One of the most devastating losses for any organization is the departure of experienced employees. Even though humankind has managed to formalize a large part of its experience in various written resources, the majority of vital knowledge continues to exist in a non-written form. For instance, a programmer may be knowledgeable of some particular coding language due to it being formally described in official guidelines; however, its company-specific variants, which stem from the unique style of the internal specialists, can be an enigma with little formal explanation. Vital knowledge about the specific variants of a coding language can be obtained only through direct contact with their users. Thus, an IT company that loses a vital specialist often risks suffering a long-term decrease in productivity rates until new specialists manage to rediscover covert knowledge. This scheme, obviously, applies to the majority of the professions in the modern world. Regrettably, such occurrences are usually unavoidable in the modern world as the workforce is too flexible, pursuing self-betterment options constantly. Therefore, modern Human Resource Managers need to know how to limit this process, which is usually called employee turnover in the academic literature, to be successful. In this regard, the essential practices to take into consideration include the abstaining from forced overwork and the provision of the potent promotion opportunities because these factors motivate the workers to make a long-term time ‘investment’ into a particular company.
Human Resource Management (HRM) and employee turnover are profoundly interconnected in the modern world. Even one incorrect company-wide policy can work as a source of massive discontent within a business, resulting in a massive outflow of valuable workers. In this regard, Santhanam and his colleagues note four significant mistakes that an HRM specialist can do regarding employee turnover: lack of training practices, toxic selection approach, insufficient career growth opportunities, and bad compensation practices (4). The effects of these factors can be especially daunting if they become worse in the process of the employee’s work within a particular company. Specialists even talk of the so-called psychological contract breach regarding such negative changes (Santhanam et al. 8-9). Thus, academic voices in HRM primarily concentrate on internal processes such as training or remuneration, as well as employee trust to explain the phenomenon of employee turnover.
The industry specialists with non-academic backgrounds name similar reasons for the high employee turnover rates; however, they also note several additional factors, showing the importance of personal experience in the sphere of Human Resource Management. For instance, Katie Martinelli mentions “lack of growth and progression, being overworked, lack of freedom and recognition, little opportunity for decision-making, and poor employee selection” as the key reasons for the elevated employee turnover rates. In this regard, the list is quite similar to that provided by academic sources; however, the HRM specialist makes a significant emphasis on the personal decision-making power of the employees and their stamina. Lack of internal democracy may be an unobvious problem; however, it makes sense in the light of the aforementioned impact of promotion opportunities. To a certain extent, employees may view the lack of internal democracy as the sign of insufficient promotion opportunities within an organization. Whether rational or not, they may hold a view that the inability to express their opinions is the sign that some high-ranking positions are guarded on purpose by the old-time company insiders. In essence, the presence of internal democracy is the best method to prevent the aforementioned psychological contract breach. Besides, Martinelli notes the high workloads; in this regard, the pay does not matter much. What matters instead is the free time of the workers: “asking the workers to choose between their work and personal life will never sit well” (Martinelli). In essence, this observation shows that the payment increases alone, which are often a response of some inexperienced HRM specialists, cannot solve the problem of turnover rates. None of the singular responses to the aforementioned problems can work.
Employee turnover rate issues can be resolved only with the help of complex policies, which include the simultaneous resolution of all outlined problems, such as high workload, low payment, insufficient democracy, and inadequate training. Mike Kappel, who is a practicing entrepreneur, notes five ways to overcome high employee turnover rates in his article on the topic. The first solution is to hire the right people, who can fit a unique internal culture of a specific business. In such a way, an HRM specialist can significantly lower the number of ‘psychological contract breaches’ as their perception tends to differ among various employee groups. For instance, young and ambitious employees may tolerate unpaid overtime work as long as it guarantees their fast rise through the managerial ranks of a particular company. Software producers may consider such a type of employees as they often have to deal with stringent deadlines and the constant threat of the need to rearrange their products completely. At the same time, companies that primarily rely on the ‘non-unique’ workforce, viewing the workers as low-cost ‘biological automatons’ that are necessary for production, may want to abstain from overwork practices and offer rigid schedules and highly standardized incomes to their workers (Kappel). This model is perfect for various factories that produce genuine material goods as their employees are primarily motivated by outside factors such as family matters. More importantly, they tend to lack formalized written information to a much greater extent than office-based works; thus, high employee retention can be crucial for their survival due to a more extensive generation of tacit knowledge. Consequently, the selection process is the first key element that any HRM specialist must consider; in this regard, the critical task is to create a coherent ‘portrait’ of the desired employee before the start of the hiring process. More importantly, the portrait must be followed most strictly (even in the presence of highly qualified but culturally incompatible candidates).
