How much does it cost us to lose essential workers? What motivates them to change and how can we retain them?
The reflection of this work revolves around these questions. The hidden costs behind the fluctuation, the motivational theories that explain the phenomenon and the existence of the Psychological Contract as a key comprehensive piece are shown.
The Loyalty Actions and how to cope productively with staff turnover are the final topics with which it is possible to organize a specific way of managing retention in the company.
Introduction
In a previous job we focused on the compelling capacity and need of our company to become an intelligent, flexible organization that learns and effectively manages its knowledge.
We were talking about an institution open to change and a consequent leap in the management of people, where we go fundamentally to the Being of the worker rather than to their skills and knowledge. We were referring on that occasion to the promotion of "champions" in the organization and the question that follows is inevitable:
What if they decide to join a more interesting employer?
Fluctuation or Rotation of staff is a traditional indicator in Human Resources Management. Of course, once again the data remains in the hands of the management technicians and the real managers of people, bosses and supervisors, remain without knowing how to deal with this issue.
How much does it cost us to lose essential workers? What motivates them to change and how can we retain them? These are important questions that we need to answer if we are to turn the human factor of the company into a powerful lever of competitiveness.
The cost of losing our people
Managing the retention of the people who make the best contributions to the company, or encourage the contribution of others given their experience and relationships, is a task that first requires sensitivity to the cost of losing them.
“…: The consequences of separation from a qualified employee go far beyond the admittedly high costs of hiring and information for his successor… this separation can cause a project to be blocked or disrupt the solid relationships established with colleagues of work and clients and result in the disappearance of a mass of knowledge accumulated after long experience, which constitutes a serious setback for a company ”(Hirschfeld, 2006)
K. Hirschfeld warns us about those "collateral damages" of fluctuation that we usually do not consider, even though we do suffer its consequences.
Whoever leaves takes with him a set of knowledge (and relationships, alliances, colleagues) that cannot be stored in a documentation or database, it is a practical and intuitive know-how that requires a close interaction between the parties to be transmitted. The company is left without the ability to take advantage of past experiences and ends up, after much effort, “reinventing the wheel” (Kransdorff, 2003. Ref. By Hirschfeld)
With the departure of key workers, the effectiveness of the management system deteriorates. Let us remember that interpersonal relationships in the company are conditioned to people more than to the functions of the position they occupy and it is these links that keep the engine running, since it is important in the work processes that people know each other and maintain relationships based in mutual trust.
This "relational capital" is a major deterrent to the simple substitution of one worker for another.
If we continue our analysis, we find that, in addition to the recruitment costs, the very costs of the vacancy are added since the work will have to be redistributed among other collaborators and colleagues, affecting the fulfillment of already established goals and the performance styles themselves.
Similarly, the period of integration of the new workers will not only cause costs associated with the orientation and training programs, the company must anticipate that the productivity of the newcomer will be weak for a considerable period. A study carried out reaches the following conclusion: “It takes up to 6 months for a new employee to achieve correct productivity at work. It takes 18 months to integrate the culture of the company and 24 to really know the strategy and activity of the company in which it has become a part ”. (Birchfield, 2001. Ref. By Hirschfeld)
In short, the moment a worker leaves, the company will incur the following costs to some extent:
1) Cost of lost knowledge and the inability to use it
2) Cost of redistribution of product functions to vacancy
3) Cost of recruitment and selection
4) Cost of Integration
5) Cost of training
6) Cost of low initial productivity
Although not all are susceptible to a monetary translation, we bring up two possible methods, depending on the case.
A qualitative variant for calculating losses in financial terms begins by considering the position in question, its complexity, and the difficulty of finding a suitable replacement for it (this could be translated into a scale), then applying an empirical formula that consists of say that these costs represent roughly 150% of the worker's annual salary (Teltschick 1999. Ref. by Hirschfeld) Let's do the math.
We could use a quantitative variant, on the other hand, when it comes to direct production jobs. In this case, the losses can be expressed as a volume of production not carried out in a certain time, and can be considered in money or physical production terms (Curbelo, 2004)
For this calculation the following formula will be used:
PEF = PDT * HDF
Where:
PEF = Economic losses due to fluctuation.
PDT = Daily productivity of the worker.
HDF = Men - days lost due to fluctuation.
