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Employee retention and building competitive advantage Report (Assessment)

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Updated: Jan 22nd, 2020

Introduction

The success and future survival of organisations is greatly dependent on the strength of its human capital. Employee recruitment forms the first step of developing a strong workforce. Nurturing a strong workforce is one of the factors that can contribute towards the creation of a high competitive advantage (Cooper & Burke 2011).

Upon selecting and inducting the best job candidates, firms’ management teams have to ensure that they retain such workers within the organisation for as long as possible. Consequently, it is essential for firms’ management teams to ensure that they incorporate effective human resource management practices. One of these practices touches on retention management.

Employee retention is one of the aspects that HR managers should focus on in their operations. Employee retention refers to voluntary efforts undertaken by organisations with the objective of creating a working environment that keeps employees for a long term. Additionally, employee retention also focuses at reducing voluntary employee turnover.

Employee retention can significantly contribute towards improvement of firms’ performance. Firms that are not in a position to retain their employees experience a problem in their effort to capitalise on their human resource (Shiekh, Qamar, & Iqbal 2008).

Currently, organisations are facing a major challenge emanating from increased employee turnover (Cooper & Burke 2011). Managing and retaining top talent is a prime consideration for most organisations especially in the 21st century. The importance of ensuring employee retention has improved in the wake of the high rate of liberalisation and globalisation being experienced in the business environment.

Consequently, employees can easily shift their workplaces. Organisations characterised by a low rate of employee turnover compared to the respective industry average tend to have a high competitive advantage. In light of the above insights, this paper evaluates how human resource management can improve employee retention coupled with building and sustaining competitive advantage.

Human Resource Management and employee retention

In the 21st century, organisations are facing a major challenge emanating from increased employee turnover. Some of the reasons that explain the high rate of employee turnover during the 21st century include shortage of skills, workforce diversity, changes in expectations of new employees, and increased competition in the labour market.

The labour market has experienced a decline in supply of qualified employees over the past decade. Consequently, retention has become a crucial issue for firms.

In addition, retaining employees puts an organisation at a good position to compete capably in the market arena for such a practice reduces induction challenges and lapses experienced in the process of hiring new employees. A high rate of employee turnover can adversely affect the competitiveness and future survival of firms in different economic sectors (O’Reilly & Pfeffer 2000).

Firstly, employee turnover pushes firms into high financial costs. One source of costs is associated with the fact that a firm may not have sufficient employees to aid in its daily operations. This aspect may culminate in a decline in the firm’s financial performance.

Secondly, the firm may incur high costs due to increased litigations by employees leaving the organisation (Sims 2009). Firms that greatly depend on critical employee skills for their survival can suffer adversely in the event of losing such expertise for such employee turnover leads to the creation of a productivity gap.

Findings of previous studies conducted reveal that there exist diverse Human Resource Management [HRM] practices that HR managers can incorporate in order to enhance employee retention. Some of the HRM practices that influence employee retention include nurturing a strong work environment, rewards, work-life policies, career development, and supervisor support. This paper evaluates these practices in details herein.

Career development

In spite of playing a central role in their workplaces, employees have aspirations regarding their careers. Therefore, employees cannot stick to an organisation that does not provide them with an opportunity to improve their talents. One of the main avenues through which employees perceive an opportunity to grow is through continuous learning.

In the course of executing their duties, employees face an uphill task of ensuring that they balance work requirements with their career needs. The high rate at which the global market is transforming has such as the emergence of a knowledge economy has stimulated employee movement.

Currently, firms’ management teams do not have any influence on the employees’ decision to stay or leave their workplace. This element has compelled HR managers to focus on employee retention (Walter, Steffy & Bray 2007).

In the quest to solidify their competitive advantage by utilising their workforces’ expertise and skills, organisations have to ensure that they address their employees’ career needs. This goal is attainable by investing in employee career development.

