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Spinning Gold from Straw Low Cost Employee Retention
and Motivation Tools
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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:
- 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.
Career matrix programs, which link individual
competency and varying levels of job complexity to support
career advancement, are also another low-cost motivational
tool. Creating a career matrix involves various steps.
Briefly, these include defining the job level outcomes
for three levels of complexity of a job or job family,
the activities and requirements that support the outcomes
at each level, the three levels of individual core competencies,
and the behavioral indicators as well as assessment processes
that will be used to determine individual competency. Once
defined, employees are then slotted into the matrix using
defined criteria, and the guidelines are finalized for
placement. This is followed by an overlay of the current
pay system and establishment of compensation policies.
Astron Solutions’ client, Northeast Georgia
Health System (NGHS), like all hospitals, faced a nationwide
nursing shortage. They were having difficulty attracting
new graduate nurses to work at the organization, much less
attracting RNs to work at their soon-to-be unveiled Open
Heart program. After implementing a career matrix program
for their Open Heart Program nursing staff, NGHS turnover
is now at 5.2%, significantly below the national average
of 15.2%. Vacancy rates have also dropped to 8.4%, again
lower than the national average of 14.3% (average for Med
/ Surg and Critical Care.) In addition, 83% of NGHS’s RN
positions were filled before the Open Heart Program opened
and the fees spent on traveling nurses / agencies declined
by $68,000.
NGHS’s career matrix program reinforced their
commitment toward employer of choice status, the link between
human resource programs, employee satisfaction, and responsibility
for contributing to NGHS’ financial objectives, as well
as the organization’s commitment to developing clinical
expertise internally. Instituting the program also helped
establish NGHS as a “learning organization” and has provided
them with a competitive edge in local and regional recruitment
of both new graduate and experienced RN staff. The program
has also required Nursing Management to become more aware
of their dual roles as career developers and patient care
coordinators. With the RN shortage continuing, NGHS is
in a position to continue to meet growing patient demands,
while addressing career advancement desires of the new
generation of RNs. The success of the program did not go
unnoticed by the American Society for Healthcare Human
Resources Administration’s (ASHHRA), who honored both NGHS
and Astron Solutions with the 2004 “Best Practice” award
at ASHHRA’s annual conference.
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 career path program development please call Astron Solutions
at 800-520-3889 or visit their website at http://www.astronsolutions.com
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