through any and potential challenges associated through enhanced, more accurate other recruitment source.48 with any job, as well as clear details job descriptions in recruiting about performance expectations advertisements, the company cut and the company’s performance turnover in certain jobs from 22% management processes. RJPs help down to just 3%.45 employees adjust easily to their new

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those that could be seen as sensitive interviews, structured Developing a WAB (for instance, anything related to such as the protected class status or family Profile or the Job Compatibility Weighted application blanks background). Questionnaire, or values and (WABs) are powerful predictors personality profile matching.51 Texas of retention. Specific weights Research shows that biodata Instruments, for example, has a Fit will vary for each organization questionnaires can be quite Check Tool on their web site that and may vary by position within predictive of retention, yet they are enables applicants to evaluate their an organization. Empirically not widely used by organizations.49 own fit with an open position and determine your own weights and One straightforward way to leverage with the company in terms of their avoid items related to protected this tool is through a weighted education and work experience as class status. application blank (WAB). A WAB well as their workplace values uses the answers of current and (www.ti.com). former employees to application questions to empirically determine whether some items differentiate Socialization those who stay from those who For many organizations, turnover leave. Items that differentiate can rates are often high among new then be weighted according to employees. This situation is how strongly they differentiate particularly troubling, because people who stay from people who the organization may have leave. You can then use these items made significant investments during selection from among future in recruitment, selection, and applicants. WABs are among the best training—and high turnover prevents predictors of turnover. the company from seeing a return on these investments.52 Research To better manage retention, many has shown that socialization organizations are beginning to assess practices can help new hires become fit (with the job and organization) embedded in the company and thus during the selection process. Fit is more likely to stay.53 These practices the compatibility of an individual include shared and individualized with the work environment. learning experiences, formal and Research shows that both person- informal activities that help people job and person-organization fit are get to know one another, and related to turnover.50 Although the assignment of more seasoned potentially useful, assessing fit during employees as role models for selection presents some challenges newcomers.54 since many of the criteria seem subjective in nature. For instance, Using Socialization to Improve one could argue that to fit well with New Hire Retention an organization, an individual should • Involve experienced organization have similar values and a compatible insiders as role models, mentors, work style to other employees—and or trainers. these can be difficult to measure in an interview. To surmount these • Provide new hires with positive challenges, consider using structured feedback as they adapt.

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• Structure orientation activities These opportunities may so that groups of new hires discourage turnover by keeping Assessing Organizational experience them together. current employees satisfied and Fit well-positioned for future growth • Provide clear information about Assessing fit with the opportunities. People in certain the stages of the socialization organization and with the job jobs that require constant updating process. during selection improves of skills (such as information retention. Fit can be assessed via technology) might leave if they have structured interviews, structured no options for strengthening those questionnaires, or values and To develop a Weighted skills. However, training may make 55 personality profile matching. Application Blank: employees more marketable and thus 1) Identify those employees who increase the ease with which they can are likely to stay and those be recruited by rival organizations. who are likely to leave. Still, research suggests a modest 2) Select items from application negative relationship between blanks for analysis. training and turnover: Those who receive more training are somewhat 3) From personnel records, less likely to quit than those identify the application-blank who receive little or no training. responses of people who stay Growing evidence also indicates that and people who leave. employees are increasingly future growth opportunities into 4) Determine the weight of each their turnover decisions, and training application blank response and development play an important category by computing role here.56 If you’re concerned that the percentage difference training will increase turnover in between people who stay and your organization, you may want to people who leave. consider offering job-specific training 5) Estimate the predictive (which is less transferable to other accuracy of the WAB. If the contexts) instead of more generalized correlation between WAB training (which transfers easily).57 scores and membership in Also think about linking some types the stay or leave groups is of developmental opportunities to significant, use the WAB for retention. For example, reimburse selection purposes. tuition for employees who remain with your company for a specified 6) Continue to cross-validate amount of time after they complete your WAB’s predictive power. a degree program.

Compensation and rewards Training and Development Compensation and rewards offered Some observers worry that training by your organization obviously play and development opportunities a critical role in the inducements- may be a double-edged sword. contributions balance described

23 Retaining Talent

earlier, which we can also think of company more competitive in the Employee Value as the employee value proposition war for talent. Proposition (EVP) n 1: (EVP). Fail to offer competitive Finally, you can explicitly link The total package of extrinsic rewards, and you may put your rewards to retention. For example, and intrinsic rewards provided company at a disadvantage for many organizations tie vacation to employees in exchange attracting and retaining talent. for joining, performing, and hours to seniority, offer retention remaining with the organization.58 At the same time, pay levels and bonuses or stock options to pay satisfaction are only modest longtime workers, or link defined predictors of people’s turnover benefit plan payouts to years of decisions, as you saw earlier.59 Thus, service. Interestingly, research you need to carefully consider shows that both defined benefit how you use rewards to retain and defined contribution plans are employees. Research suggests several associated with longer tenure.62 approaches. One is to lead the Likewise, retention bonuses or market with respect to rewards. This “golden handcuffs” may help you has the dual benefit of promoting keep employees on board during satisfaction (thereby decreasing periods of transition or uncertainty, workers’ desire to leave) and such as mergers or reorganizations. minimizing the relative attractiveness However, these may be less effective of alternatives.60 Of course, this as ongoing retention tools, because approach needs to be consistent with more organizations are offering your organization’s overall strategy “golden hellos” to lure employees and its HR strategy. Also, keep in away from competitors.63 mind that you can lead the market In weighing the pros and cons of with types of rewards other than base any compensation and rewards pay. For example, market-leading strategies, keep in mind that variable or incentive pay, benefits, or employees are concerned not only intrinsic rewards such as increased with the fairness of the outcomes decision-making autonomy can of reward-allocation decisions but powerfully motivate people to stay. also with the fairness of the processes

by which reward decisions are You can also tailor rewards to made and communicated. Reward- individual needs. Employees may allocation processes that are seen differ in their preferences for certain as fair may trigger less upset over types of rewards—variable pay, individual tailoring than processes benefits, work arrangements, and seen as unfair. This research so forth. Although organizations also raises questions about the continuously try to balance market long-term efficacy of pay-secrecy forces, internal compensation policies. In the short run, these structures, and individual fairness, policies may help the organization many are increasingly weighting avoid triggering dissatisfaction market forces and individual needs associated with rewarding employees more heavily.61 True, tailoring differently. However, over time, rewards to individual needs may they tend to give the impression of raise concerns about internal equity; unfairness. however, it can also make your

24 Retaining Talent

Leveraging Rewards to Retain on leadership roles, you may want to Valued Employees 64 provide training and coaching that Offering Training and covers not only how to be a good • Lead the market on rewards that Development as a Retention boss but also how to retain talent. fit with business and HR strategy Tool Also remember that a manager’s • Tailor rewards to individual needs • Providing training and behavior stems in part from how he and preferences development opportunities or she is evaluated and rewarded. generally decreases the One way to encourage supervisors • Promote justice and fairness in pay desire to leave. This may be to focus on retention is to measure and reward decisions particularly critical in certain retention among their teams. You jobs that require constant • Explicitly link rewards to retention can then incorporate this metric skills updating. into your company’s evaluation and reward system. Federal Express, • Organizations concerned Supervision for example, explicitly evaluates about losing employees by You’ve heard the maxim before: managers on retention metrics in making them more marketable “People leave because of bad their work groups. should consider job- bosses.” Research supports this specific training and linking Finally, pay particular attention claim: the quality of employees’ developmental opportunities to —defined relationships with their supervisors to tenure. as sustained hostile verbal and/ is an important driver of turnover. or nonverbal behaviors such Evidence also suggests that a as criticizing direct reports in worker’s satisfaction with his or her public, ridiculing subordinates, boss, the quality of the exchanges lying, breaking promises, making between them, and fair treatment by threats, and misdirecting anger supervisors are related to retention.65 at employees.67 Training may One study found that fair treatment discourage some of these behaviors. by supervisors was more important If it doesn’t, you’ll need to remove than the distribution of outcomes in abusive supervisors if their actions predicting turnover.66 are driving valued employees away.

