Lecture 12

Strategic HRM

Case Analysis Report Submission

Employee Motivation and Retention

Importance of Employee Retention

• The cost of losing an employee can range from 25 percent to 200 percent of that employee’s salary.

• Voluntary and Involuntary Turnover

It Will Cost You $4,000 to Replace Just One$8 per Hour Employee!!

Hawthorne Studies

Retention Strategies

• Retention plans outline the strategies the organization will use to reduce turnover and address employee motivation.

• Effective high-performance work systems (HPWS) is the name given to a set of systematic HR practices that create an environment where the employee has greater involvement and responsibility for the success of the organization.

• A high performance work system is a strategic approach to many of the things we do in HR, including retention.

• HPWS gets employees involved in conceiving, designing, and implementing processes that are better for the company and better for the employee, which increases retention.

• Salary and benefits• Training and development• Performance Appraisals• Succession Planning• Work life balance• Career growth

Most important factor !!

Reward Strategy

Rewarding Employees

• Major strategic rewards decisions:– What to pay employees– How to pay individual employees– What other benefits to offer

Reward Management

• Formulation and implementation of strategies and policies, the purposes of which are to reward employees fairly, equitably and consistently in accordance with their value to the organization.

• It deals with design, implementation and maintenance of reward systems (processes, practices, procedures) that aim to meet the needs of both the organization and its stakeholders.

Philosophy of Reward Management

• Strategic sense: long-term focus & it must be derived from the business strategy

• Total Reward approach: considering all approaches of reward (financial or not) as a coherent whole; integration with other HRM strategies

• Differential reward according to the contribution

• Fairness, equity, consistency, transparency

Transactional(tangible) rewards

Relational(intangible)

rewards

Base pay

Contingent pay

Employee benefits

Learning and development

The work experience

Totalremuneration

Non-financial rewards

Recognition, achievement, growth

Total reward

Components of Total Reward (Armstrong 2009)

Components of Total Remuneration• Base pay: Base pay is the fixed compensation paid to an

employee for performing specific job responsibilities. There is a tendency towards market orientation and the increasing role of qualifications.

• Contingent pay: Individual contingent pay relates financial rewards to the – individual performance, organisation or team performance,– competence, – service,– contribution or – skill of individual employees.

• Employee benefits: Elements of remuneration given in addition to the various forms of cash pay.

Team based pay

• Pay is related to team performance

• It can encourages teamwork, loyalty and co-operation

Organizaton-wide schemes

• Profit-Sharing Plans – organization-wide programs that distribute compensation based on an established formula designed around profitability

• Employee Stock Ownership Plans (ESOPs) – plans in which employees acquire stock, often at below-market prices

Main types of Employee benefits• Personal (and family) security: different types of insurances• Financial assistance: loans, house purchase schemes, discount

on company services• Personal needs: holidays, child care, recreation facilities,

career breaks• Company cars and petrol• Intangible benfits: quality of working life• Other benefits: mobile phones etc

4Ps of Rewards

The 4Ps of Reward

• Pay– Salary, bonus, shares, etc.

• Praise– Positive feedback, commendation, staff-of-the-year

award, etc.• Promotion– Status, career elevation, secondment, etc.

• Punishment– Criticism, etc

Reward Strategy

• A declaration of intent that defines what the

organization wants to do in the longer term to

develop and implement reward policies, practices

and processes that will leads to the achievement of

its business goals and meet the needs of the

stakeholders.

• Reward strategy provides a sense of purpose and direction and a framework for developing reward policies, practices and processes.

• It is based on an understanding of the needs of the organization and its employees and how they can best be satisfied.

Developing Reward Strategy

1. The diagnosis phase

2. The detailed design phase

3. The final testing and preparation phase

4. The implementation phase

Top 5 Employee retention Strategies

1. Working Environment2. Employee relationship strategies3. Employee support strategies4. Employee growth strategies5. Employee compensation strategies

Following is a list of some possible retention strategies. Rank each

one in order of importance to you as an employee !!

1. Salary2. Opportunity for bonuses, profit sharing3. Social Recognition4. Flextime scheduling5. Sense of empowerment