Walter, Steffy, and Bray (2007) opine that it is paramount for organisations to ensure that they offer their employees an opportunity to grow their talents, objectives, and visions. This aspect is realisable by integrating the concept of career development, which entails preparing the workforce to contribute towards the organisation’s future survival.

Firms’ management teams should consider career development as an organisational wide aspect. Consequently, career development opportunities should not only be a preserve of new employees in the organisation, but all employees in an organisation (Jones, Steffy, & Bray 2007).

Organisations carry the responsibility of communicating the various career options and paths that are available to employees in their quest to achieve their career goals. Therefore, to enhance employees’ career development, organisations have to ensure that they assist their workforce in their self-assessment.

Additionally, it also important for firms’ management teams to incorporate a comprehensive employee training and development program. Such career development programs will provide employees with an opportunity to increase their skills.

Other intangible benefits that associate with employee training include improvement in employees’ self-esteem, improved morale, and high job satisfaction due to the additional abilities, knowledge, and skills gained. The competitive nature of the business environment today makes it paramount for firms to invest in training and development.

This move will contribute towards the firm becoming more customer-oriented, which in turn enhances its competitiveness. Findings of previous studies conducted reveal that employee training and development plays a critical role in promoting employee retention, increased employee productivity, and enhanced organisational effectiveness.

Investing in career development plays an important role in strengthening the bond between the firm and employees. Employees develop a positive attitude towards organisations that are conscious of their career goals. Therefore, to integrate the career development plan effectively, it is critical for firms’ management teams to ensure that employees participate in the plan.

Employee participation plays a critical role in ensuring that career development plan contributes towards the attainment of the intended objective. Additionally, it is important for firms’ management teams to ensure that the career development program incorporated aligns with the firms needs.

Compensation and reward system

Compensation and reward management is one of the main HRM strategies that firms’ management teams should incorporate in their effort to keep employees in the organisation, as long as possible. Kandula (2007) opines that it is important for HR managers to ensure that they integrate effective employee compensation policies.

The compensation policies adopted should contribute towards improvement in the organisation’s ability to attract, retain, and motivate a strong workforce. Attainment of these aspects will contribute towards improvement in the firm’s performance efficiency, and thus ensure the firms’ future survival.

Reward management entails formulating and implementing polices and strategies whose objective is to reward employees fairly, consistently, and equitably in accordance with their input to the organisation (Armstrong & Murlis 2006).

Firm’s management teams can incorporate various reward strategies in their quest to employee retention. The reward strategies adopted by firms are either monetary based or non-monetary based. The monetary reward system constitutes elements like employees’ salaries, wages, and bonuses.

In a bid to increase the effectiveness of monetary rewards, it is important for firms’ management teams to formulate a grade and pay structure policy. The policy should outline the elements that should be taken into account in a firm’s effort to establish the pay (Armstrong & Murlis 2006).

Additionally, to improve employee retention, it is important for firms’ management teams not to overemphasise on monetary rewards. However, they should establish a balance between non-monetary and monetary rewards.

Firms’ management team should incorporate various non-monetary rewards in their effort to retain employees. Examples of such non-monetary reward system include commendation, employee recognition, and praise. One of the most effective ways through which organisations can undertake employee recognition is by conducting employee appraisal.

Effective employee feedback should also be integrated in the firm’s performance appraisal process. The feedback should contribute towards development of a strong teamwork within the organisation. Ultimately, a firm attains greater operational efficiency. Additionally, the appraisal should be impartial in all aspects.

Additionally, the appraisal process should focus on aspects associated with employee performance, productivity, and behaviour. There is a direct relationship between employee performance appraisal and organisational performance. The relationship hinges on the fact that the feedback given contributes towards increment in the employees’ performance and productivity.

Other examples of formal incentives and rewards include integrating award schemes, community involvement schemes, leadership groups, and career planning. The award schemes aim at recognising employees who portray special performance. Award schemes play an important role in recognising and motivating employees to continue with their positive performance.