This body of research points to several recommendations for managing retention. First, prepare Developing Better the supervisors and managers in your Managers organization to lead and to develop • Train supervisors and managers effective relationships with their how to lead and how to develop subordinates. In many companies, effective relationships with individual contributors are promoted subordinates to managerial positions based solely • Hold supervisors and managers on their performance on technical accountable for retention aspects of the job—not on their supervisory abilities. However, there • Identify and remove abusive is no guarantee that good technical supervisors performance will translate into effective supervision. To prepare people in your organization to take

25 Retaining Talent

Employee engagement employees were five times less likely Spotlight: Improving Strengthening employee to quit than employees who were 70 Leadership at SAP Americas engagement in your organization not engaged. To learn more about the implications of such findings Through a series of employee can also help you retain talent. for HR practitioners and about surveys, SAP Americas, a Engaged employees are satisfied ways to improve engagement in leading business software with their jobs, enjoy their work your organization, see the SHRM company, learned that and the organization, believe Foundation Effective Practice leadership vision, leadership that their job is important, take Guidelines report “Employee regard (how management pride in the company, and believe Engagement and Commitment.” treats employees), and that their employer values their 69 Table 5: Strengthening Engagement management support were the contributions. One report in Your Organization71 offers top three drivers of turnover on measuring engagement at additional tips. in its organization. The Intuit found that highly engaged company launched an effort to improve supervisor-employee Table 5: Strengthening Engagement in Your Organization relationships and perceptions of leadership vision and support. The effort included • Increase meaningfulness, autonomy, variety, and co-worker support Job design monthly conference calls in jobs. and TV broadcasts through which top management could communicate with employees, Recruitment and • Use clear communication to achieve person-job and person- and a two-and-a-half-day selection organization fit. session with 2,500 employees • Hire internally where strategically and practically feasible. to clarify the firm’s strategic direction. Voluntary annual turnover rates fell from 14.9% 68 Training and • Provide orientation that communicates how jobs contribute to the to just 6.1%. development organization’s mission and that helps new hires establish relationships with colleagues. • Offer ongoing skills development.

Compensation • Consider competency-based and pay-for-performance systems. and performance • Define challenging goals. management • Provide positive feedback and recognition of all types of contributions.

26 Retaining Talent

Conclusion

Effectively managing retention in your organization isn’t easy. It takes extensive analysis, a thorough understanding of the many strategies and practices available, and the ability to put retention plans into action and learn from their outcomes. But given the increasing difficulty of keeping valued employees on board in the face of major shifts in the talent landscape, it is well worth the effort.

To get the most from your retention management plans, you’ll need to: (1) analyze the nature of turnover in your organization and the extent to which it is a problem (or likely to become one); (2) understand research findings on the drivers of employee turnover and the ways in which workers make turnover decisions; (3) diagnose the most important and manageable drivers of turnover in your company; and, (4) design, implement, and evaluate strategies to improve retention in ways that meet your organization’s unique needs. The research, guidelines, and examples provided in this report will help you to tackle this challenging but crucial responsibility.

Retention Results at American Home Shield

Using primary and to develop their retention management strategy, American Home Shield was able to reduce turnover from nearly 90% to about 35% in a short period of time. American Home Shield first defined the extent to which turnover mattered in their organization. It then gathered primary data to measure and understand why some employees were leaving and others were remaining with the organization. Finally, the company developed a retention management plan that allowed management to control employee turnover on an ongoing basis.

27 Retaining Talent

References

1 Griffeth, R.W. & Hom, P.W. 2001. Retaining Valued Employees. Sage.

2 Trevor, C.O. 2001. Interactions among actual ease of movement determinants and job satisfaction in the prediction of voluntary turnover. Academy of Management Journal, 44, 621-638.

3 Confronting the coming talent crunch: What’s next? 2006. Manpower white paper.

4 Cascio, W.F. 2006. Managing Human Resources: Productivity, Quality of Work Life, Profits (7th ed.). Burr Ridge, IL: Irwin/McGraw-Hill. Mitchell, T.R., Holtom, B.C., & Lee, T.W. 2001. How to keep your best employees: Developing an effective retention policy. Academy of Management Executive, 15, 96-108.

5 Sommer, R.D. 2000. Retaining capital in the 21st century. SHRM White Paper.

6 Heneman, H.G. & Judge, T.A. 2006. Staffing Organizations, 5th edition. McGraw Hill Irwin.

7 Driving the bottom line. 2006. PricewaterhouseCoopers Saratoga Institute White Paper.

8 Alexander, Bloom, & Nuchols, 1994.

9 Batt, R. 2002. Managing Customer Services: Human Resource Practices, Quit Rates, and Sales Growth. Academy of Management Journal, 45, 587-597. Huselid, M. 1995. The impact of human resource management on practices, on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38, 291-313.

10 Shaw, J.D., Duffy, M.K., Johnson, J.J., & Lockhart, D. 2005. Turnover, social capital losses, and performance. Academy of Management Journal, 48, 594-606. Shaw, J., Delery, J., Jenkins, G., & Gupta, N. 1998. An organization-level analysis of voluntary and involuntary turnover. Academy of Management Journal, 41, 511-525.

