Employee retention using lessons from motivation theories - Essay Example

? Employee retention using lessons from motivation theories School Executive summary The tough global economy has had a devastating effect on the labour market. Whereas many companies have been forced to lay off staff, the shortage of talented individuals needed to lead firms through this tough period has meant that retention of critical staff has become challenging. The human capital theory posits that not all labour is equal and therefore it is in the best interest of an organization to retain its high-impact employees. This paper begins by explaining the importance of retaining critical staff. It then proposes that employee retention is largely determined by motivation and as such warrants a review of motivation theories. The motivation theories covered include Maslow’s hierarchy of needs, Herzberg’s two-factor theory, Adam’s equity theory, Vroom’s expectancy theory, Hackman and Oldham’s Job characteristics model and Hofstede’s cultural dimensions theory. The paper then identifies ways that an organization could deploy to enable it retain its critical staff based on the issues raised by the motivational theories. Table of Contents Executive summary ii Table of Contents iii 1.0.Introduction 4 2.0.Work motivation 5 3.0.Theories of Motivation 6 3.1.Content theories 6 3.2.Process theories 7 3.3.Job characteristics model 9 3.4.Cross-cultural dimensions 10 4.0.Ways to retain employees 10 5.0.Conclusion 12 6.0.References 13 1.0. Introduction As businesses face the challenge of operating in a tough global economy they have been forced to perform painful layoffs while at the same time seek to retain their high-impact performers. One would expect it to be easier to retain staff amidst this period of economic recovery however the paradox is that there is a shortage of people with the requisite talent that companies need to remain competitive in this tough business environment (Erickson, 2010a). This means that the few critical employees that each company seeks to retain are also the ones who are attractive to competitors. The challenge therefore remains in retaining these critical staff. The importance of retaining critical staff cannot be gainsaid. When an employee leaves an organisation the organization loses primarily on the knowledge, skill and experience that the individual had developed over time at his/her present occupation. To fully comprehend the importance of maintaining critical employees Ramlall (2004) raises three postulations of the human capital theory. To begin with human capital theory posits that people possess skills, experience and knowledge which represent capital to an organization because they enhance productivity. This means that employees are of economic value to organizations. Secondly, the theory posits that not all labour is equal. Some labour is more valuable than others by the mere fact that more resources have been invested in their training. It is therefore important for the organization to ensure that it retains those on whom it has invested more in developing. Thirdly, investment in building skills among employees would be more profitable and more likely to be undertaken the longer the period over which the returns from the investment can accrue (Ramlall, 2004). This implies that an organisation would derive more value out of its staff if it can train them and then retain them for a significant amount of time within which the staff can use their skills, experience and knowledge to improve the organization’s processes. Employees possess skills, experience and knowledge, and therefore have economic value to organizations. Where employee turnover is high the company fails to realize a full return on its investment in hiring and training staff. This report reviews the classic motivation theories and uses them to explain how organizations could devise techniques that will enable them retain their high-impact employees. 2.0. Work motivation The heart of motivation is to give people what they really want most from work (Mullins, 2010). Motivation can be of two forms: extrinsic and intrinsic. Extrinsic motivation is manifested as tangible rewards often determined at the organizational level while intrinsic motivation is manifested as psychological rewards which is largely determined by the actions of managers. Previously, before the 90s there was greater focus on extrinsic motivation. This was manifested through what Erickson (2010b) defined as the traditional trust-relationship between employees and their employers where the staff professed their loyalty to the employer in exchange of employers promising its staff of long-term opportunities and enhanced rewards. However, this has changed. In today’s economy, most people are increasingly motivated by broader concerns such as their work/life balance, opportunities for flexible working, career advancement and personal development and growth. These are intrinsic factors that are mostly determined by the behaviour of an organization’s management. 3.0. Theories of Motivation The classic theories of motivation are separated into two broad categories: content theories and process theories. Content theories emphasize on what motivates individuals and they include Maslow’s hierarchy of needs, Alderfer’s modified need hierarchy theory, Herzberg’s two factor theory and McClelland’s achievement motivation theory. Process theories, on the other hand, emphasize on the actual process of motivation and include theories such as Vroom’s expectancy theory, Adam’s equity theory of motivation, Locke’s theory of goal-setting, and the attribution theory. 