Spinning Gold from Straw: Low-Cost Employee Retention and Motivation Tools
Employee retention and motivation…why should employers care? A storm is brewing. National productivity was up 3.9% in the second quarter and 1.9% in the third quarter of 2004. At the same time, the unemployment rate was up 5.5% in October 2004. “Productivity is up, but fewer people are doing more,” said Jennifer Loftus, SPHR, CCP, CBP, GRP, National Director, Astron Solutions. “In addition, the number of 25-34 year old workers will decline by 2.7 million by 2008, resulting in a predicted shortage of 10 million workers within the next ten years.”
New York, NY (PRWEB) January 19, 2005 -- Employee retention and
motivation…why should employers care? A storm is brewing. National productivity
was up 3.9% in the second quarter and 1.9% in the third quarter of 2004. At the
same time, the unemployment rate was up 5.5% in October 2004. “Productivity is
up, but fewer people are doing more,” said Jennifer Loftus, SPHR, CCP, CBP, GRP,
National Director, Astron Solutions. “In addition, the number of 25-34 year old
workers will decline by 2.7 million by 2008, resulting in a predicted shortage
of 10 million workers within the next ten years.”
According to the
Society for Human Resource Management (SHRM), each employee who leaves a company
generates a cost. Conservative estimates place that cost at 30% of an employee’s
salary. For example, an organization that loses and replaces 150 employees a
year, each at an average annualized salary of $50,000, incurs an estimated
turnover cost of $2,250,000 in one year.
However, making changes to
recruitment and retention programs can generate positive fiscal returns. If the
same organization that replaced 150 employees were to implement changes,
financial savings would accrue. The organization would enjoy a $22,500 decline
in recruitment and retention costs with each 1% decline in turnover. By working
to improve the employment relationship, the organization would also reap the
recruiting benefits of a reputation as an employer of choice.
How can
employers cost-effectively retain and motivate employees?
Communication is
the key ingredient in finding what will best motivate and meet employee needs.
According to the February 2001 Workspan article, “Igniting Passion in
Employees,” employers should first ask their employees a series of detailed
questions. For example, answers to why they stay at the organization, what would
make them leave, and what should be done to keep them from leaving, can be
essential in planning incentive programs.
Variable compensation, or
incentives, used to be the domain of senior management and executives but are
now increasingly being used in a number of organizations. According to a recent
WorldatWork study, 77% of organizations in 2004 provided variable compensation
opportunities to their employees at all organizational levels.
Team and
small group variable compensation programs provide several benefits to the
employee and the organization including increased total cash compensation
opportunities, no increase to fixed salary costs, greater opportunities to
reward top-performing employees and departments, enhanced line of sight helps
employees to achieve goals, improvement in organizational processes and fiscal
situations as a result of goal achievement.
Astron Solutions’ client,
Boston Children’s Hospital launched a small group variable compensation program
for their patient financial services department, when their days in receivable
had increased to 110 days. This extended length of time in receivable translated
into an extremely large daily revenue loss. A quarterly incentive program was
formulated focusing on the department’s efforts to decrease days in receivable,
with a maximum incentive pool equivalent to 20% of the department's total
quarterly payroll. Cash payouts were equal among all employees, with the
understanding that performance needed to be kept at satisfactory levels in order
to be eligible for participation and payouts. The result was a positive return
on investment for the hospital. In addition, the employees learned how to work
more efficiently together as a team, the hospital decreased its days in
receivable which generated positive cash flow, and the employees increased their
take-home cash without causing the organization fiscal strain.
Spot
awards are another option for organizations looking to motivate their employees.
According to the William M. Mercer 2004 / 2005 Compensation Planning Survey, 55%
of organizations continue to use spot cash awards to reward, motivate, and
retain key performers, which is 7% more than in 1998. Another 8% of
organizations are considering implementing a spot cash award program in the
future.
Non-monetary recognition awards also continue to grow in
popularity. As also indicated in the Mercer survey, 72% of organizations offer
non-monetary recognition awards to reward, motivate, and retain key performers,
with an additional 10% of organizations considering implementing a non-monetary
recognition award program in the future. Since 1998, non-monetary recognition
awards have been the primary emerging reward and recognition practice. These
rewards include a public “thank you” or recognition in a company newsletter for
a job well done, a special one-on-one lunch, and job restructuring. “Employers
should ask their employees how they would like to be rewarded. Employees who
work for not-for-profit organizations know that money is tight, and will often
be an organization’s best source of ideas with faster buy-in and appreciation,”
said Loftus.
With all of these various choices, employers should not feel
like the spinning impaired miller’s daughter from the beloved children’s fable,
“Rumplestiltskin.” Low cost solutions to retaining and motivating employees are
readily available, proven to be effective, and are relatively easy to execute,
resulting in a “happy ending” for employers.
Astron Solutions is a
consulting firm dedicated to the delivery of HR consulting services and
supportive technology. For more information about variable compensation or
incentive development please call Astron Solutions at 800-520-3889 or visit
their website at www.astronsolutions.com.
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Source : http://www.prweb.com/releases/2005/1/prweb198582.htm