Chapter 5: Individual/Organization Relations and Retention
Number of employee separations during the year × 100
Total number of employees at midyear
Common turnover rates range from almost 0% to more than 100% a year and vary
among industries. As a part of HR management information, turnover data can be
gathered and analyzed in a number of different ways, including the following
categories:
• Job and job level
• Department, unit, and location
Detailing Turnover Costs
Other areas in addition to lost productivity to be included in calculating detailed
turnover costs include the following:
• Separation costs: HR staff and supervisory time; pay rates to prevent
separations; exit interview time; unemployment expenses; legal fees for
separations challenged; etc.
These turnover metrics illustrate that turnover is an expensive HR and managerial
issue that must be constantly evaluated and addressed. Figure 5-9 summarizes the
costs of turnover.
Not all turnover is negative. Losing low performers should be considered positive.
Chapter 5: Individual/Organization Relations and Retention
There may be an “optimal” amount of useful turnover to replace low performers and
add part-time or contract workers with special capabilities to improve workforce
performance.
Optimal Turnover
V. Retention of Human Resources
In one sense retention is the opposite of turnover. However, the reasons key people choose
to stay with an employer may not be the opposite of those that compel others to quit.
Retaining top talent is a concern for many employers and understanding retention is the
beginning of keeping more of those top performers.
A. Myths and Realities about Retention
Keeping good employees is a challenge that all organizations share and that becomes
even more difficult as labor markets change. Unfortunately, some myths have arisen
about what it takes to retain employees. Some of the most prevalent myths and realities
that exist are as follows:
• Money is the main reason people leave. Money certainly is a powerful recruiting
tool, and if people feel they are being paid inadequately, they may be more likely
Chapter 5: Individual/Organization Relations and Retention
retention. Although some people’s jobs may have to be cut because of
organizational factors, the remaining employees that the company would like to
keep may have the most opportunity and reason to leave voluntarily.
• If high performers want to leave, the company cannot hold them. Employees are
“free agents,” who indeed can leave when they want. The key to keeping high
performing employees is to create an environment in which they want to stay and
grow.
B. Drivers of Retention
Because both people and jobs are so varied, managers and HR professionals need to
realize that individuals may remain or leave their employment for both job-related and
personal reasons. For instance, if employees choose to leave an organization for family
Organizational and Management Factors
Many organizational/management factors influence individuals’ job satisfaction and
their decisions to stay with or leave their employers. Organizations that have clearly
established goals and hold managers and employees accountable for accomplishing
results are viewed as better places to work, especially by individuals wishing to
progress both financially and career-wise. Further, effective management provides
the resources necessary for employees to perform their jobs well.
Chapter 5: Individual/Organization Relations and Retention
taking credit for what others do, and other actions that occur in many departments
and organizational settings.
Work Relationships
Work relationships that affect employee retention include supervisory/management
support and coworker relations. A supervisor or manager builds positive
relationships and aids retention by being fair and nondiscriminatory, allowing work
flexibility and work-family balancing, giving feedback that recognizes employee
efforts and performance, and supporting career planning and development.
Job and Work-Life
Many individuals have seen a decline in job security during the past decade. All the
downsizings, layoffs, mergers and acquisitions, and organizational restructurings
have affected employee commitment, loyalty and retention. As coworkers experience
layoffs and job reductions, the anxiety levels of the remaining employees rise.
Consequently, employees start thinking about leaving before they too get cut.
Organizations in which job continuity and security are high tend to have higher
retention rates.
Chapter 5: Individual/Organization Relations and Retention
• Both timing of work schedules and geographic locations may contribute to
burnout of some individuals but not others.
• The ability of employees to balance work and life requirements affects their
job performance and retention.
Rewards
However, the reality of compensation is a bit more complex than it seems at first
glance. Studies typically show a modest positive relationship between pay level and
satisfaction with a job. However, there is a great deal of variance across employees—
some value money more than others and for different reasons. Such things are
outside the purview of employers.
Many different circumstances from acquisition of another company to furloughs
during an economic downturn can affect compensation and retention. Handling those
challenges can be done without losing retention goals.