We know, it is unusual for these analyzes to be done seriously in companies. Nor do the Financial Statements find the way to reflect and interpret such issues and it is regrettable because we aspire to increase the response capacity of our organizations.
The fact is that we are incurring in a series of important expenses that we do not account for and are usually, at present, those that make the difference because they are closely associated with the human factor and the level of management that we are capable of developing.
Reasons for leaving the company
Certainly this is an intimate question, which points to that fiber that makes us human, motivated beings, owners of self-esteem, with a story; we wonder about the motives for a behavior that usually involves a difficult decision.
The decision to change employment, which we have already seen, can be very expensive for the company, it can occur in two ways: when it responds to the desire to end an unsatisfactory employment relationship, in other words, the worker feels that there are reasons that they push you to change. The other alternative is when you are motivated by factors that attract you to a new employer.
The first case is certainly more unhappy, but in both cases the company has failed to consider the motivations of its most valuable staff.
Motivation
We should review some of the most popular and validated theories of human motivation, those that can best help us understand the internal forces that collide and mobilize the person who decides to leave the company.
Vroom Expectations Theory
This theory holds that highly motivated people are those who perceive certain goals and incentives as valuable to them and, at the same time, understand that the probability of achieving them is high.
The points that I prefer to highlight from this conception are:
- All human effort is made with the expectation of a certain success or reward. The subject trusts that if the expected performance is achieved, certain consequences will follow for him. People expect that those who do the best work will achieve the best results.
This approach to motivation has several important consequences when trying to understand fluctuation:
- The worker is motivated by good management by objectives, so these must respond to real estimates, to difficult but achievable demands. Rewards for achievement must be very well aligned with the true expectations of the worker. This requires fine knowledge of the people, their culture, their true interests.
In other words, if the person does not feel challenged by the work to be done, or their most heartfelt expectations are unknown or, what is worse, false expectations are created that the organization will not fulfill, then with all certainty demotivation will appear and loss of commitment.
Stacey Adams Equity Theory
The previous theory says that we expect a reward according to the effort made. This tells us more: the reward has to be fair if we compare ourselves with another.
"Equity theory holds that an employee's motivation, performance and satisfaction depend on his subjective assessment of the relationships between his effort-reward ratio and the effort-reward ratio of others in similar situations" (Stacey Adams. Cit. by Valdés Herrera) It means that in addition to being interested in obtaining rewards for our performance, we also hope that these are fair, which makes motivation much more complex.
The consequence is clear: if the worker perceives injustice within the management of the company, even not directly applied to him, this will be a sufficient reason to break the emotional bond with the organization and feel the "push" in search of a new employer.
Herzberg's Two Factor Theory
Fair Reward is what we get out of the two previous conceptions. They are the voice of common sense, pure recognition of human nature, we just forget it. Both theories explain how people are motivated (or demotivated), for this they are known as process theories. Content theories, one of which interests us, describe what specifically motivates you at work.
F. Herzberg made a very interesting discovery in this regard: he found aspects of our work life that make us feel good, give us satisfaction… but do not motivate us. Others, on the other hand, have a strong motivational character. He called some of them Extrinsic or Hygienic Factors, the other Intrinsic or Motivational Factors.
Hygienic Factors are factors external to the task. Its presence eliminates dissatisfaction, but does not guarantee a motivation that translates into effort and energy towards the achievement of results.
Motivational factors refer to the job itself. They are those whose presence or absence determines the fact that individuals feel motivated or not.
In the following graph we can see the whole set of questions found and valued in Herzberg's research, as well as the motivating load (favorable percentages) or dissatisfaction generator (unfavorable percentages) of each aspect.
As you can see, it is the Achievement, the Recognition, the Professional Advancement, what motivates us the most and probably what attracts us when changing employers. Bad Administration, Incompetent Supervisors, also not being able to self-fulfillment constitute the main dissatisfactors at work and will most surely push towards the change of company.
There is much current empirical evidence (Ángel, 2005. Henning, 2005. Kallus, 2004) about the content of the motivations of those who decide to change employers, which is very interesting and consistent with the Two Factor Theory.
These studies suggest that one of the first reasons that lead a worker to accept a new job offer is the desire for new challenges (or the mediocrity of the current job content) To this argument are also added career prospects, which they were relatively limited with the old employer, but satisfactory with the new one.