3.1. Content theories The more popular of the content theories are Maslow’s, Alderfer’s and Herzberg’s. Maslow’s defining work was the development of the hierarchy of needs, which is considered in several literatures as the foundation of the motivation theories. Maslow’s argument was that humans (and therefore employees) are a perpetually wanting group and that the average member of society is partially satisfied and partially unsatisfied in all his wants. One of the implications that arise from Maslow’s theory is that managers need to devise practices aimed at satisfying their staff’s unmet needs. Failure to do this would lead to lower job satisfaction by employees and increased withdrawal from the organization (Ramlall, 2004). Herzberg’s two-factor theory postulates that what motivates individuals could be classified into either hygiene factors or motivating factors. Hygiene factors can be related roughly to Maslow’s lower-level needs and motivators to Maslow’s high-level needs. Thus one could use Herzberg’s two-factor theory to identify ways to motivate their employees and as such lower their staff turnover. Hygiene factors are concerned with the job environment and are extrinsic to the job itself. They prevent dissatisfaction. Examples of hygiene factors are pay, organization policies, supervisory style, status, job security, working conditions and so on. On the other hand, motivators are factors related to job content and serve to motivate the individual to superior effort and performance. The strength of motivators will affect feelings of satisfaction or no satisfaction but not dissatisfaction (Mullins, 2010). Examples of motivators are achievement, advancement, growth, recognition, responsibility, the work itself and so on. It is important for the company to clearly distinguish hygiene factors from motivators because increasing one instead of the other has leads to a totally different outcome. Increasing hygiene factors diminishes dissatisfaction but does not increase productivity. To increase satisfaction, the organization would have to increase its higher level motivating factors. From this knowledge the company is better placed to create an environment that its staff members find difficult to contemplate leaving through improvements in areas such as human resource policies, organizational culture and structure, and job enrichment. 3.2. Process theories Process theories of motivation guide the company in understanding how to go about motivating their employees. The underlying thinking behind the expectancy theories is that motivation is a function of the relationship between, on the one hand, effort expended and perceived level of performance and, on the other hand, the expectation that rewards will be related to performance (Mullins, 2010). In simple terms, people are influenced by the expected results of their actions because they prefer certain outcomes from their behaviour over others. Vroom’s expectancy theory argues that motivation will be high when workers believe that high levels of effort lead to high levels of performance and high performance leads to the attainment of their desired outcomes. The company must therefore find ways to reinforce this belief by structuring their reward structure to recognize high levels of performance in a way that will appear adequate to its staff. The point here is that resorting to gimmick or fad-of-the-month rewards that a company may opt for as a short-term measure may backfire in the long run. When staff eventually realizes that the reward schemes are gimmicks their motivation will be negatively affected. Process theories of motivation also address one of the thorny issues that companies have continued to face for decades, the question of equity. Employees, for probably as long as employed-worked has existed, have always compared how the organization treats them with how their colleagues are treated. Adam’s equity theory of motivation informs us that perception of unfairness leads to tension, which then motivates the employee to resolve that unfairness. More often, this self-quest to resolve unfairness by an individual leads to behavior that lowers employee performance and motivation to work. The challenge therefore is for the company to develop reward systems that are perceived to be fair and equitable. Finally, from Locke’s goal setting theory it is seen that people with specific quantitative goals – such as a defined level of performance or a given deadline for the completion of a task – will perform better than those with no set goal or vague goal. Also, individuals who have difficult goals perform better than people with easier goals. This means that companies should institute the culture of leaders helping their staff develop goals so that together they can come up with well-defined challenging but achievable goals. The mere participation by employees in setting up goals is in itself motivating. 3.3. Job characteristics model The task itself is also important to employee motivation. The most popular perspective on job design is that which has been developed by Richard Hackman, Greg Oldham, and their associates. According to Hackman and Oldman’s job characteristics model an employee will experience internal motivation from his job when: (1) the job he does is meaningful, (2) he feels personally accountable and responsible for the results of the work he does and (3) he knows and understands, on a continuous basis, how effectively he is performing at the job. Hackman and Oldman refer to these three as critical psychological states. Hackman and Oldham identified five job dimensions whose variations have an effect on the motivation, satisfaction and performance of employee. These five dimensions are: skill variety, task identity, task significance, autonomy and feedback. Skill variety refers to the degree to which the job requires different skills. Jobs that require the use of multiple talents and experiences are more meaningful, and thus more intrinsically motivating, than jobs that require the use of only one or two types of skills (Ramlall, 2004). Task identity refers to degree to which the worker is involved in all tasks of a job from beginning to the end. According to Hackman and Oldham employees find their work more meaningful when they understanding how their jobs job fits in with those of other employees. Task significance refers to the extent to which the job has an impact on other people, within or outside the organization. Employees whose work appears to have a great impact on the society for example in conserving the earth, find their jobs to be more meaningful. 