Chapter 5: Individual/Organization Relations and Retention
Career Training and Development
Many employees in all types of jobs consistently indicate that organizational efforts
to aid their career training and development can significantly affect employee
retention. Opportunities for personal growth lead the list of reasons why individuals
took their current jobs and why they stay there.
Training and development efforts can be designed to indicate that employers are
committed to keeping employees’ knowledge, skills, and abilities current. Also,
training and development can help underused employees attain new capabilities.
HR Perspectives: Using Perks to Help Retention
Aspenware, a software developer in Denver goes beyond free lunches and days off for
skiing. It offers as a perk free time to pursue projects that have potential as a startup,
subsidiary, or new line of business. Janet McIllece spent 10 to 20 hours per week for 6
months recently trying to find ways to explain complex data on the health of a stream
to nontechnical audiences. Financing would have been available had the project turned
into a business, with ownership stakes for McIllece. It did not turn into a business.
Chapter 5: Individual/Organization Relations and Retention
Programs in some firms cover communication and negotiation tactics, which gives
the employees additional capabilities that are needed in managerial and other jobs.
Employer Policies and Practices
A final set of factors found to affect retention is based on the employer relations
policies that exist. Such areas as the reasonableness of HR policies, the fairness of
disciplinary actions, and the means used to decide work assignments and
opportunities all affect employee retention. If individuals feel that policies are
unreasonably restrictive, unethical, or are applied inconsistently, they may be more
likely to look at jobs offered by other employers.
C. Retention and Top Performers
Organizations that cannot retain their top performers consistently are doomed to going
forward with a less qualified workforce, and perhaps understaffed as well. In a study of
24,829 employees, the top performers mentioned job satisfaction most frequently as a
reason they were staying. Low performers were more likely to stay because of pay and
benefits than because of positive attitudes toward the job, company, or coworkers.
VI. Managing Retention
A. Retention Assessment and Metrics
Calculating both turnover and retention provides a more complete view of worker
movement. By definition, the retention rate is the percentage of employees at the
beginning of a period who remain at the end.
Chapter 5: Individual/Organization Relations and Retention
selected individual situations, or panic reactions to the loss of key people. Examples of
a process for managing retention are highlighted in Figure 5-12.
Employee Surveys
Employee surveys can be used to diagnose specific problem areas, identify employee
needs or preferences, and reveal areas in which HR activities are well received or are
viewed negatively. Whether the surveys are on general employee attitudes, job
satisfaction, or specific issues, the survey results must be examined as part of
retention measurement efforts.
By asking employees to respond candidly to an attitude survey, management is
building employees’ expectations that actions will be taken on the concerns
identified. Therefore, a crucial part of conducting an attitude survey is providing
feedback to those who participated in it. It is especially important that even negative
survey results be communicated to avoid fostering the appearance of hiding the
results or placing blame.
Exit Interviews
Chapter 5: Individual/Organization Relations and Retention
Many HR departments regularly contact former employees who were valuable
contributors, as they may be willing to provide more information on questionnaires
that are e-mailed to their homes or in telephone conversations conducted some time
after they have left the organization. Many times these follow-up conversations
reveal the “real” reasons for departures, other than what was said in the exit
interviews.
First-Year Turnover Evaluations
A special type of retention assessment focuses on first-year employees. It is not
unusual for turnover to be high among newer employees during their first year.
Sometimes the cause of departure is voluntary; for example, individuals may identify
HR Skills and Applications: Conducting Exit Interviews
Departing employees may be reluctant to divulge their real reasons for leaving. A
skilled HR interviewer may be able to gain useful information that departing
employees do not wish to share with managers and supervisors. The following
suggestions may be useful when conducting exit interviews:
When doing the actual exit interview, numerous questions can be asked. Ones typically
asked of individuals include the following:
• Why are you leaving?
• What have you liked and disliked about your job and managers?
Chapter 5: Individual/Organization Relations and Retention
and conflicts with other employees and managers. If these situations occur too often,
HR may need to reevaluate its recruiting and selection processes, as well as its job
previews to make sure they are realistic.
B. Retention Evaluation and Follow-Up
Management can take numerous actions to deal with retention issues. The choice of a
particular action depends on the analysis of the turnover and retention problems in a
particular organization and should be custom-tailored for that organization.
