Employee Retention

This document discusses the importance of employee retention in business organizations and provides strategies to improve retention rates. It focuses on the case of ABC Company and suggests improvements in performance management and selection processes. The document includes a literature review, company background, recommendations, and references.

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Employee Retention
PEOPLE MANAGEMENT - 983523

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Employee Retention
Table of Contents
Introduction..............................................................................................................................3
Employee Retention........................................................................................................................3
Company Background....................................................................................................................3
Literature Review......................................................................................................................4
Conclusion................................................................................................................................6
Recommendations.....................................................................................................................6
Performance Management.............................................................................................................7
Selection Process.............................................................................................................................8
Conclusion..............................................................................................................................11
References...............................................................................................................................12

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Employee Retention
Introduction
Employee Retention
Employee retention, in simple words, is defined as the ability of a business organisation to
retain its employees for a long run (Goldstein, Goldstein, Pulakos, Passmore, & Semedo,
2017). The contemporary business world is changing at a rapid pace and the spread of
globalization has increased the level of competition amongst rival firms. The increase in
competition has increased the reliability of business organizations on their human resources
for achieving market competencies (Cloutier, Felusiak, Hill, & Pemberton-Jones, 2015). As a
result, they are trying their best to attract, recruit and retain a larger pool of talented
employees. In order to develop a competent workforce, business organizations are poaching
talented employees working in their rival companies, which is increasing the labour turnover
rates in almost all industries (Lewis & Sequeira, 2012).
Company Background
ABC Company Pvt. Ltd. is an Australian company that provides software and hardware
related services and solutions throughout the globe. The company has 4 subsidiaries in India,
Malaysia, Canada & America, while its headquarters are based in Sydney. The company was
founded in 2003 and has been able to grab a good market share since then. The company has
around 1,700 employees working for it. Recently, the human resource management
department of the company has identified a rise in its employee turnover rates, which has
resulted because of the inability to retain employees. As a result, the CEO of the company has
decided to look into the matter and study the mediating effects of selection process and
performance management in dealing with retention issues.

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Employee Retention
Literature Review
As discussed above, retention of employees has become an important function for human
resource managers as lack of retention can create a number of issues for their organizations.
Employee retention is one of the critical issues that the global industry is facing. Long gone
are the days when a recruited employee used to stay with a company till retirement (Suresh &
Krishnaraj, 2015). Employees are important for running a business. In case of staff shortages,
it can become impossible for business organizations to carry out their day to day operations
and tasks. According to Surji (2013), high employee turnover or lack of retention can cause a
substantial loss of finances for a business organisation. Lack of retention creates a void in the
human resources, which creates an urgency for business organizations to carry out
recruitment and selection drives more often. A number of researches carried out in the field
of employee turnovers and retention have concluded that the cost of replacing an outgoing
employee can be as much as 30-40% of the outgoing employee’s salary. According to Nasir
& Mahmood (2018), lack of retention can have a number of negative effects on an
organisation. The loss of talent not only has a cost disadvantage for a business but can also
result in a loss of productivity, efficiency and overall competency. For a new employee,
reaching the same productivity level of an outgoing employee can sometimes takes years as
business organizations have to train and develop them to achieve the same level of
productivity.
Performance management is a strategic approach that allows business organizations to create,
assess and monitor performance objectives for their employees (Noe, Hollenbeck, Gerhart, &
Wright, 2017). Performance management can foster a workplace environment where the
workforce is driven by performance and is ready to go an extra mile for the achievement of
organisational goals and objectives. Krishnan (2013) states that performance management