11 Confronting the coming talent crunch: What’s next? 2006. Manpower White Paper.

12 Collison, J. 2005. Future of the U.S. labor pool. SHRM Research.

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13 March, J.G. & Simon, H.A. 1958. Organizations. 21 Mitchell, T.R., Holtom, B.C., Lee, T.W., Sablynski, John Wiley. C.J., & Erez, M. 2001. Why people stay: Using to predict voluntary turnover. Academy 14 Mobley, W.H. 1977. Intermediate linkages in the of Management Journal, 44, 1102-1121. relationship between job satisfaction and employee turnover. Journal of Applied Psychology, 62, 237-240. 22 Murtaugh, Frank. “Show and tell.” Memphis Business Hom, P.W. & Griffeth, R.W. 1991. Structural Quarterly. Spring 2007: 13-14. equations modeling test of a turnover theory. Journal 23 Paragon National Bank. 2007. Online. Internet. of Applied Psychology, 76, 350-376. Steel, R.P. 2002. . Turnover theory at the empirical interface: Problems of fit and function. Academy of Management Review, 24 Mitchell, T.R., Holtom, B.C., & Lee, T.W. 2001. 27: 346-360. How to keep your best employees: Developing an effective retention policy. Academy of Management 15 Griffeth, R.W., Hom, P.W., & Gaertner, S. 2000. Executive, 15, 96-108. A meta-analysis of antecedents and correlates of employee turnover: Update, moderator tests, and 25 Fegley, S. 2006. 2006 Talent management survey research implications for the next millennium. Journal report. SHRM Research. of Management, 26, 463-488. 26 Adapted from Steel, R.P., Griffeth, R.W., & Hom, 16 Zimmerman, Eilene. 2004. “The joy of flex.” P.W. 2002. Practical retention policy for the practical Workforce Management. 83: 38-40. manager. Academy of Management Executive, 16, 149-161. 17 Adapted from Mitchell, T.R., Holtom, B.C., & Lee, T.W. 2001. How to keep your best employees: 27 Heneman, H.G. & Judge, T.A. 2006. Staffing Developing an effective retention policy. Academy of Organizations, 5th edition. McGraw Hill Irwin. Management Executive, 15, 96-108. 28 Frincke, J. 2006. 2006 U.S. Job Retention. SHRM 18 Strauss, G. 2003. UPS’ pay, perks make it a and CareerJournal.com, SHRM Research. destination job for many. Wall Street Journal, October 14, Section B, pp. 1-2. 29 Cascio, W.F. 2000. Costing human resources: The financial impact of behavior in organizations (4th ed.). 19 Mitchell, T.R., Holtom, B.C., & Lee, T.W. 2001. Cincinnati, OH: South-Western. Heneman, H.G. & How to keep your best employees: Developing an Judge, T.A. 2006. Staffing Organizations, 5th edition. effective retention policy. Academy of Management McGraw Hill Irwin. SHRM Retention Toolkit, www. Executive, 15, 96-108. shrm.org.

20 Lee, T.W. & Mitchell, T.R. 1994. An alternative 30 Steel, R.P., Griffeth, R.W., & Hom, P.W. 2002. approach: The unfolding model of voluntary employee Practical retention policy for the practical manager. turnover. Academy of Management Review, 19, 51-89. Academy of Management Executive, 16, 149-161. Mitchell, T.R., Holtom, B.C., & Lee, T.W. 2001. How to keep your best employees: Developing an 31 Steel, R.P., Griffeth, R.W., & Hom, P.W. 2002. effective retention policy. Academy of Management Practical retention policy for the practical manager. Executive, 15, 96-108. Academy of Management Executive, 16, 149-161.

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32 Heneman, H.G. & Judge, T.A. 2006. Staffing 40 McKay, P.F., Avery, D.R., Tonidandel, S., Morriss, Organizations, 5th edition. McGraw Hill Irwin. Parus, M.A., Hernandez, M., & Hebl, M.R. 2007. Racial B. & Handel, J. 2000. Companies battle talent drain. differences in : Are diversity climate Workspan, Sept. 2000, 16-72. perceptions the key? Personnel Psychology, 60, 35-62.

33 SHRM Retention Practices Survey 2000. Heneman, 41 Tyler, K. 2007. The tethered generation. HR H.G. & Judge, T.A. 2006. Staffing Organizations, 5th Magazine, May 2007, 41-46. edition. McGraw Hill Irwin. 42 Finegold, D., Mohram, S., & Spreitzer, G. 2002. 34 Fegley, S. 2006. 2006 SHRM Talent Management Age effects on the predictors of technical workers’ survey report. SHRM Research. commitment and willingness to turnover. Journal of Organizational Behavior, 23, 655-674. Jurkiewicz, 35 Zarandona, J.L. & Camuso, M.A. 1985. A study of C.L. 2000. Generation X and the public employee. exit interviews: Does the last word count? Personnel, Public Personnel Management, 29, 55-74. 62, 47-48. 43 Schramm, J. 2004. Age groups mostly in accord. HR 36 Griffeth, R.W. & Hom, P.W. 2001. Retaining Valued Magazine, September 2004. Employees. Sage. Heneman, H.G. & Judge, T.A. 2006. Staffing Organizations, 5th edition. McGraw 44 Breaugh, J.A. & Starke, M. 2000. Research on Hill Irwin. employee recruitment: So many studies, so many remaining questions. Journal of Management, 26, 37 Allen, D.G. and Griffeth, R.W. 2001. Test of 405-434. Phillips, J.M. 1998. Effects of realistic a mediated performance-turnover relationship job previews on multiple organizational outcomes: highlighting the moderating roles of visibility and A meta-analysis. Academy of Management Journal, reward contingency. Journal of Applied Psychology, 41, 673-690. Zottoli, M.A. & Wanous, J.P. 2000. 86, 1014-1021. Allen, D.G., and Griffeth, R.W. Recruitment source research: Current status and 1999. Job performance and turnover: A review and future directions. Human Resource Management integrative multi-route model. Human Resource Review, 10, 353-382. Management Review, 9, 525-548. Sturman, M.C., Trevor, C.O., Boudreau, J.W., & Gerhart, B. 2003. Is 45 White, Erin. “Job ads loosen up, get real.” The Wall it worth it to win the talent war? Evaluating the utility Street Journal. March, 12, 2007: B3. of performance-based pay. Personnel Psychology, 56, 46 Adapted from Griffeth, R.W. & Hom, P.W. 2001. 997-1035. Trevor, C.O., Gerhart, B., & Boudreau, Retaining Valued Employees. Sage. J.W. 1997. Voluntary turnover and job performance: Curvilinearity and the moderating influences of salary 47 Phillips, J.M. 1998. Effects of realistic job previews growth and promotions. Journal of Applied Psychology, on multiple organizational outcomes: A meta-analysis. 82, 44-61. Academy of Management Journal, 41, 673-690.

38 Griffeth, R.W. & Hom, P.W. 2001. Retaining 48 Breaugh, J.A. & Starke, M. 2000. Research on Valued Employees. Sage. McKay, P.F., Avery, D.R., employee recruitment: So many studies, so many Tonidandel, S., Morriss, M.A., Hernandez, M., & remaining questions. Journal of Management, 26, Hebl, M.R. 2007. Racial differences in employee 405-434. retention: Are diversity climate perceptions the key? Personnel Psychology, 60, 35-62. 39 Griffeth, R.W. 49 Griffeth, R.W. & Hom, P.W. 2001. Retaining Valued & Hom, P.W. 2001. Retaining Valued Employees. Employees. Sage. Hunter, J.E. & Hunter, R.F. 1984. Sage. Validity and utility of alternative predictors of job performance. Psychological Bulletin, 96, 72-88.

