Recruitment and Retention in the Australian Context Report

Executive Summary

In the present day business organizations, there is no other activity that has to be considered critical other than placing the right employee in the right position. If the proper person fitting to the position is not placed the result would be range from low productivity, low morale, employee dissatisfaction and frequent absenteeism. Hence it becomes crucial that the right talented employees are selected and appointed so that the organization can grow and achieve its goals. Selection of the right people for the right position definitely is a vitally important function in any progressive organization.

The job of a Human Resources manager doesn’t stop with just recruiting the right person for the right job. He also needs to ensure that the employees so recruited are retained. In fact this becomes the essential part of the Human Resources Management. When the right people are not placed in the right positions the organization faces the problem of a higher employee turnover ratio. Hence the employee retention needs to be strategically approached with the objective of recruiting and retaining the best talents of the industry.

The employee retention and the reduction in the employee turnover ratio comprises of a strategic planning process with various well defined steps that are to be attended with great skill and care on the part of the HR manager.

This report makes a detailed analysis of the causes for increased employee turnover and makes few recommendations for addressing the issue of retaining the employees. While advising that increased efforts on the part of the organization to provide training and development opportunities to the employees will lead to higher employee retention the report also suggests that increasing the employee value propositions will go a long way in retaining the best talents.

Introduction

Tactful employee retention usually results in enormous benefits for both the employers as well as the employees. Salma Aliakbar (2004) lists the advantages resulting to the employers in

• Increased Productivity and capability
• Better linkage between individuals’ efforts and business goals
• Commitment of valued employees
• Reduced employee turnover
• Increased bench strength and better fit between people’s jobs and skills

The employees also derive several benefits from continuing in the employment with the same employer in the from of enhanced motivation, better commitment, prospects for career development, improvement in the knowledge base, increased sense of belonging to the company and above all a good job satisfaction. Though the process of employee retention immense benefits to both employers and employees alike the act of retaining the employees requires a different talent.

Having gained so much of significance in today’s management perspective, the function of employee retention which is the core function of HR management. Employee retention is often influenced by a set of factors which are both internal and external to the organization. Addressing these factors form the major function of the HR management professionals throughout the world in almost every large and small business entity.

In the changing business environment both the employees and employers are put under tremendous pressure to perform and achieve their respective goals. Meaghan et al. (2002) opine that “these employees are extremely crucial to the organization since their value to the organization is essentially intangible and not easily replicated. According to Abbasi et al. (2000) the employees are to be regarded as the major contributors to the efficient achievement of the organization’s success.

The war for talent has assumed greater significance in the economically liberalized cutting edge technology where the employee selection, recruitment and retention have proved to be a major concern for the top management. Any increase in the employee turnover ratio would cost the company heavily on the financial front also in the form of enhanced administrative, recruitment and selection costs.

With this background this reports aims:

• To get a deep insight into the various aspects of ‘employee turnover and employee retention’ to understand and appreciate the intricacies of this branch of HR management being a very critical aspect in today’s HR function.
• To collect information on the employee turnover and employee retention management practices prevalent in the business and industrial enterprises in the Australian context for analyzing the information to meet the objectives of the research study.
• To understand on the basis of the information collected and analyzed, the strategies involved in the employee turnover and employee retention and make suitable strategic recommendations for improving the employee turnover ratio and to retain the employees to the maximum extent possible.

Discussion/Analysis

Lot of time and efforts are being spent by the organizations on the recruitment, selection, training and development and retention of their employees. Hence it becomes imperative that the mangers should take all possible efforts in minimizing the employee turnover. Kevin et al.(2004) state, “although, there is no standard framework for understanding the employees turnover process as whole, a wide range of factors have been found useful in interpreting employee turnover”. It places a necessity on the part of the HR managers to get a full and thorough knowledge on the factors that affect the employee turnover as also the strategic moves the company has to undertake to retain the employees and thereby reduce the turnover.

Definition of Employee Turnover

Price (1977) defines the employee turnover “as the ratio of the number of organizational members who have left during the period being considered divided by the average number of people in that organization during the period.”

Another way of looking at the employee turnover is advocated by Woods (1995); according to whom there occurs employee turnover every time an employee leaves organization either voluntarily or involuntarily and such employees are replaced. This ‘replacement cycle’ can be regarded as the employee turnover. According to Bluedom (1982) and Price and Mueller (1981) turnover intention can be used for analyzing employee behavior.