As for the salary increase, it plays a much less important role than is generally believed. Most studies highlight that salary increases only reach the bottom of the list of reasons for changing employers (Rippe, 1974. Ángel, 2005. Ref. By Hirschfeld, 2006)
And something really surprising, contrary to being a purely pragmatic and profit-oriented initiative, the decision to change employment or not is based largely on the emotional ties of the worker with the company. It is a predominantly emotional decision.
In short: a challenging job, with possibilities of success and achievement, fair rewards and some level of certainty regarding how we are going to make a career is what mobilizes us and, if we fail, another employer will surely attract the best employees of the company.
On the other hand, poorly defined administration and the presence of mediocre managers where effective leadership is lacking (probably with the existence of internal conflicts, exhaustion and disorientation) will push the most valuable thing out of the organization, generating a pernicious turnover in all employees. possible orders.
The psychological contract
Until I heard about the so-called Psychological Contract, I was not able to fully understand the subject we have been dealing with. Everything we have seen so far is summarized or collected in the Psychological Contract.
The term appeared in the business environment around the sixties, exactly with the presentation of three studies on attitudes and behaviors in the workplace. The first was Understanding Organizational Behavior (Argyris, 1960), followed by Men, Management, and Mental Health (Levinson et al., 1962) and Organizational Psychology (Schein, 1965).
Psychological Contract is, to specify:
“… An addition to the economic agreement that covers wages, hours of work and their conditions (…) It defines the conditions of the employee's psychological commitment to the system” (Davis and Newstron, 1991)
"… a set of expectations, not written anywhere, that operate at all times between any member and other members and leaders of the organization." (Schein, 1992)
"… the individual belief about the terms and conditions of a reciprocal exchange agreed between a person and another party" (Rousseau, 1989. Cit. By Topa Cantisano)
Of course, this contract is a metaphor that science has invented to name the way the worker internally defines his relationship with the company or institution that employs him. It happens that the legally established Labor Contract does not include all the aspects that will regulate (implicitly) the relationship between the worker and the organization, and that they are just as legitimate as they could break it at any time.
The employment relationship is more than hours, work content and pay; it is conditioned, as we have already analyzed when studying motivation, to a set of expectations and requirements that regulate it. The employment relationship, let us point out, is defined as a reciprocity process in which each one evaluates what they are offering and what they are receiving in return.
This is why the psychological contract is such to the extent that we collect (mentally) what we expect from the company. But there is a detail, it is psychological, it is probably not known by the agents that represent the entity.
Such a contract is the materialization of the motivations, expectations, judgments, idiosyncrasies of the worker, what he believes is fair and deserves. It affects how you will perceive and interpret all the events around you.
"The Psychological Contract - highlights Tazarona - becomes the determinant of most everyday situations at the moment that an individual interacts with any human group, deciding whether or not to remain in it based on the satisfaction of their expectations" (Tazarona)
The Psychological Contract is not static
Something that we often overlook is the simple fact that work relationships (and all relationships) change over time, as do our expectations of work and the conditions of our engagement.
"As needs and external forces change, so do expectations, turning the psychological contract into a dynamic contract that must be constantly negotiated." (Arana Mayorca, 2006)
The psychological contract changes as the needs of the organization and the individual change. What a worker expects from her job at age 25 can be completely different than what she expects at 40.
The reevaluation of the psychological contract is especially significant when there are changes in the organization, when new policies and procedures are proposed, new bosses are appointed, increases or losses occur in salaries, disciplinary actions, new performance standards, or with the perception of injustice (Guzzo et al., 1992; Wiesenfield and Brockner, 1993. Ref. by Tena Tena).
Over time, there may also be a change in the contract as the parties vary their perceptions by the belief that one has fulfilled the obligations while the other has not. It has been found that workers' perceptions of their psychological contracts change remarkably, believing that their obligations decrease over time while the organization's obligations increase (Robinson et al., 1994. Ref. By Tena Tena)
This detail is very striking because, if at the beginning of the employment relationship the person feels more obligated to the company, over time this equation will be reversed, which will make it likely that they will perceive their expectations have been violated since they expect to give less … And receive more.
Violation of the Contract
The violation of the psychological contract becomes, for the purposes of explaining the phenomenon of demission, the most negative cause due to the way in which it deteriorates the worker-company relationship. It goes without saying that this worker will probably never return, cooperate little during his departure and become a negative promoter of the institution, compromising future recruits and even business.