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50 Kristof-Brown, A.L., Zimmerman, R.D., & Johnson, research implications for the next millennium. Journal E.C. 2005. Consequences of individuals’ fit at work: of Management, 26, 463-488. A meta-analysis of person-job, person-organization, 62 Ippolito, R.A. 2002. Stayers as workers and savers. person-group, and person-supervisor fit. Personnel Journal of Human Resources, 37, 275-308. Ippolito, Psychology, 58, 281-342. R.A. 1991. Encouraging long-term tenure: tilt 51 Griffeth, R.W. & Hom, P.W. 2001. Retaining Valued or pension? Industrial and Labor Relations Review, 44, Employees. Sage. 520-535.

52 Griffeth, R.W. & Hom, P.W. 2001. Retaining 63 Cappelli, P. 2000. A market-driven approach to Valued Employees. Sage. Kammeyer-Mueller, J.D. & retaining talent. Harvard Business Review, Jan-Feb, Wanberg, C.R. 2003. Unwrapping the organizational 103-111. entry process: Disentangling multiple antecedents 64 Griffeth, R.W. & Hom, P.W. 2001. Retaining Valued and their pathways to adjustment. Journal of Applied Employees. Sage. Heneman, H.G. & Judge, T.A. Psychology, 88, 779-794. 2006. Staffing Organizations, 5th edition. McGraw Hill 53 Allen, D.G. 2006. Do organizational socialization Irwin. tactics influence newcomer embeddedness and 65 Griffeth, R.W., Hom, P.W., & Gaertner, S. 2000. turnover? Journal of Management, 32, 237-256. A meta-analysis of antecedents and correlates of 54 Van Maanen, J. & Schein, E.H. 1979. Towards a employee turnover: Update, moderator tests, and theory of organizational socialization. In Staw, B.M. research implications for the next millennium. Journal (Ed.), Research in Organizational Behavior, vol. 1, of Management, 26, 463-488. 209-264. Greenwich, CT. JAI. 66 Aquino, K., Griffeth, R.W., Allen, D.G., & Hom, P.W. 55 Adapted from Griffeth, R.W. & Hom, P.W. 2001. 1997. An integration of justice constructs into the Retaining Valued Employees. Sage. turnover process: Test of a referent cognitions model. Academy of Management Journal, 40, 1208-1227. 56 Allen, D.G., Shore, L.M., and Griffeth, R.W. 2003. The role of perceived organizational support and 67 Tepper, B. 2000. Consequences of abusive supervision. supportive human resource practices in the turnover Academy of Management Journal, 43, 178-190. process. Journal of Management, 29, 99-118. 68 Rutigliano, Tony. “Tuning up your talent engine.” 57 Hom, P.W. & Griffeth, R.W. 1995. Employee Management Journal. Fall 2001: 1-3. Turnover. South-Western. 69 Vance, R.J. 2006. Employee engagement and 58 Heneman, H.G. & Judge, T.A. 2006. Staffing commitment. SHRM Foundation. Organizations, 5th edition. McGraw Hill Irwin. 70 Ramsay, C.S. 2006. Engagement at Intuit: It’s the 59 Griffeth, R.W., Hom, P.W., & Gaertner, S. 2000. people. Society fo Industrial and Organizational A meta-analysis of antecedents and correlates of Psychology 21st Annual Conference, Dallas, TX. employee turnover: Update, moderator tests, and Vance, R.J. 2006. Employee engagement and research implications for the next millennium. Journal commitment. SHRM Foundation. of Management, 26, 463-488. 71 Vance, R.J. 2006. Employee engagement and 60 Heneman, H.G. & Judge, T.A. 2006. Staffing commitment. SHRM Foundation. Organizations, 5th edition. McGraw Hill Irwin. 72 See note 70. 61 Griffeth, R.W., Hom, P.W., & Gaertner, S. 2000. A meta-analysis of antecedents and correlates of employee turnover: Update, moderator tests, and

31 Strengthening employee engagement in your organization can also help you retain talent. One report on measuring engagement at Intuit found that highly engaged employees were five times less likely to quit than employees who were not engaged.72 Retaining Talent

Sources and Suggested Readings

Abelson, M.A. 1987. Examination of avoidable and unavoidable turnover. Journal of Applied Psychology, 72 (3): 382-386. Past research has suggested that workers leave either voluntarily or involuntarily. In this article, the author holds that this approach excludes some involuntary departures from analysis, while treating all people who leave voluntarily as being similar. Drawing on Dalton, Krackhardt, and Porter’s (1981) suggested taxonomy of avoidable and unavoidable turnover, this article examines whether the taxonomy aids in the analysis of turnover. The key finding from this research is that unavoidable departures and retentions did not significantly differ on four variables: Commitment, satisfaction, job tension, and withdrawal cognitions. These findings suggest that researchers should consider the circumstances of job quits when analyzing the causes of employee turnover.

Alexander, J., Bloom, J., & Nuchols, B. 1994. turnover and hospital efficiency: an organization-level analysis. Industrial Relations, 33, 505-520. This article explores the relationships between organization-level turnover and firm performance using a national sample of registered nurses at 333 hospitals. Although a U-shaped relationship between turnover and performance is proposed, the findings indicate that even low levels of turnover increase both non-personnel and personnel costs, suggesting that turnover harms organizational efficiency via disruptions created by employees who leave. The negative relationship between turnover and efficiency was found in this study to not be U-shaped as proposed, but instead linear in nature.

Allen, D.G. 2006. Do organizational socialization tactics influence newcomer embeddedness and turnover? Journal of Management, 32, 237-256. The study provides evidence that organizational socialization tactics influence turnover among new hires. The author uses hierarchal logistic regression to analyze the relationship between socialization tactics and turnover. Two socialization tactics, serial and investiture, are significantly negatively related to turnover. For each one-unit increase in investiture tactics, the odds of quitting go down by a multiplicative factor of 0.524, and for each one-unit increase in serial tactics, the odds of quitting go down by a multiplicative factor of 0.438.

33 Retaining Talent

Additionally, three socialization The results provide support for the evaluations of the desire to leave the tactics, collective, fixed, and proposed model of the performance- organization, 2) actual and perceived investiture, are shown to turnover relationship, and may help mobility in the job market, and 3) be positively related to job explain the complex relationship performance, which may lead more embeddedness. These results suggest between performance and turnover. directly to turnover in response to that how new hires are socialized The results indicate that visibility performance-related shocks in the can more fully embed them in moderates the relationship between system. the organization, and thus reduce performance and alternatives, turnover. and that reward contingencies moderate the relationship between Allen, D.G., Shore, L.M., and performance and satisfaction. Griffeth, R.W. 2003. The role of Allen, D.G. and Griffeth, The mediation results were less perceived organizational support R.W. 2001. Test of a mediated clear because of a lack of direct and supportive human resource performance-turnover relationship effects involving performance. practices in the turnover process. highlighting the moderating Additionally, the potentially Journal of Management, 29, roles of visibility and reward conflicting mechanisms of ease and 99-118. contingency. Journal of Applied desirability of movement may help A model investigating antecedents Psychology, 86, 1014-1021. to explain the mixed results found regarding the performance-turnover of perceived organizational support A model of the performance- relationship. (POS) and the role of POS in turnover relationship was tested predicting voluntary turnover that addressed at least three was developed and tested in two shortcomings of previous research samples via structural equation Allen, D.G., and Griffeth, R.W. (first empirical test of a mediated modeling. Both samples of 1999. Job performance and performance-turnover relationship). employees (N=205 department sales turnover: A review and integrative First, the model recognized that people; N=197 insurance agents) multi-route model. Human performance may have simultaneous completed attitude surveys that Resource Management Review, 9, and sometimes conflicting effects were connected to turnover data 525-548. on both the desire and the ability collected approximately one year to leave an organization. Second, The authors argue that research later. Procedures were similar in the model explicitly included two should examine which individuals both samples, except measures in important moderators of these are leaving the organization. If, sample one were taken at two points relationships: contingent rewards for example, only the poorest in time, whereas those in sample and visibility. Third, the model performing individuals are leaving, two were taken at three points. suggested that performance is a turnover could be beneficial and Identical analyses were performed somewhat psychologically distal not negative for the organization. on both samples. A confirmatory antecedent of turnover with effects Conversely, if the very highest factor analysis (CFA) was performed that are mediated by other variables. performers are leaving, the results to assess the distinctiveness of the Data consisted of organizational could be highly negative for the measures. performance and turnover records organization. An integrative The results suggest that perceptions for 130 employees of a medical model of the relationship between of supportive human resources services organization. During the individual job performance and practices (participation in decision- period under investigation, 20% of turnover is proposed, which argues making, fairness of rewards, and the sample voluntarily quit. that performance may lead to growth opportunities) contribute to turnover through three different the development of POS, and that routes: 1) cognitive and affective