Factors Causing Employee Turnover

As such there are a number of factors that cause the phenomenon of the employee turnover. Firth et al. (2004) identify “the experience of job related stress (job stress), the range factors that lead to job related stress (stressors), lack of commitment in the organization; and job dissatisfaction make employees to quit” Perhaps these can be considered as the reasons that the individuals attribute to their changing the jobs. There are other factors connected with the locus of control on the employees concerned. Firth et al. (2004) defines the locus control as “the extent to which people believe that the external factors such as chance and powerful others are in control of the events which influence their lives”. Economic reasons are cited as the reasons for the employee turnover by Mano et al. (2004).

Some of the factors that generally influence the workforce to leave their current employment are:

Comparison of Alternatives

The comparison by the employees on the basis of economic benefits being offered by alternative opportunities forms the major cause for the employees to take turnover decisions. The actual alternative employment opportunities available as well as the perceived alternatives by the employees affect the employee turnover.

Organizational Commitment

Various kinds of organizational commitment have been established by different researchers. Allen & Meyer (1990) on the basis of an investigation of the connection between the employee turnover and the organizational commitment had identified three elements of organizational commitment that have a bearing on the employee turnover. These elements are basically attitude related commitments; an ‘affective commitment’ describes the emotional attachment of the employees with the organization as well as the identification of the sense of belonging and involvement of the employees concerned. ‘Continuance commitment’ refers to the “commitment base on costs that employees associate with leaving the organization;” The last one being the normative commitment refers to the feeling and attitude of the employees to continue working with the organization. Based on a study of these elements it follows that, the a strong affective commitment makes the employee stay with the organization as it is his desire; a strong continuance commitment makes the employees stay because of the need and a strong commitment represents the behavior of the individual to stay with an organizations because the individual feels he ought to stay.

Job Satisfaction

A consistent relationship between job satisfaction, organizational commitment and employee turnover has been established by researches though the period of time. According to Muller & Price (1990) the job satisfaction has its impact on the organizational commitment and thereby indirectly influences the turnover intentions.

Wages and Working Conditions

The wage levels and working conditions prevalent in any organization has a large influence on the employee turnover. Higher wages coupled with career opportunities available elsewhere in any other organization has been the one of the main causes making the employees decide to leave the current employment. Similarly when the high performers are paid poorly they are bound to leave the organization.

Employee Training and Career Development

Martin (2003) has identified a somewhat complex relationship between the training facilities and the employee turnover. He has found out that in those organizations where there are facilities for enhancing the skills of the workers through training the turnover rate is bound to be less. However the turnover ratio has a tendency to increase when there are training facilities for developing varied skills of employees, as there are chances that the employees trained in multi-skills will find better alternative employment opportunities.

Organizational Size

Kirschenbaum & Mano-Negrin (1999) observed that the organizational size has a strong influence in the internal labor market of any organization. The wage rates and the chances for the career development are the important organizational factors dependent on the size of the organization concerned and thus influence the turnover rates. A highly developed and well defined internal labor market reacts negatively for the employee turnover decisions for career advancement reasons by offering wide promotion opportunities.

Impact of Unions

Martin (2003) has found evidences to support the view that with the presence of the unions the organizations employee turnover rate is lower. The lower turnover ratio may be due to the fact that the unions play a responsible role for negotiating better working conditions and other facilities for the employees and thereby make the workers feel secured to stay in their current jobs.

Influence of Co-Employees

The intention of the coworkers to leave the job greatly influences the turnover intentions of individual employees. It was observed that the more positive the perception of the co-workers thinking of leaving the job the more the individuals also think in the same direction. Researchers suggest the co-workers intentions to leave may act as a sort of social pressure or serve as a justification for one’s own decision to change the job.

Employee Turnover in Australian Context

As per the survey conducted by the recruitment consultants Vedior Asia Pacific, many of the organizations in Australia indicate that the presence of a tight labor market is the main reason for the difficulty in finding the right talents for their organization. 61.8 percent of the respondents have attributed this reason. The shortage of skilled employees, strong competition from the available candidates and the general economic environment are the important reasons cited for the difficulty in sourcing the correct talents.

The organizations participated in the survey have identified the organizational culture and values, the market position and standing of the organization and the employee benefits being offered by the organizations are the basic factors for a majority of the organizations in Australia for attracting the talents.

The organizations have also identified the following as the main reasons as to why the employees decide to leave the organizations.

• External career progression opportunities
• Personal reasons
• Lack of internal career opportunities
• Lifestyle reasons
• Inadequate remuneration
• Poor management
• Poor cultural fit
• Overseas career opportunities
• Lack of learning and development programs
• Lack of formal performance measurement
• Lack of employee benefits programs (Vedior)

Strategic Measures for Recruitment

The following are the important strategic measures that the organization has to consider while making its recruitment decisions:

Developing External Employment Brand

The best strategy the company can always adopt is to develop a strong external employment brand which is useful as one of the long term recruitment strategy. The company can use the strong employment brand image to attract best talents and more applicants to have a better choice in recruiting.