Alternatively, organisations can recognise employees who portray exemplary performance by incorporating leadership groups (Hyer & Wemmerlov 2000). The group constitutes employees who depict high performance and potential. Establishing such leadership groups in an organisation is the highest level of distinction that an organisation can award its employees.

Additionally such recognition plays a critical role in a firm’s effort to establish and retain positive organisational culture (Hyer & Wemmerlov 2000). Other non-monetary rewards that can be used to retain employees include offering employees holiday coupons and healthcare benefits.

When formulating reward systems, it is important for firms’ management teams to ensure that they contribute towards the creation of a positive and lasting impact on the employee. This way, it will be possible for a firm’s management team to sustain the competitive advantage derived from the high employee productivity.

Work-life policies

Currently, employees are facing a challenge of ensuring that they strike a balance between their professional life and family issues. As a result, it is important for organisations to be cognisant of the work-life pressures that employees experience.

Currently, employees are increasingly willing to trade a certain proportion of their remuneration for reduced working hours. Therefore, to deal with this challenge, organisations should assist their workforce in creating work-life balance (Clutterbuck 2003).

Firm’s management teams should consider different policies in their quest to achieve this goal. Some of these policies include integrating flexible working schedules, offering employees parental leaves, career leaves, and providing them with childcare assistance.

Some of the flexible working schedules that a firm’s management team should consider include part-time jobs, working from home, and providing employees with career breaks (Clutterbuck 2003).

Alternatively, firm’s management teams should also integrate the concept of job sharing. Such flexible work schedule will not only promote the employees’ ability to balance between competing priorities, but also enhance their productivity. Increased productivity emanates from the fact that the employees experience lower levels of work-related stress (Clutterbuck 2003).

As a result, the level of their concentration improves significantly, which arises from the fact that employees develop a perception that the firm is cognisant of their personal needs, thus culminating in increment in the level of employee loyalty.

Ultimately, there is an improvement in the firm’s competitiveness and future success. In summary, one can assert that effective integration of work-life balance policies contributes towards the development of a strong competitive advantage.

Work environment

The ability of organisations to retain employees is dependent on the effectiveness with which they create a conducive working environment. According to Leblibici (2012), the employees’ decision to stay in a particular organisation hinges on the working environment created.

A poor working environment is one of the reasons that explain the high rate of employee turnover. One of the ways through which organisations can improve the working environment is by ensuring organisational commitment and employee involvement.

Employee involvement can be attained by providing employees with a chance to take part in decision-making process. This goal is realisable by adopting effective leadership styles such as democratic leadership.

This type of leadership will provide employees with an opportunity to air their views during the decision making process, thus enhancing employees’ commitment towards their attainment, and thus ensuring the firm’s future competitiveness and future survival (Pravin 2008).

It is important for a firm’s management team to develop a comprehensive understanding of its employees’ emerging needs. This move will contribute towards the creation of an environment that enhances the attainment of such needs. Employees enjoy working in organisations that are committed towards the creation of a positive working environment.

Organisations can create a conducive working environment through different ways. Examples of such ways include ensuring effective work design and providing employees with effective working tools and equipments. Additionally, organisations can create a conducive working environment by ensuring a high level of workplace safety.

In the course of their operation, HR managers experience numerous cases of employee conflict. The existence of such conflicts can result in the creation of a poor working environment. Consequently, it is important for HR managers to integrate effective dispute resolving strategies. HR managers should ensure that the differences that prevail amongst employees do not result in dispute that can adversely affect the firm’s future survival.

One of the ways through which HR managers can resolve conflicts amongst employees is by nurturing the concept of teamwork. This move will provide an opportunity for employees to interact and understand each other (Werner 2006).

Supervisor support

The relationship prevailing between employees and supervisors plays an important role in employee retention. Supervisors are the representatives of an organisation and thus they typify how an organisation appears. Consequently, their actions should not adversely affect the employees’ morale. However, they should ensure that they motivate employees in their effort to achieve organisational goals and their personal expectations.