34 Retaining Talent

POS mediates their relationships not hold this belief, poor outcomes employee turnover. Specifically, with organizational commitment can produce negative responses the chapter provides methods for and job satisfaction. Further, POS directed inward (stress, depression) calculating the associated costs of is negatively related to withdrawal, or outward (absenteeism, poor separation and organizational quit with the relationship between performance, ). Linkages rates, and offers three categories POS and withdrawal mediated by between referent cognitions, of turnover costs: Separation costs, commitment and satisfaction. Thus, turnover intentions, and turnover replacement costs, and training the authors suggest that POS may were established. costs. Separation costs are those be a more distal determinant of costs associated with the loss of turnover that affects turnover as a continuity from an employee critical antecedent to commitment. Batt, R. 2002. Managing leaving. Replacement costs are Customer Services: Human costs associated with finding Resource Practices, Quit Rates, employees to take the place of Aquino, K., Griffeth, R.W., Allen, and Sales Growth. Academy employees who leave. Training D.G., & Hom, P.W. 1997. An of Management Journal, 45, costs are costs associated with integration of justice constructs 587-597. getting new employees integrated into the turnover process: Test into the prevalent practices of the This study examines relationships of a referent cognitions model. organization. between high-involvement HR Academy of Management Journal, practices, quit rates, and sales 40, 1208-1227. growth. A sample of call centers Dalton, D.R., Todor, W.D., The authors propose a model for across the United States yielded a & Krackhardt, D.M. 1982. clarifying psychological processes mean quit rate of 14%. Notably, Turnover overstated: A by which felt deprivation instigates high-involvement HR practices were functional taxonomy. Academy of quitting. Using referent cognitions significantly negatively correlated Management Review, 7, 117-123. theory, which holds that individual with quit rate (r = -.28), and quit dissatisfaction arises when a person rate was negatively correlated This article provides a critical look compares existing reality to a with sales growth, with a pairwise at how turnover is viewed as well as more favorable alternative, the correlation of -.10. measured. The key theme posited results illustrate that outcome and is that turnover among employees The results of the article suggest supervisor satisfaction are negatively who are evaluated negatively by that HR practices that emphasize related to withdrawal cognitions. the organization is a positive for an investment in human capital said organization. Specifically, that Referent cognitions occur when reduce turnover and thus increase while too much turnover may individuals compare their outcomes firm performance. Key among the be negative, limited amounts of with another person’s, and thus findings is the confirmation of the tie turnover may actually be positive for think about “what might have between quit rates and performance. the performance of the firm. The been”. The results explained that authors hold that recommendation people may view existing outcomes for rehire is an adequate proxy as temporary because satisfaction Cascio, W.F. 2006. Managing for “good” (functional versus may be influenced by what they Human Resources: Productivity, dysfunctional) turnover. expect to receive in the future. If Quality of Work Life, Profits they believe that the organization (7th ed.). Burr Ridge, IL: Irwin/ can change, then inferior outcomes McGraw-Hill. may not necessarily produce dissatisfaction. But, if employees do The portion of this text devoted to turnover concerns the costs of

35 Retaining Talent

Dess, G., & Shaw, J. 2001. Fitz-Enz, J. 2002. How To Regression analysis revealed a Voluntary turnover, social capital Measure Human Resources curvilinear relationship. The findings and organizational performance. Management (3rd ed.). McGraw- indicate that high turnover was Academy of Management Review, Hill. harmful, but the proposed inverted 26, 446-456. U-shape was not found. The chapter of this text devoted This treatise draws upon the work to turnover focuses on of Dalton, Todor, and Krackhardt costs of high organizational quit Griffeth, R.W. & Hom, P.W. (1982) to further the notion that rates and provides a unique look 2004. Innovative Theory and turnover is not always a “problem” into the categorization of people on Employee for the organization. The authors who leave. Separations, as the Turnover. Information Age expound on the idea the general authors call them, are divided Publishing. indicator quit rate is not adequate into quits, layoffs, and discharges. to explain the impact of turnover on The text also offers formulas for This missive offers a look at firm performance. Specifically, it is accession rate (total hires/average particularly innovative research on proposed that losses of individuals headcount) and separation rate (total turnover and retention. Multiple with large amounts of social capital termination/average headcount). theoretical perspectives are offered. may be more damaging to firm The key theme put forth is that The book offers a view into the performance than quitting by low- retention management should be a , scope, theory development, capital employees. proactive process, not an eleventh- and generalizability of research on hour afterthought. The authors turnover and retention. Additionally, also provide illumination on hidden the authors delve into unresolved Ferris, G.R. 1985. Role of costs of turnover, such as costs issues in existing theoretical leadership in the employee for unemployment and workers’ frameworks of turnover. Issues withdrawal process: A compensation insurance. regarding models from March and constructive replication. Journal Simon’s equilibrium framework to of Applied Psychology, 70, 777-781. the job embeddedness construct Glebbeek, A., & Bax, E. 2004. are discussed. A key advance on The contributions of average Is high employee turnover really turnover theory in this text is the exchange and leader-member harmful? An empirical test using notion of turnover as a risky decision exchange (LMX) to explaining company records. Academy of that weighs upon the individual variance in employee turnover Management Journal, 47(2), organization member. The were examined in an investigation 277-286. interaction of individual risk traits designed to constructively replicate as well as risky situational aspects is a study by Graen, Liden, and Hoel The authors tested the discussed in the context of extant (1982). The results showed LMX to that employee turnover and firm turnover models. be a stronger predictor of turnover performance have an inverted than average leadership style, U-shaped relationship. The article although the effect size was not as hypothesizes that overly high or Griffeth, R.W. & Hom, P.W. large as in the Graen et al. study. low turnover is harmful for firm 2001. Retaining Valued Also, LMX predicted turnover better success. The analysis was based on Employees. Sage. than did employee attitudes, despite performance data from 110 the fact that employee attitudes of a temporary . This work provides a comprehensive seemed to mask the LMX-turnover The offices had high variation in look at how firms can keep key relationship. turnover but were otherwise similar, members of the organization. allowing the researchers to control A national survey of American for important intervening variables. reveals that 52% of