Developing a Retention Plan

Developing an internal retention plan of the organization internally would help the organization to reduce the employee turnover. Studying the reasons why the top performers stay with or leave the firm would enable the managers to form a proper recruitment strategy.

Measure the Quality of Hire

Recruiting must learn to measure and report on each of the elements of quantity, quality, time, money, and satisfaction to the management in respect of the recruitment activity. The strategic measurement approach of measuring on the job performance of the employees would provide the basis for the future recruitment process.

Focus on Referrals

“Not only are referrals great hires (one recent study completed by MIT’s Sloan School of Management conclusively proved that new hires generated via employee referral outperform all others), but they get produced via a process that frees up a great deal of recruiting time and resources for other strategic efforts” (Dr. John Sullivan, 2006)

Developing a Workforce Plan

The recruitment managers should develop and study multiple scenario plans that encompasses the solutions for various ‘what if’ situations in respect of the recruitment process.

Quantifying the Impact of Recruitment

It is important to convert all the activities connected with the recruitment as well as managing the talents in to dollar terms to analyze the return on investment in the recruitment and retention process. Making these calculations would enable the managers to get out of the mounting pressure to outsource the recruitment function.

Developing a Written Recruiting Strategy

It is essential that a written strategic plan of action is evolved for internal working within the organization. Without the strategy reduced in writing form it may not be possible to bring everyone into the same wave length of thought. According to research studies the written strategy has a significant impact on the functioning of any business. Hence it is imperative to develop a written recruitment strategy for ensuring a proper follow up action.

Strategic Measures for Employee Retention

There are several policy options that the management of any firm engage for retaining the employees. These options include changing or improving over the existing policies concerning the process of employee selection, recruitment, and training and development induction and employee compensation. It should be remembered that the choice of policies and the proposed changes should take in to account the nature of the issues with respect to the employee turnover and retention. By adopting the following strategic measures in respect of the human capital management, the management would be able to have an effective employee turnover management and thereby the firm shall be able to retain the best talents.

Job Designs

The designing of the jobs and the selection of the employees suitable for such jobs are at the root of an efficient employee turnover management. The process of engaging the services of the employees, the capacity of the organization to devise effective policies and procedures in the areas of recruiting and retaining the employees would go a long way in improving the value of the employees.

Accessibility of Knowledge

The chances available to the employees to access to more knowledge and the organization’s support and ability for making the knowledge available extensively to the employees would also help the employees decide in favor of staying with the organization. It is for the organization to ensure that the information is shared at all levels of management.

Workforce Optimization

The following activities on the part of the management optimize the performance of the employees towards the achievement of the organizational goals:

• Establishment of the essential processes of getting the work done in most efficient manner
• Provision of effective working conditions which really motivate the employee performance
• Establishment of well defined accountability of the employees to the different positions of authority
• Making the hiring policies of the organization efficient so that there is selection of employees who fit into the organizational culture and in to the job designs.

All the above actions on the part of the organizations would result in retaining the employees in the organization.

Job Involvement

“Job involvement describes an individual’s ego involvement with work and indicates the extent to which an individual identifies psychologically with his/her job” (Kanungo, 1982)

The job involvement invariably relates to the internalization of the values of about the better jobs executed by the employees and also the importance attached to the efforts of the employees in achieving the desired results have made the employees reconsider their decisions to leave the organization. Generally such involvement relates to the characteristics of the tasks involved. It is observed that the workers who are able to find larger varieties of tasks postpone their turnover decisions. Higher involvement in the job promotes improved job satisfaction among employees and thereby enhances the commitment of them towards the organization.

Empowerment of Employees

By empowering the employees it is possible to enhance the possibility of the employees continuing to work in the organizations. “Empowered employees where managers supervise more people than in a traditional hierarchy and delegate more decisions to their subordinates “(Malone, 1997) Supervisors can perform the role of the coaches and advise the employees on solving their issues. The increased responsibilities placed on the employees will make them respond to problem situations rapidly and positively.

This way the empowerment leads to higher commitment of the employees to the organization and reduces the intensity of their turnover intentions.

Best Practices to Become ‘Employer of Choice’

With the increasing intensity of war for talents in attracting and retaining talent to become an employer of choice has become vital in the context of retaining the talents. The term ‘employer of choice’ represents the special characteristics of an organization to attract and retain the exceptional talents. Usually the employer of choice organizations are expected to posses the key characteristic elements of a positive and comfortable work situations, adequate comparable compensation, well refined organizational culture and the prospects of career path and professional development. Another important criterion that is also being increasingly considered by the prospective talented employees is the work-life balance which implies the provision of an “attractive and fulfilling working environment that balances work life with the personal life of the employees where the employees feel valued and respected”. Good ethical standards being adopted by the organization also enhance the value of the organization in the employee’s perception.