The second solution is much more apparent, including the provision of higher pay and benefits to the workers. As the aforementioned Kappel notes, “if you don’t pay your employees well, they’ll find a business that will.” In this regard, the principal target of any Human Resource Manager is to find an optimal balance between the existing remuneration in their business field, the overall income of a company, and the average needs of the employees. Current data, for instance, indicates that the provision of maximal benefits and remuneration can be the most optimal strategy. As John Fechter shows in his article, modern Starbucks provides “adoption assistance, tuition reimbursement, employee assistance program, accidental death & dismemberment cover, life insurance, 401 (k) Plan, stock purchase plan, free snacks, employee discount, and free take-home coffee or tea” for its workers. Even though the company spends massive resources on maintaining the vast benefits network for its employees, the outcome is positive because Starbucks’ workers accumulate massive volumes of the aforementioned non-written knowledge. Besides, the payment and remuneration heavily depend on the average characteristics of the employees, which were mentioned in the previous paragraph. Essentially, the selection process is vital for setting up an efficient remuneration program within a particular company. In this regard, the most critical factor to balance is the difference between the volume of remuneration in the stable monthly payment and bonus-related additions. Companies that do not require specialists with unique skills and feature repetitive work can use stable remuneration with minor bonus-related differences to promote consistency. At the same time, innovative firms should utilize bonus-based remuneration to push the ambitions of their talented employees to the forefront. Thus, only a combination of the efficient selection process and remuneration strategy can provide tangible results; essentially, both processes should not be viewed in separation.
Thirdly, the workers should always be allowed to understand their potential career paths within a particular company. In essence, there should be a clear road map that can carry a beginner employee to the top management position (Kappel). In this way, certain companies can indicate the presence of internal democracy, the ability to renew the managerial ranks and prevent their corruption by the long-term insiders. More importantly, the promotion map should always be supplemented with the clear delineation of the tasks that need to be fulfilled to move through the ranks. Essentially, there should be no secrets for the employees; the most talented of them should be even capable of calculating the average time it will take to reach the top (Kappel). One of the most optimal ways to set the indicators of an impending promotion is the remuneration. In this regard, the provision of a large number of bonuses should be seen as a sign of moving in the right direction by the employees. Essentially, HRM specialists should tie the remuneration approach to the career path of their employees. In this way, they will ensure both the material interest of their workers and proper communication with them.
Another critical factor of the successful long-term employee retention is the promotion of healthy training practices. Martinelli mentions the lack of feedback and recognition as one of the critical negative factors regarding low employee retention. Since training is one of the key ways to provide vital feedback, its existence is crucial for the successful onboarding of new employees. In this regard, the principal aim of any organization is to make the training process rigid enough to enable the maximal absorption of vital internal information (Kappel). As mentioned previously, it is impossible to encode all tacit information within the written sources; thus, the new employees should be given maximal attention from the management and veteran workers to succeed. HRM specialists should do everything to promote a culture within which the long-term ‘veteran’ employees have enough motivation to share their knowledge with the newcomers. In this regard, one of the essential methods to promote this positive behavior is to offer massive bonuses for the provision of internal teaching opportunities. Primarily, the success of proper training programs also relies on other factors, such as remuneration. The motivation to train diligently may also stem from the presence of the career map; perhaps, it may be even rational to incorporate training directly into it.
Lastly, the HRM specialists must give maximal autonomy and, to a certain extent, democracy to their workers to prevent high employee turnover rates. The range of pro-democracy measures can be quite extensive in modern business environments. For instance, Mike Kappel offers to allow flexible work schedules. According to him, “employees can create a work-life balance for themselves” by using such schedules. This measure is perfect because it gives self-expression to both the employees with outside goals and the ones that strive to achieve successful careers. Thus, people that strive to achieve educational goals will not leave a company with flexible schedules due to the possibility of combining their work with studying. At the same time, the most ambitious ones will be able to maximize their work time and shorten the period between their promotions. Thus, the provision of the democratic elements within an organization can be a crucial ‘game-changing’ decision for any Human Resource Manager as it can give doubting employees an opportunity to calibrate the work environment to their needs and, consequently, retain their position within a business, providing long-term knowledge accumulation benefits to a business.
To summarize, modern Human Resource Managers have many options when it comes to controlling employee turnover rates. They include the support of rigid promotion paths, better remuneration, internal autonomy/democracy, robust training programs, and rational selection frameworks. In this way, the managers can ensure that the needs and ambitions of the maximal number of employees are satisfied. More importantly, the investigation into the matters of employee turnover shows that the separation of HRM measures aimed at its lowering cannot be efficient. For instance, the selection process must always be connected with the remuneration scheme as both are heavily influenced by the required psychological characteristics of the future employees. A similar occurrence is present when it comes to career paths since remuneration can be used as a strong signal of success when it comes to scaling the corporate hierarchy. Without the combination of all methods, regrettably, HRM specialists risk to raise the suspicions of the employees and cause a psychological breach of contract.
Fechter, Josh. “Starbucks Employee Benefits Review: Are Their Careers Worth It?” FutureFuel.io, https://futurefuel.io/employee-benefits/starbucks-careers/.
Kappel, Mike. “5 Ways to Reduce Employee Turnover.” Forbes, Forbes Magazine, 9 Aug. 2017, https://www.forbes.com/sites/mikekappel/2017/08/09/5-ways-to-reduce-employee-turnover/#4469f2b25001.
Martinelli, Katie. “Causes of Staff Turnover & Strategies to Reduce It.” The Hub, High Speed Training, 14 Sept. 2018, https://www.highspeedtraining.co.uk/hub/causes-of-employee-turnover/.
Santhanam, Nivethitha, et al. “Impact of Human Resource Management Practices on Employee Turnover Intentions.” Journal of Indian Business Research, vol. 9, no. 3, 2017, pp. 212–228., doi:10.1108/jibr-10-2016-0116.