By violation of a psychological contract we understand the perception that the organization itself has failed in the adequate fulfillment of one or more of the obligations that made up the contract. The use of the term rape here is not accidental, but rather tries to convey that strong negative emotional experience, with concomitant feelings of betrayal and injustice, and the response of anger or disappointment that the worker experiences (changing jobs is usually, we saw, a very emotional decision)
The violation of psychological contract can originate in two ways: breach or incongruity. Non-compliance occurs when the agent of the organization consciously breaks a promise made to the worker (something quite open to criticism); while the incongruity happens when between the worker and the representative of the Administration there are different understandings about a promise.
On many occasions of psychological breach of contract, those who represent the company sincerely believe that they have responded to their promises while the worker perceives that the organization has failed him.
1) Different ways of representing the same thing, 2) the complexity or ambiguity in our obligations, 3) the lack of communication, are three of the most frequent factors that play a fundamental role in the emergence of such incongruity.
In this sense, it is important to recognize that “we live in a world of implicit promises that are normally part of the culture of organizations, and the implicit nature of these promises becomes obvious only when they are broken… He should be, the expression of our annoyance, is the expression of implicit promises not shared ”(Herrera)
When we perceive a discrepancy between our reality and what we expected (let's remember the Theories of Expectations and Equity), a process of comparison begins immediately through which the worker weighs their own promises and contributions, on the one hand, and the promises and contributions of the company, on the other.
It is possible that this comparison process leads to the perception of a breach of the contract, because the worker finds that their contributions have not been adequately reciprocated.
The perception of violation of the contract can have serious consequences from the moment it damages the trust and good faith that is inherent in the employment relationship. Commitment and pro-role behaviors can cease, that extra so necessary today, when workers perceive that the promises made have been broken and that they have been treated unfairly.
The loss of trust is especially important because it is considered crucial to organizational effectiveness. The loss of commitment and initiative of the worker can be costly for the company in terms of productivity, quality and work environment.
If we are going to represent the effect of the violation, we will say that the worker “distances himself”, separates himself psychologically from the employer. They will be less willing to wait, they will be less involved and their relationship will be a bit of a "give and take", give and take, now, without further commitment or future3.
It may still last a little longer in the organization, but without loyalty, just because there is no choice. This type of situation is not reflected in the statistics, but it leaves traces. A worker who internally distanced himself from the company, weakened his attachment, reduced his dedication to a moderate level and remains open to any external job offer, without a doubt he will not give us his best contribution and influence.
The need for a job change that has not been able to materialize (potential fluctuation) will always hit the productivity and quality of work, the initiative of the worker and the agility before the change that the company requires.
We will retain the effective worker
Loyalty Clients, Positioning in the Market, can be two of the most traditional and current goals within any company but, looking within the organization, which ultimately produces or offers services thanks to its people, know-how, internal synergies, motivation… it is not unreasonable to highlight the joint need to retain the Worker and position itself in the Labor Market as an attractive institution in the eyes of those who are able to work. There are numerous examples of companies or business groups that have adopted this policy and their commercial action has been logically strengthened.
In truth, we realize that we look so carefully outside the organization that we forget who we are, we lose contact with our corporate identity, what distinguishes us and how we are feeling in the process.
In the end, the company inevitably does not know where it is going, it goes without strategy or vision, accumulates contradictory decisions and barely survives. We speak of an immature organization that oscillates to the beat of the environment without creating and consolidating its strengths.
It is simply not possible to aspire to organizational success and effectiveness by ignoring the organization itself, in particular its culture and business climate.
And within the culture of the company, its strategy and policies, a central line of action is to ensure the loyalty of employees whose presence is considered strategically vital due to the contribution they make and the cost of losing them. In our field we call these: “key positions”.
Let's start by identifying them correctly and thoroughly (a key position can be something very relative and circumstantial).
Segment to retain
If we pay attention to those who have worked on the issue of staff loyalty, we join the consensus according to which the loyalty instrument should be devised for a selective application, targeting mainly the most effective, letting the less effective people leave quickly.
Retention efforts should primarily target "strategically important employees" who would be difficult to replace. In business terms “not all employees have the same level of result, therefore there is no reason to feel it the same way when they leave” (Dalton 2005. Cit. By Hirschfeld, 2006)
There is a fact that we know and do not like to mention: the retention of ineffective people not only compromises the success of the company, but also runs the risk of demotivating the rest of the staff.