Ethical Standards

The ethical values being nourished by the organization has also an important role to play in the employee retention. Ethical issues cover aspects of equality in treatment, diversity management, flexibility in the approach to issues concerning the labor, voluntary and involuntary occasions of employee leaving the services of the company, retrenchment and downsizing and fixing the standards of performance and rewarding the employees for exceptional performance.

Managing Diversity

Most of large organizations are keen on focusing on this aspect as one of the important business values. Management of workforce diversity presents the organization enhanced synergy and richness in addition to the improvement in the organizational values. Diversity management encompasses different organizational aspects like providing employment opportunities for people with disabilities, promotion of women labor force and also creating a diverse management team within the organization.

Corporate Social Responsibility

This is another area in the corporate world which has assumed prominence recently and is being talked about with larger interest. By being socially responsible and meeting the obligations prescribed legislatively and otherwise the firms would be able to enhance their financial standards and would be able to attract more capital for their expansion plans. The brand image and turnover of the company are also likely to be improved for the companies that have fulfilled their social responsibility obligations.

Thus the critical values adopted by the organization for sustaining the improvements in the organizational performance are more or less the same in so far they also rely on the employer-employee relationships and the development of the skills and knowledge of the people, which are the same standards and values being adopted for enhanced employee retention.

Recommendations

The following are a few recommendations which may be made strategic by aligning them with the overall business objectives of the organization that will prove in the long run beneficial to the growth of the organization:

1. A constant exercise of judging the employee needs in terms of their personal advancement in their career and take the necessary measures to meet such needs. Proper training and development of the employees that ensure the long term career advancement for them would make the best talents stay with the company for longer periods. This report considers this as the foremost initiative that needs to be taken in the sphere of employee retention.
2. The company should strive to develop a complete set of recruiting metrics so that all aspects of recruitment process are measured and reduced to dollar terms. This eliminates the possibility of doubts and uncertainties at any stage of the process of recruitment as to whether the company should go ahead with the process or not. It is crucially important that the company measures the performance of the newly recruited employees and in the process transform the metrics into monetary terms so that the impact on the organizational performance can be ascertained.
3. Appointment of full time executives to assess the training needs of the employees and organizing such training programs which not only develop their technical skills but also contribute to the development of their managerial aptitudes. The executives in charge of training should make a periodic and careful assessment of the training needs of the employees at various levels of the organization and arrange for the provision of the training at the time it is needed so that the training imparted will be effective and useful for the organization.
4. The company may work with compensation plans to develop an effective and efficient recruitment and retention plans in such a way that the performance of the managers in respect of employee recruitment and retention are measured and rewarded on the basis of how well they have done the recruitment and retention. There must be evolved a reward system to encourage the internal recruiters. It may be observed that the external recruiters are effective and better than the corporate recruiters at least partially due to the reward system. When the impact of the reward on the performance of the internal recruiters is recognized it may produce best results.
5. Change in the employee compensation policies to take into account the individual performances instead of providing the employees across-the-board increments
6. Changes in the company policies towards the long-term monetary benefits covering not only the employees’ welfare but also that of their families.
7. Forming ‘employee welfare improvement’ committees with members from the employees to suggest suitable schemes of welfare measures to the HR department that will act to improve the employee retention.

Conclusion

In this report relating to the employee turnover and retention the following factors have been found to determine the employees’ attitude and their turnover intentions. The factors are:

• The physical working atmosphere in the organization
• The attitude of the supervisors and managers towards the treatment of the employees and their performance.
• The attitude of the colleagues of the workers towards the employees
• The employees’ perception of their career development and their sense of belonging to the company
• The response of the management towards improving the employee retention and the strategic measures they undertake to achieve this.

From this report it may be observed that out of the above factors, the employees’ perception about their own career development shapes the turnover intentions of the employees in the any organizational context and so long as this aspect is taken care of by the company, it may be able to retain the best talents with them. In addition to the career development or as a support for that end the employees are also keen on finding whether the organization has

• A supervisor who takes interest in the employee by recognizing his accomplishments and encouraging professional development within the organization
• A team of coworkers who are able to help the employees to complete their mission of a better performance and thereby improving their position within the organization
• The policies and procedures of the companies supportive of the ultimate aim of the career development of the employees and
• The provision of training and skill development opportunities that will enable the worker to reach their objectives.

Hence it is important for the company to take serious measures in this direction to retain the employees who are found to contribute more to the accomplishment of the objectives of the organization.

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