36 Retaining Talent

companies report that turnover is the predictors of turnover. The Heneman, H.G. & Judge, T.A. increasing. The authors also draw on meta-analysis yields new findings. 2006. Staffing Organizations, 5th survey results to state that employee Notably, intentions to quit remain edition. McGraw-Hill Irwin. loyalty at U.S. companies is at an the best predictor of turnover with This text examines three types of all-time low, making employee a correlation of .46, up from .35 turnover: voluntary, discharge, retention a key issue in the 21st in the 1995 study. Commitment and downsizing. Each form of century. The key issue raised by and satisfaction were shown to turnover and its drivers are explored. the authors is that academic studies be modest predictors of turnover Additionally, each type is examined on turnover and retention, while with correlations of .27 and -.19 from the perspective of three theoretically insightful, have offered respectively, consistent with the primary causes—ease of movement, very little in the way of direction for 1995 study. The study examined 6 cost of leaving, and availability of management practitioners. general variable categories and their alternatives. Also examined are prediction of turnover: personal A turnover classification scheme development and initiation of characteristics, satisfaction, other which delineates voluntary versus retention strategies, with a particular dimensions of work experience, involuntary, functional versus focus on reducing voluntary external environmental factors, dysfunctional, and unavoidable and turnover, employee discharges, and behavioral predictors, and avoidable turnover is put forth. the consequences of downsizing. withdrawal cognitions. Also discussed are the tangible and intangible costs of turnover. Specifically addressed are the often Hom, P.W. & Griffeth, R.W. Harrison, D.A., Newman, unrecognized costs of turnover, such 1991. Structural equations D.A., & Roth, P.L. How as a loss of organizational memory modeling test of a turnover important are job attitudes? and a lack of seasoned mentors theory. Journal of Applied Meta-analytic comparisons of that comes with high turnover Psychology, 76, 350-376. integrative behavioral outcomes rates. Tactics for reducing turnover and time sequences. Academy are offering, such as an increased This study uses Hom, Griffeth, of Management Journal, 49, emphasis on socialization of new and Sellaro’s (1984) theoretical 305-325. hires to promote job embeddedness. alternative to Mobley’s (1977) turnover model in two This article proposes that overall investigational studies. Study 1 job attitudes (satisfaction and validated conceptual distinctions Griffeth, R.W., Hom, P.W., commitment) predict a variety among model constructs and & Gaertner, S. 2000. A meta- of behavioral criteria, including operationalizations of those analysis of antecedents and turnover. The study confirmed constructs. A sample of 206 nurses correlates of employee turnover: a moderate correlation between was surveyed, and constructs were Update, moderator tests, and overall and turnover assessed with multiple indicators. research implications for the (corrected r = -.22). The 95% This article illustrates how the use next millennium. Journal of confidence interval (-.12 through of structural equation modeling Management, 26, 463-488. -.36) indicates that although (SEM) identified more parsimonious the correlation is moderate, it is This article provides an update to conceptualization than do previous legitimate. This article emphasizes the turnover meta-analysis of Hom linear growth models. that when examining the impact of and Griffeth (1995). Among its job attitudes on job-related behavior, contributions is the identification of researchers should view the outcome various moderators of antecedent- at a high level of abstraction, with turnover correlations. Additionally, the idea being that a general attitude this article is the most wide-ranging will be linked to a general outcome. quantitative review to date of

37 Retaining Talent

Hom, P.W. & Griffeth, R.W. that properties that are correlated The article establishes the role 1995. Employee Turnover. South- at one level of aggregation are not of strategic human resources Western. necessarily correlated within the management in the success of the same unit at the individual level. organization, specifically by reducing This text features a meta-analysis organizational turnover rates. In of research on turnover among The labor market/turnover this study, HPWS were shown individuals. The meta-analysis literature shows the consistency to improve corporate financial categorizes antecedents of turnover and strength of the negative performance through reduced costs into six groups: Demographic and relation between job opportunities associated with high quit rates. personal determinants, satisfaction, or unemployment and voluntary work environment, job content, job terminations (turnover) in external environment, and aggregated data – sharing up to 70% Ippolito, R.A. 1991. Encouraging withdrawal cognitions. Examples of of the variance. However, in studies long-term tenure: Wage tilt or variables in each category include of individual decisions to turnover, pension? Industrial and Labor cognitive ability (demographic the consistency and strength of the Relations Review, 44, 520-535. determinants), job satisfaction effect is not as large as expected (satisfaction), compensation (work based on the . In This article examines the influence environment), job scope (job addition, results do not show that of wage tilt (the payment of below- content), labor market conditions alternative job options or assessment market wages in the early years of (external environment), and of labor conditions behave at the the worker’s employment with a firm turnover intentions (withdrawal individual level in the same manner and above-market wages in the later cognitions). as at aggregate level. years) and the presence of defined benefit pension plans on worker The study yielded interesting results. tenure. A sample of 6,416 persons Turnover intentions proved to be Huselid, M. 1995. The impact in 109 firms was examined to test the best predictor of actual turnover of human resource management whether wage tilt or pension plan (r=.35). However, the passage of on practices, on turnover, was a greater contributor to tenure. time between developing intentions productivity, and corporate Contrary to the popular (but little to quit and quitting weakened financial performance. Academy tested) belief that wage tilt creates the relationship. Satisfaction and of Management Journal, 38, commitment by workers to the commitment showed a consistent 291-313. organization, the results show that but weak correlation with turnover. wage tilt had no significant effect on This study provides a wide-ranging tenure. On the other hand, pensions evaluation of the links between increased average tenure by more Hulin, C.L., Roznowski, M., & systems of High Performance than 20%. Hachiya, D. 1985. Alternative Work Systems (HPWS) and firm opportunities and withdrawal performance. Results based on a decisions: Empirical and nationwide sample of almost 1,000 theoretical discrepancies and an firms indicate that HPWS have integration. Psychological Bulletin, an economically and statistically 97, 233-250. significant impact on both intermediate employee outcomes The authors argue that aggregate (turnover and productivity) and and individual level data may not short- and long-term measures of come to the same conclusions organizational financial performance. about turnover. This phenomenon, termed an ecological fallacy, means