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Employee Retention
has become an integral part of business organizations that allows them to align employee
goals with their mission and vision. Krishnan states that a good performance management
system can help an organisation in promoting team work in the organisation along with
superior performance levels. Performance management also instills a sense of belongingness
and pride amongst the employees, which further continues and helps them in developing their
skills and competencies. Ultimately, performance management helps in retaining the
employees by keeping them engaged in their work and committed to their organizations. Ali
(2019) used his study to analyze the impact of performance appraisal on employee retention
with a mediation role of job satisfaction. Performance appraisals can help in keeping the
employees of an organisation engaged in their jobs by providing them with a review on their
performance over an assessment period. Wijesiri, Paranagama, Siriwardhana & Weerarathna
(2019) performance related rewards also play an important role in motivating the employees
of a business organisation. Rewards & recognition can become an important part in retaining
employees as they are able to receive monetary and non-monetary benefits on the basis of
their performance. This helps them to grow in their careers, which makes them more
committed to their jobs and organisation.
Selection is a process of screening the job applications received for a vacant job post that has
been advertised by a business organisation (Kaplan, et al.). According to Vispute (2013)
retention of employees starts from the very first step i.e. with better recruitment and selection
procedures. By strengthening recruitment and selection processes, it can become easier for
business organizations to reach out to those candidates who have the skills and competencies
that are desired to excel in a particular job position. Khattak & Rehman (2014) suggest that
finding the right fit through efficient selection processes can enable business organizations to
recruit employees who will enjoy their jobs and will find it easier to adjust in a particular

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Employee Retention
workplace culture. The suitability of a candidate in the job role and in the culture of an
organisation is an important factor that can lead to employee retention. Mohammad (2015)
suggests the importance of selection strategies in employee retention. According to him,
business organizations can use a number of tests and analytical tools to forecast the likelihood
of a candidate to quit his or her job in the near future, in exchange for higher compensation,
benefits, brand, etc. Therefore, it can be clearly stated that the selection process of an
organisation has a major role to play in its ability to retain employees in the long run.
Conclusion
From the information discussed above, it can be observed that employee retention has
become an integral part of business organisation. Employee retention not only ensures higher
productivity and a happier workforce but can also help a company in establishing itself as an
employer of choice in the market (Aruna & Anitha, 2015). Employee retention can have a
positive impact on employee morale, motivation and productivity levels, which can
ultimately be beneficial for business organizations (Aguenza & Som, 2018). Therefore, it is
important for business organisation, like ABC Company Pvt. Ltd. to strengthen its policies
and strategies that would help it in ensuring higher retention rates throughout its subsidiaries.
Recommendations
ABC Company is facing a situation where its employee turnover rates are piling up and
making it difficult for the company to retain its talented employees. The inability of the
company to retain its employees is making it difficult for the company to sustain its position
in the market. Therefore, it is important for the company to look for strategies that will help it
in retaining its employees. The two areas where the company needs to make improvements
are performance management and employee selection.

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Employee Retention
Performance Management
ABC Company needs to revitalize its performance management system by including certain
key components that will make it more effective. The key components of a performance
management system, that can lead to higher employee retention, are discussed below:
Goal Setting
Goal setting is a process that allows business organizations to establish performance goals for
employees by relating them with organisational goals and objectives. According to the goal
setting theory, the performance goals developed for the employees should be acceptable,
measurable, time bound and specific. Further, the goals should be developed by ensuring
adequate employee engagement so that the employees remain committed to their goals. This
way, the organisation will be able to ensure high levels of motivation among its employees
and will be able to retain them within the organisation by making their work more
challenging (Hausknecht, Rodda, & Howard).
Performance Reviews
Performance reviews have been found to have a huge impact on the employee performance
levels. The company can use one of the best systems of performance reviewing, which is the
360-degree feedback system. In this system, each employee receives performance reviews
from his or her peers i.e. juniors, seniors, co-workers as well as clients and customers. Such a
system would ensure that the performance reviews are accurate and reliable. As performance
feedbacks are reviews are demanded by employees, providing them with a review on their
performance levels on a regular basis will keep them engaged and committed in their work.
Employees with higher levels of job engagement and commitment become less likely to leave
their organisation (Garcia, Area, & Tag, 2015).

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Employee Retention
Potential Appraisal
Potential appraisal is a process that allows business organizations to evaluate the potential of
their employees and provide them with rewards on the basis of their potential. One of the
most important needs of the employees is to develop their career path by rising in the
organisational hierarchy or by learning new skills and competencies. Potential appraisal
allows business organizations to adopt a future oriented approach to plan the succession of
their employees. In case an employee meets his performance objectives, he can be considered
for a promotion in the future whereas a person who has not been able to meet his or her
performance objectives can be sent for a training or a development program or can be
assigned a coach or a mentor that would help the employee in performing better in the next
assessment period (Kakar, Raziq, & Khan, 2017). Potential appraisal also provides business
organizations with a strategic tool to offer monetary or non-monetary rewards to their
employees on the basis of their performance levels. Overall, employees become more
engaged in the workplace and also show high levels of job & organisational commitment,
which would make it easier for the company to retain its employees.
Selection Process
As evident from the literature review, the selection process can also play a huge role in
ensuring high retention rates in a business organisation. ABC Company can also ensure high
retention rates by strengthening its selection process in the following ways:
Increased Clarity
The management of the company will have to strengthen its selection process by preparing
job descriptions and personal specifications that would provide a greater clarity about the