Critical Thinking Challenges
1. Describe your expectations for a job. How well does your employer meet the
expectations you bring to the psychological contract?
Students will have various answers to this question. The psychological contract refers
2. If you became the new manager at a restaurant with high employee turnover, what
actions would you take to increase retention of employees?
Students will have various answers to this question. Employee turnover poses an
immediate problem for most employers—the timely recruiting and hiring of a
Chapter 5: Individual/Organization Relations and Retention
3. As the HR manager you must provide the senior management team with turnover costs
Position: Machine Operator
Number of employees: 250
Number of turnovers: 85
Average wage: $11.50/hour
Cost of benefits: 35% of payroll
The other data that would be relevant would be the actual costs for all of the various
direct costs and indirect costs associated with this position. Talentkeepers has a
turnover cost calculator; however, students would need to enter specific direct and
indirect costs. However, the list of items for direct and indirect costs will help students
see the type of costs that should be used to determine turnover costs.
4. Your company has reaped the benefits of having long-term, tenured employees, but
many of them are now approaching retirement. It is anticipated that approximately
Chapter 5: Individual/Organization Relations and Retention
20% of the company’s workforce will retire in the next 3 to 5 years. In reviewing the
remaining workforce through HR planning efforts, you have become aware of work–
life balance issues that need to be reviewed and addressed. The company president has
A. What steps will you take to identify key priorities in the work-life balance
issues?
Students might suggest doing an employee survey and looking at demographic
B. How will you present a business case to gain management support for
addressing those issues in order to help retain existing workers and to fill the
positions vacated by retiring employees?
To present a business case, students might recommend calculating the cost of
Case
Reducing Turnover at Rosemont Center
1. Did the social services nature of this organization make the turnover situation any
different that in a private company? Why or why not?
The social services nature of this organization didn’t make the turnover situation any
different from that in a private company. When the HR Director checked the accuracy
Chapter 5: Individual/Organization Relations and Retention
2. Have you seen similar efforts occur in places where you have worked? Describe them
and comment on their success in that context. What could have been done differently?
Students will have various answers to this question. Their answers may cover the
following:
• The management could see to it that there are less work rule violations.
Supplemental Cases
The Clothing Store
Questions
1. Discuss how the culture of the Clothing Store is fostered by the HR activities and
practices used.
Student answers may vary. The HR activities and practices at the clothing store are
aimed at building a highly motivated, enthusiastic, and loyal workforce. In order to
2. Compare the culture at your present employer to the culture suggested by the
examples at the Clothing Store. Then identify recommendations you would make to
the executives where you work.
Chapter 5: Individual/Organization Relations and Retention
Student answers may vary. Students may talk about the compensation policies,
Comments
HR spent an enormous amount of time figuring out exactly what kind of future employee
would fit the company’s culture and values. In addition, by paying more than the norm, the
Clothing Store has more applicants to choose from which results in less compromise on
that “fit” they are seeking. In addition, employees are less likely to leave for money which
also helps reduce turnover.
Accenture—Retaining For Itself
This case describes what a large consulting company does to retain a virtual workforce.
1. Identify how some Accenture-type efforts have and have not occurred in your current
and previous workplaces. Also, discuss why focusing on employee retention pays off
for Accenture clients, not just for Accenture itself.
Students’ responses will depend on their work experience. However, many of them
will probably not have experience working in an organization that uses work/life
career-related information that might need to be adapted by other employers. As part
of this research, examine how Accenture markets itself to current and potential
employees.
Chapter 5: Individual/Organization Relations and Retention
Alegent Health
This case discusses how Alegent, a large nonprofit health care system, improved
employee retention and reduced turnover. (For the case, go to
1. Discuss how Alegent’s practices match with the recommended retention practices
covered in the chapter.
The text discusses the drivers of retention—characteristics of the employer, job
design, career opportunities, rewards, and employee relationships. Regarding the
2. Why was Alegent’s broad based approach to nursing retention important?
A broad based approach to nursing retention is important because of the severity of the
turnover costs and because retention is connected to so many other areas of HR—