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Ippolito, R.A. 2002. Stayers as as a precursor to various antecedents These factors are proposed to workers and savers. Journal of of turnover. This theoretical advance contribute to the decisions and Human Resources, 37, 275-308. has implications for both turnover behavior of people who voluntarily researchers and HR managers in leave an organization. The unfolding This paper presents an alternate understanding how to keep valued model utilizes constructs from explanation to the traditionally employees. Beach’s (1990) generic decision- held belief that deferred wage making model, image theory, to keep employees in the understand the specific issues of organization. The authors propose Kammeyer-Mueller, J.D., employees’ decisions to quit. In the that deferred wages instead attract Wanberg, C.R., & Ahlburg, D. unfolding model, screening rather employees who are inclined to 2005. Turnover processes in a than choosing among options is save, or “savers”, and that savers temporal context: It’s about time. the most important mechanism for are generally better employees than Journal of Applied Psychology. understanding decisions. Screening non-savers. Because it is in the best is a process that ascertains whether interest of the organization to retain This article puts forth a turnover new information can be integrated good employees, savers are induced model incorporating dynamic easily into a set of three domain- to stay with the organization. predictors measured at 5 distinct specific images: value, trajectory, and This proposed process creates points in time. To better understand strategic. organizational situations whereby the process of organizational deferred wages and high levels of withdrawal, turnover was examined The unfolding model has four compensation are coupled with low by following a large occupationally decision paths. Two key concepts quit rates. Therefore, low turnover and organizationally diverse sample to the four paths are shock to rates are a function of good selection over a 2-year period. Results show the system and decision frames. techniques. Simply by attracting that turnover can be predicted by A shock to the system is a very “savers”, firms can produce low rates critical events if they are measured distinguishable event that jars of organizational turnover. soon after organizational entry. employees toward deliberate Other factors such as alternative judgments about their jobs and, opportunities also became significant possibly, to voluntarily quit their Jackofsky, E.F. 1984. Turnover predictors when measured over jobs. A decision frame is simply and job performance: An time. In line with Lee and Mitchell’s an individual frame of reference. integrated process model. unfolding model, critical events Also proposed is a path of quitting Academy of Management Review, such as shocks predicted turnover abruptly with no plan in place, 9, 74-83. separately from attitudinal factors. known as impulsive quitting. The key contribution of this article is the integration of job performance Lee, T.W. & Mitchell, T.R. 1994. into predominant process models of An alternative approach: The turnover. Numerous process models unfolding model of voluntary (e.g. March and Simon, 1958; employee turnover. Academy of Mobley, 1977) have been applied in Management Review, 19, 51-89. an attempt to explain the decision to leave an organization, but this is This article advances an “unfolding the first to look at the role of job model” of employee turnover performance in the process. Job by drawing on concepts and performance is conceptualized as constructs from both market-pull both a direct influence on turnover and psychological-push approaches.

39 Retaining Talent

Maertz, C.P. & Campion, M.A. concept, known as equilibrium examined individually, and partial 2004. Profiles in quitting: theory, holds that inducements are correlation results revealed greater Integrating process and content payments made by (or through) and more pervasive adverse effects turnover theory. Academy the organization to its participants for downsizing (reduction in force) of Management Journal, 47, (e.g., wages to a worker, service in comparison with the effects of 566-582. to a client). Contributions are voluntary and involuntary turnover. payments made by a participant in The results reaffirm the differential In this review and integration of an organization to the organization effects of downsizing, placing an process models (how people quit) (e.g., work from the worker, fee emphasis on the need to move and content models (why people from the client). beyond the traditional voluntary- quit) of turnover, the authors involuntary classification system studied 159 quitters to cull four The inducements-contribution that is prevalent in existing turnover generic turnover decision types balance is a function of two theory. that they believe each quitter uses major components: the perceived in his or her decision to leave a desirability of leaving the job. The first of these decision organization and the perceived ease McKay, P.F., Avery, D.R., types is impulsive quitting, which is of movement from the organization. Tonidandel, S., Morriss, M.A., characterized by quitting without The perceived desirability of Hernandez, M., & Hebl, M.R. an alternate plan of action and a movement is a function of both 2007. Racial differences in short, precipitous decision process. the individual’s satisfaction with employee retention: Are diversity The second decision type identified his/her present job and his/her climate perceptions the key? is comparison quitting, which is of alternatives that do Personnel Psychology, 60, 35-62. simply the act of leaving a job not involve leaving the organization. for another job one deems more The perceived ease of movement is This study examined the role of desirable. The third decision type is a function of the number of extra- diversity climate perceptions on termed preplanned quitting, and is organizational alternatives perceived. turnover rates among Whites, distinguished by an advanced plan African-Americans, and Hispanics. to quit, after a specific event occurs The authors hypothesized that or a specific time period has passed. McElroy, J., Morrow, P., & perceptions of a climate of diversity The final decision type identified is Rude, S. 2001. Turnover and would be most negatively correlated conditional quitting, a plan to quit organizational performance: A with turnover intentions among only if a specific event occurs. comparative analysis of voluntary, African-Americans, followed by involuntary, and reduction-in- Hispanics and then Whites. The

force turnover. Journal of Applied findings were indeed strongest March, J.G. & Simon, H.A. 1958. Psychology, 86, 1294-1299. among Blacks, but contrary to the Organizations. John Wiley. hypothesized effects, both White In this study, data were collected men and women showed stronger This piece puts forth the notion from 31 regional sub-units of a effects than Hispanics. that the decision to participate national financial services company. lies at the core of organizational Differential aspects of 3 types of equilibrium, a condition of survival turnover (voluntary, involuntary, of an organization. Equilibrium reduction-in-force) on measures of reflects the organization’s success organizational subunit performance in arranging payments to its were examined. Each type of participants adequate to motivate turnover showed adverse effects their continued participation. This on sub-unit performance when

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Mitchell, T.R., Holtom, B.C., a broad constellation of influences and turnover is significant and & Lee, T.W. 2001. How to keep on employee retention. Two related consistent, it is not very strong. The your best employees: Developing research frameworks that help author suggests that it is probable an effective retention policy. explain the core of this construct are that other variables mediate the Academy of Management Executive, embedded figures and Kurt Lewin’s relationship between job satisfaction 15, 96-108. field theory. The critical aspects of and the act of quitting. Key among job embeddedness are 1) links—the these variables is the concept of This article examines turnover from extent to which people have links behavioral intentions. The model a practitioner perspective. Drawing to other people /activities, 2) presented is one of the first to on the idea that competition to fit,—the extent to which their jobs propose the role of intentions to retain key employees can be intense, and communities are similar to or fit quit in the turnover process. the authors hold that top-level with the other aspects of their life, executives and HR departments and 3) sacrifice—the ease with which spend large amounts of time, effort, these links can be broken. Sacrifice Mobley, W.H., Griffeth, R.W., and money trying to figure out how encompasses the perceived cost of Hand, H.H., and Meglino, B.M. to keep their people from leaving. material or psychological benefits 1979. Review and conceptual This article describes new research that may be forfeited by leaving a analysis of the employee turnover and its implications for managing job. process. Psychological Bulletin, 86, turnover and retention. In doing 493-522. so, the conventional wisdom that The major contribution of the dissatisfied people leave and money study is that it develops and The authors define turnover as a makes them stay is challenged. The tests the aforementioned new form of employee withdrawal where notion that people often leave for organizational attachment construct: the employee voluntarily leaves reasons unrelated to their jobs is job embeddedness. Embeddedness the organization. The belief is that explored. Multiple other causes is a new way of looking at turnover turnover is an individual choice are put forth. In many situations, because it reflects the totality of behavior; therefore, individual is events or shocks are the forces that constrain people from primary unit of analysis. Specifically, cause. Conversely, employees often leaving their current employment. the authors do not address turnover stay because of personal attachments Results provided support for the that comes involuntarily, such as and fit, both on the job and in their that people who are . community. Recommendations for embedded in their jobs have less integrating research into practice are intent to leave and do not leave Besides putting forth an expanded offered. as readily as those who are not model of turnover, the article embedded. Thus, off-the-job and offers a comprehensive review non-affective causes have utility for that illustrates key themes in the turnover literature. Central among Mitchell, T.R., Holtom, B.C., predicting turnover. them are that satisfaction does not Lee, T.W., Sablynski, C.J., & Erez, seem to be an adequate composite M. 2001. Why people stay: Using of other precursors and correlates job embeddedness to predict Mobley, W.H. 1977. Intermediate of turnover. Also, behavioral voluntary turnover. Academy linkages in the relationship intentions—directly or as part of of Management Journal, 44, between job satisfaction and commitment—enhance prediction 1102-1121. employee turnover. Journal of of turnover. Age, tenure, overall Applied Psychology, 62, 237-240. This paper introduces the construct job satisfaction and reactions to job job embeddedness to the turnover Although it is clear that the content consistently and negatively domain. Embeddedness represents relationship between job satisfaction are associated with turnover.