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Employee Retention
position being advertised. It would allow the management to take a deeper look into the skills
and competencies that a candidate must possess to work in particular job position. This would
allow the company to make sound recruitment decision so that a person with the right skills
and competencies is able to perform in a particular job, which will make it easier for him to
fulfil his job roles and responsibilities. Further, this will also assure that the recruited person
is able to fit in his role and in the culture in a better way, which would help the company in
ensuring better retention of its employees.
Personality Assessments
Personality assessments can also play a huge role in ensuring high retention rates for a
business organisation. A number of companies have started using personality assessments test
to forecast the possibility of a person leaving their workplace if he or she is recruited.
Gaining deeper insight into the previous work experience and the number of companies that a
candidate has switched to can also provide a judgement on his tendency to quit and can make
it easier for companies like ABC to recruit people with lower tendency to switch to other
organizations (Chan & Kuok, 2011).
Analytics
Some of the top companies like Google have started using analytical tools during recruitment
and selection processes to forecast the tendency of the candidates to switch to other
organisation in exchange of a higher compensation or benefits. Google also uses analytical
tools to keep a check on the employees who have a high possibility to become a retention
problem for the company in the near future. ABC Company can also implement its own
system where an analytical tool can be used by the company to help it in identifying

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Employee Retention
employees that have a higher tendency to quit and focusing on their retention (Ma, Mayfield,
& Mayfield, 2018).

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Employee Retention
Conclusion
ABC Company is facing a tough situation, where it is not being able retain its employees and
is losing them to its competitors. The problem being faced by the company is serious and if it
is not dealt with, it would continue to pile up and will add on more problems for the
company. Therefore, it is important for the management of the company to take a detailed
account of the situation and to implement necessary strategies to deal with it. The
management of ABC Company can look into the information discussed above, which
emphasizes the need of a performance management system and efficient selection process to
increase retention rates in a workplace. Following the above recommendations, it would
definitely become easier for the company to deal with its issue of lack of retention and ensure
that its employees stay with the company for a longer period of time.

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Employee Retention
References
Aguenza, B. B., & Som, A. P. (2018). Motivational factors of employee retention and
engagement in organizations . IJAME.
Aruna, M., & Anitha, J. (2015). Employee retention enablers: Generation Y employees.
SCMS Journal of Indian Management, 12(3), 94.
Chan, S. H., & Kuok, O. M. (2011). A study of human resources recruitment, selection, and
retention issues in the hospitality and tourism industry in Macau. Journal of Human
Resources in Hospitality & Tourism, 10(4), 421-441.
Cloutier, O., Felusiak, L., Hill, C., & Pemberton-Jones, E. J. (2015). The Importance of
Developing Strategies for Employee Retention. Journal of Leadership, Accountability
& Ethics, 12(2).
Garcia, P. R., Area, S., & Tag, B. R. (2015). Factors affecting job retention: Basis for
retention management model. International Journal of Education and Research, 3(4),
381-392.
Goldstein, H. W., Goldstein, H., Pulakos, E. D., Passmore, J., & Semedo, C. (. (2017). The
Wiley Blackwell handbook of the psychology of recruitment, selection and employee
retention. John Wiley & Sons.
Hausknecht, J. P., Rodda, J., & Howard, M. J. (n.d.). Targeted employee retention:
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Kakar, P., Raziq, A., & Khan, F. (2017). Impact of Human Resource Management Practices
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Kaplan, D. M., Palmer, J., Thompson, K., Dustin, S., Arroyo, C., Perera, S., & Marx, R. D.
(n.d.). Recruitment, selection and staffing. Teaching Human Resource Management.
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