Compensation and other Retention Strategies

Topics: Executive compensation, Management, Organization Pages: 18 (2825 words) Published: April 20, 2014


There are three human elements that are important to any organizations success - good leadership at the top, effective management at all levels, and personnel who possess the knowledge and skills to get the job done. Retaining effective employees is a challenge, and replacing employees who leave an organization is extremely expensive. Roger E. Herman’s book Keeping Good People – Strategies for Solving the Dilemma of the Decade discusses five strategies that an organization can implement, and which will aid in retaining top talent. This paper discusses those five strategies. Compensation strategies are those which ensure top talent can be recruited, and retained due to competitive compensation from an organization. Environmental strategies involve efforts that address 1) ethics and values, 2) organizational policies that interpret values and translate them into action, and 3) the physical environment that a company’s employees occupy. Relationship strategies are the actions of how an organization treats its people, as well as how they treat each other. Support strategies are those that equip employees with the resources that they require to complete the job. People growing strategies are actions that organizations can practice that contribute to the professional and personal development of their employees. For most organizations to be successful there are three human elements which are crucial to that success – good leadership at the top, effective management at all levels, and personnel who possess the knowledge, skills, aptitudes, and attitudes to accomplish an organization’s mission and goals. One of the major challenges facing employers is finding and keeping motivated and effective employees. Today’s highly diverse workforce wants to achieve the greatest possible results, both personally and financially, during his or her career. It is because of this individual desire and motivation that employee turnover is one of the most significant challenges that any organization faces. It is imperative that companies understand the challenge of employee retention, and are prepared to retain top talent. This third human element, skilled personnel and the importance of retaining that skill, is what I will focus on in this paper. THE TRUE COST OF REPLACING EMPLOYEES

In most organizations one of the highest overhead and operating costs is employee turnover. The Society for Human Resource Management (SHR30-50M) has conducted several well-regarded studies which have identified the relative cost of employee turnover. An SHRM study estimated that it costs $3,500.00 to replace one $8.00 per hour employee when all costs are considered. These costs include recruiting, interviewing, hiring, training, and reduced productivity. Another important fact to consider – the SHRM estimate was the lowest of 17 nationally respected companies who calculated this cost (Blake, 2006). Furthermore, it has been measured in numerous studies that turnover costs are 30-50% of the annual salary of entry-level employees, 150% of middle level employees, and up to 400% for specialized and high level employees. It is a fact that employee turnover is unavoidable, and in some cases even desirable. Turnover is necessary when an organization must replace marginal or poor employees with more productive ones and to bring in people with new ideas and expertise. High turnover costs are both avoidable and unnecessary and this avoidable turnover cost is where companies need to focus much effort. The goal is to retain valued performers while replacing poor ones. In 1990 Roger E. Herman published “Keeping Good People – Strategies for Solving the Dilemma of the Decade” – in this book he discusses five strategies for retaining talent. Although this book was published more than two decades ago, these strategies are still very sound and effective in today’s diverse...

References: Herman, Roger E. (1997.) Keeping Good People – Strategies for Solving the Dilemma of the Decade. Summerfield, North Carolina: Oakhill Press
Ross Blake (2006.) Employee Retention: What Employee Turnover
Really Costs Your Company. As retrieved on 28 Sep 2012 at
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Human Resources – Compensation. As retrieved on2 Oct 2012 from
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