It is evident that the concept of retention based on a classification of workers, a requirement in vogue for effective people management and derived from the Competency Management approach, is only effective based on the quality of the Performance Evaluation. But this often faces serious methodology problems and varies greatly by evaluator. For this reason, it is advisable to approach our policy of selective management of fluctuations with prudence.
Loyalty actions
Many actions can be unleashed in order to retain the valuable workers of the organization but, as a wise Buddhist would say, the essence is not in knowing them, but in practicing them. Here is an extract ready to be applied:
1. Tell the prospective recruiter what you can really expect from the company. Be sincere and look for a true match of interests between the two of you.
2. Guide the reception and initial training of the new worker, not only to provide information, but to transmit the Culture (values, customs, beliefs) of the company and Sense of Belonging.
3. Organize the work of your positions in an attractive way, with a dose of Autonomy and possibilities of Success. Entrust them with an important role that reinforces their feeling of attachment to the company (an interesting action is to appoint them leaders of a group or project)
4. Constantly offer opportunities for development: promotion, specialization. (It may increase the danger of them being "siphoned off" by other employers but it is a necessary risk)
5. Develop incentive and recognition systems that, make sure, respond to the worker's aspirations.
6. Probe the level of commitment of workers to the company and whether or not they intend to leave. This survey should make it possible to identify obstacles to motivation and highlight opportunities for improvement.
7. Practice the Separation Interviews with the workers who leave the company to gather information on the reasons for their decision and, in an atmosphere of confidentiality, obtain the most sincere information possible on the weaknesses and problems as perceived by the employee.
Productively cope with fluctuation
It's hard to be productive when we're frustrated. For the same reason, the company - its agents - tend to react negatively when a valuable worker decides to leave despite our efforts to retain him. We know what it will cost to find and locate a replacement, the inevitable delay or resignation of projects, the cumbersome process of integrating the newcomer, etc.
This high extra-accounting cost perhaps explains why the company “closes its eyes” to the possibility that its best men resign, considers them to be completely loyal, and the simple fact that they may be open to other proposals is considered high treason.
We find that the decision of the “unfair” worker is not normally understood or accepted. Too often "wounded" superiors forget to try to retain the one who has decided to leave, when this possibility could objectively exist, just because the dismissal is heard by the company as a cheap blow that completely upsets the relationship. With the resignation announcement, the attitude towards the worker changes in depth and even courtesy relationships may disappear.
It seems appropriate to me then to conclude our analysis on Retention Management by sharing a couple of useful ideas on how to cope with fluctuation positively.
Start by accepting that there will always be high-level workers who will leave the company, even if it is among the best positioned in the labor market and applies all the variety of measures planned to retain staff.
The fundamental thing in this situation is that you consider the quality of relationships with the people who leave the company as very important. In this regard, careful planning of the period from when the worker announces his decision until his effective separation can represent great advantages for the company, the colleagues who remain and the successor.
It is essential to use the remaining time constructively.
Conclusions
After all, it is moving to find organizations that are insensitive to fluctuations, without responsible policies or analysis in this regard, without the slightest appreciation of their costs. These organizations, more frequent than we would think, do not analyze and discuss these issues, they do not include them as a criterion of effectiveness in the management of people and companies… and they make a mistake.
When the Administration resents or is indifferent to the dismissal, it does not analyze where and how it could do things better, when and how much it ignored the worker's Psychological Contract, what loyalty actions were not applied. In this way you miss important improvement opportunities that can be used immediately.
At the time that the Human Resources Department assumes labor fluctuation as its own technical problem, when it prepares “readable” analyzes for those who are not experts in the matter and provides managers with ways and means to retain their workers, at this time Management Human Resources gains prominence and significance, does justice to the complexity of its mission and promotes something fundamental in the organization: the ability to retain its Human Capital.
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Within the concepts of Motivation I propose for reading of this work that of R. Solana: "Motivation is a combination of processes that decides, in a given situation, with what vigor to act and in which direction the energy is channeled" (p. 208)
3 McNeil (1985) proposed a distinction of the Psychological Contracts: Relational Contract, which would be the most long-term and committed; Transactional Contract, involves expectations for "here and now", focused on immediate rewards, without compromising with the employer.