Organisational supervisors can support employees in their self-assessment process. Supervisors should assist employees in identifying their strengths and weaknesses (Pravin 2008). Additionally, it is important for supervisors to assist employees in their effort to harmonise their work and other competing personal priorities.

Lack of supervisor support can motivate employees to leave an organisation in search for other forms of employment. In the course of executing their duties, employees should not only focus on the employees’ formal evaluation. However, they should be more concerned with enhancing employee’s progress (Pravin 2008).

Ensuring sufficient supervisor support is critical in enhancing organisations’ employee retention efforts, which emanates from the fact that the employees become more committed towards their employer.

Conclusion

The high rate of globalisation coupled with increased competing priorities amongst employees being experienced contemporarily presents a major challenge to HR managers. The challenge emanates from the fact that organisations are experiencing an increment in the rate of employee turnover. Consequently, the future survival and success of firms is threatened.

Consequently, organisations in the 21st century have increasingly become concerned with incorporating strategies that contribute towards the attainment of a high level of employee retention.

Nurturing a high level of employee retention contributes towards a firm developing high competitive advantage. One of the ways through which HR managers can enhance their organisation’s ability to retain employees is by incorporating effective HR practices.

Some of the most effective HR practices that enhance employee retention include integrating career development strategies, effective employee compensation, and reward system, work-life policies, nurturing a good working environment, and ensuring effective supervisor support.

Effective integration of career development strategies can contribute towards improving their employees’ productivity, which arises from the fact that they perceive an opportunity to attain their career goals through continued stay in the organisation. One of the ways through which organisations can enhance attainment of the employees’ career goals is by integrating an effective employee-training program.

Employee compensation and reward systems are important in improving employees’ performance and loyalty to the organisation. Additionally, creating a good working environment is also critical in reducing the rate of employee turnover.

Ensuring a good working relationship between supervisors and employees is also paramount in firms’ effort to retain employees for the relationship prevailing between employees and supervisors determines whether employees are comfortable within a given firm or not.

By integrating the above HRM practices, HR managers stand a realistic chance of reducing the rate of employee turnover within their organisations. Ultimately, a firm’s future survival and ability to sustain the competitive advantage associated with a strong human capital increases.

Reference List

Armstrong, M & Murlis, H 2006, Reward management: A handbook for remuneration strategy and practice, Kogan Page, New Jersey.

Clutterbuck, D 2003, Managing work-life balance: a guide for HR in achieving organisational and individual change, Chattered Institute of Personnel and Development, London.

Cooper, C, & Burke, R 2011, Human resource management in small business: achieving peak performance, Edward Elgar, Cheltenham.

Hyer, N & Wemmerlov, U 2000, Reorganising the factory: competing through cellular manufacturing, Productivity Press, Sydney.

Kandula, S 2007, Human resource management in practice: with 300 models, techniques and tools, Prentice-Hall, New Delhi.

Leblibici, D 2012, ‘Impact of workplace quality on employee’s productivity: case study of a bank in Turkey’, Journal of Business Economics and Finance, vol.1 no.1, pp. 38-49.

O’Reilly, C & Pfeffer, J 2000, Hidden values: how great companies achieve extraordinary results with ordinary people, Harvard Business School, Boston, Mass.

Pravin, D 2008, Human resource management, Pearson Education India, Sydney.

Shiekh, M, Qamar, W & Iqbal, F 2008, Impact of human resource management practices on employee retention: A case study of education and banking sector in Bahawalpur, <>

Sims, R 2009, Human resource development: Today and tomorrow, IAAP, London.

Walter, J, Steffy, B & Bray, W 2007, Applying psychology in business: the managers’ handbook, Lexington Books, Chicago.

Werner, S 2006, Managing human resources in North America: current issues and perspectives, Routledge, New York.

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