41 Retaining Talent

Greater variance in turnover can be Shaw, J.D., Gupta, N., & reduce quit rates. Quit rates were explained using multiple variables, Delery, J.E. 2005. Alternative negatively linked to performance and a great deal of variance is still conceptualizations of the measures. Hence, high-involvement unexplained. Based upon these relationship between voluntary HR practices are tied to increased findings, the authors put forth a turnover and organizational performance through the mediating model of turnover. One of the major performance. Academy of effect of reduced quitting. additions to the model is the role Management Journal, 48, 50-68. of time. The authors posit that the Four alternative predictions temporal dimension may be relevant Steel, R.P. 2002. Turnover regarding voluntary turnover to the extent that organizational theory at the empirical interface: and workforce performance are socialization processes are important Problems of fit and function. offered. Primarily, the authors in turnover. Academy of Management Review, suggest a curvilinear relationship 27: 346-360. between turnover and workforce performance. Voluntary turnover The author argues that turnover Shaw, J.D., Duffy, M.K., Johnson, is proposed to have a negative theory has relied too heavily on J.J., & Lockhart, D. 2005. relationship with workforce rational analytic decision models, Turnover, social capital losses, performance that attenuates as and suggested alternative decision and performance. Academy turnover increases. Hence the theory frameworks as good jumping- of Management Journal, 48, inverted U-shaped relationship off points for advancing turnover 594-606. between turnover and performance theory. The theoretical model This article tests the theory that found by Gleebek and Bax (2004) is presented in this article suggests turnover among those who possess supported. The authors draw on 2 that search is a dynamic process that social capital leads to greater losses studies to support their contentions. involves a confluence of traditional in firm performance than those affective models of withdrawal. who do not possess such capital. This model proposes that as This study of 38 upscale restaurants Shaw, J., Delery, J., Jenkins, G., & search processes evolve over time, supported the idea that turnover Gupta, N. 1998. An organization- individuals receive greater feedback is negatively correlated to firm level analysis of voluntary and and gain more knowledge about performance when the turnover involuntary turnover. Academy their potential alternate employment occurs among high-social capital of Management Journal, 41, opportunities, which in turn individuals. Alternatively, turnover 511-525. influences their turnover responses. among low-social capital employees This research examines the effects has a relatively small impact on of human resource management firm performance. The authors also Steel, R.P., Griffeth, R.W., & practices on quit rates at the hypothesize that network density Hom, P.W. 2002. Practical organizational level. This study moderates the relationship between retention policy for the practical used organizational-level data from social capital losses and performance. manager. Academy of Management 227 organizations in the trucking That hypothesis was not supported, Executive, 16, 149-161. industry to explore this issue. and the findings suggest instead Results show that human resource that social capital losses are most This paper suggests that management practices predict damaging when overall turnover was organizations must employ a performance through quit rates. low. comprehensive retention policy in order to deal with the consequences High-involvement HR practices of spiraling replacement costs for (those that involve investment in employees. The suggestion is to human capital) were shown to

42 Retaining Talent

integrate research on retention in retention tool. The findings of the average performers. Moderating order to create a comprehensive study suggest that using utility the curvilinear relationship were policy. The synthesis of research analysis can assist firms in evaluating salary growth and promotion. Salary presented attests that average the usefulness of incentive-laden growth in particular moderated the performers are less likely to quit than compensation. relationship for high performers. high or low performers. Those with high salary growth were less likely to turn over whereas those The authors suggest a process for Trevor, C.O. 2001. Interactions with low salary growth were more the formulation of a retention among actual ease of movement likely to leave the organization. policy. This process begins with determinants and job satisfaction the comparison of organizational in the prediction of voluntary quit rate with the quit rate of the turnover. Academy of Management industry and an assessment of the Journal, 44, 621-638. organization’s retention goals and projected workforce needs. In this article, interactions between This leads to an assessment of determinants of ease of movement the organization’s focused and and job satisfaction are hypothesized blanket strategies and ultimately the to predict voluntary turnover. The formulation of an organizational study features a longitudinal design retention policy. and a sample of 5,506 individuals who participated in the National Longitudinal Survey for Youth Sturman, M.C., Trevor, C.O., (NLSY). Using survival analysis, Boudreau, J.W., & Gerhart, the authors found the impact of B. 2003. Is it worth it to win job satisfaction and unemployment the talent war? Evaluating the rate on employee turnover was utility of performance-based moderated by education level, pay. Personnel Psychology, 56, general mental ability, and job 997-1035. training. This article offers a framework for winning the “talent war”. Trevor, C.O., Gerhart, B., & The importance of talented Boudreau, J.W. 1997. Voluntary employees is trumpeted in the turnover and job performance: popular business press, suggesting Curvilinearity and the moderating that firm success often hinges on influences of salary growth and acquiring and retaining the most promotions. Journal of Applied creative employees with top- Psychology, 82, 44-61. notch ability. This paper offers a process for examining the impact This study utilized a vast sample of of compensation and turnover at 5,143 employees in a single firm various levels of firm performance. to examine the impact of employee The authors use the staffing utility turnover on job performance. As framework of Boudreau and Berger proposed by Jackofsky (1984), (1985) to examine the outcomes turnover was higher among low of incentive compensation as a and high performers, and lower for

43 Retaining Talent

45 Retaining Talent

46 The SHRM Foundation is a 501(c)(3) non-profit organizational affiliate of the Society for Human Resource Management (SHRM). Founded in 1966, the SHRM Foundation maximizes the impact of the HR profession on organizational decision-making and performance by promoting innovation, education, research and the use of research- based knowledge. The SHRM Foundation is governed by a volunteer board of directors comprising distinguished HR academic and practice leaders. Contributions to the SHRM Foundation are tax-deductible. Online at www.shrm.org/foundation.