3.4. Cross-cultural dimensions Doubts are raised about the universality of the theories of motivation especially when we consider that different cultures have different values. For example individualistic cultures place a high regard on equity whereas collectivist cultures value equality more than equity. The business case for managing diversity has been led by the need for: greater access to a wider range of individual strength, experience and perspectives; a greater understanding of diverse groups who are potential and existing customers; and need for better communication with these diverse groups of potential and existing customers. To tackle the challenge of national culture the company could use Hofstede’s model of dimensions of national culture. The four commonly used dimension of Hofstede’s model are: power distance, uncertainty avoidance, individualism and masculinity. Power distance refers to the extent of equality or inequality between people or groups of people within a society. Uncertainty avoidance reflects the level of acceptance for ambiguity within a particular society. Individualism focuses on the extent to which a society supports individual or collective achievement. Masculinity is concerned with the distribution of emotional roles between the sexes and how a given society reinforces the traditional masculine work role (Hofstede, 2011). A good understanding of Hofstede’s national dimensions should enable the organization tailor its organizational culture and human resource policies to accommodate the different areas that the organization operates in. 4.0. Ways to retain employees Goldsmith (2010) outlines the following ways that the organization could use to retain its good employees in a bad economy. First, the company must treat its employees with kindness, respect and dignity. These correspond to Herzberg’s hygiene factors. Kindness, respect and dignity may have a limited impact insofar as motivating employees in concerned but they greatly reduce dissatisfaction. All factors remaining constant, employees prefer working under a manager who shows them respect and treats them with dignity. The secondly method proposed by Goldsmith (2010) is for the company to create an environment where people are learning, getting training, and developing their skills. This environment will increase staff knowledge and experience on different aspects of the organization. This is in line with Hackman and Oldham’s job enrichment strategy of increasing employee skills and task identity – which increases the meaningfulness of work. The third technique is to provide employees with continuous feedback and coaching that goes beyond the annual performance review function. Continuous feedback enables employees to continuously improve in their weak areas as they get to form mentoring relationships and support groups. Coaching on the other hand aids in nurturing more productive relationships between managers and their staff. Finally, organizations need to develop new basis of trust between them and their employees. Erickson (2010) defined this new trust equation as on the one hand the company promising to provide interesting and challenging work to its employees and on the other hand, the employee promising to put in discretionary effort in his/her task and give out relevant results. Where either party is unable to deliver their side of the equation then the relationship should be terminated. This however should not prevent either party from rekindling the relationship when appropriate work opportunities arise in future. 5.0. Conclusion As stated earlier, most workers are increasingly motivated by broader concerns such as work/life balance and other intrinsic factors that largely fall under what Herzberg would refer to as motivator factors. The modern organization is therefore obligated to seek ways to enhance these factors while equally maintaining the hygiene factors so as to prevent employee dissatisfaction. This dilemma is aggravated by the poor state of most economies around the world. The bigger challenge though for the organizations would be how to incorporate the cultural dimension into their employee motivation and retention strategies. Whereas formerly it was possible to develop a one-size-fits-all human resource policy, in the globalised world, organizations have to customise their staff motivation and retention strategies to fit in the different cultural contexts. That said, the motivational theories provide the best place from where organizations can begin this strategy formulation journey. 6.0. References Erickson, T. (2010a, May 12). The Workforce Paradox: We’re Short on Talent, Not Just Jobs. HBR Blog Network. Retrieved September 12, 2011, a from http://blogs.hbr.org/erickson/2010/05/the_workforce_double_whammy_no.html?cm_sp=blog_flyout-_-erickson-_-the_workforce_double_whammy_no Erickson, T. (2010b, May 18). Restore Trust with Employees? Forget About It. HBR Blog Network. Retrieved September 11, 2011, b from http://blogs.hbr.org/erickson/2010/05/restore_trust.html Goldsmith, M. (2010, February 26). How to Keep Good Employees in a Bad Economy. HBR Blog Network. Retrieved September 11, 2011, from http://blogs.hbr.org/goldsmith/2010/02/how_to_keep_good_employees_in.html Hofstede, G. (2011, September 11). Dimensions of national Cultures. Geert Hofstede. Retrieved September 12, 2011, from http://www.geerthofstede.nl/culture/dimensions-of-national-cultures.aspx Mullins, L. J. (2010). Chapter 7: Work motivation and job satisfaction. Management and organizational behaviour (9th ed.). Harlow: FT Prentice Hall. Ramlall, S. (2004). A review of employee motivation theories and their implications for employee retention within organizations. Journal of American Academy of Business, Cambridge, 5(1/2), 52 - 63.  Read More