Spinning Gold from Straw Low Cost Employee Retention and Motivation Tools
Jennifer Loftus
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.
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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
Jennifer C. Loftus, SPHR, CCP, CBP, GRP is a National Director
for Astron Solutions. Prior to Astron, Jennifer was an Associate
Consultant with the Metro New York Rewards consulting practice of the
Hay Group, a worldwide leader in compensation consulting services. Her
primary areas of expertise are the design, administration, and analysis
of customized market surveys, employee opinion surveys, and exit
interview systems. Jennifer also focuses on the development, design, and
implementation of base pay compensation systems, primarily as they
impact healthcare, non-profit, and small to moderate sized
organizations. Jennifer also has extensive experience in the creation of
computer-based solutions to human resource issues.
Jennifer has eight years of compensation and Human Resources
generalist experience. In addition to the Hay Group, Jennifer garnered
experience at organizations including Parsons Brinckerhoff, Eagle
Electric Manufacturing Company, Pace University, and Harcourt General.
Her past experience has focused on total cash compensation management,
FLSA compliance, performance management design, ADP payroll, training,
human resource process automation, and HRIS improvement.
Jennifer is a member of the Society for Human Resource Management
(SHRM), SHRM’s Consultants Forum, WorldatWork (former American
Compensation Association), Institute of Management Consultants (IMC),
and the American Society of Healthcare Human Resource Administration
(ASHHRA). She is also a member of several local human resource
associations, including HR/NY, the New York Compensation Association,
and the Massachusetts Healthcare Human Resource Association. Jennifer
participates in HR/NY's Career Planning and Professional Development
Committee and is the Chair of HR/NY's Public Relations committee.
Jennifer’s biography appears in Strathmore’s Who’s Who, Five
Hundred Leaders of Influence, and the International Who’s Who of
Professional and Business Women. Jennifer was awarded the Pace
University chapter of Omicron Delta Epsilon’s first annual Alumni
Achievement Award. Jennifer has been published in The American Economist
and Workspan, the magazine of WorldatWork. She has appeared on Cold
Pizza, ESPN2's morning show, and WNET, New York City's PBS affiliate, on
The Employment Channel. Jennifer is also a volunteer article reviewer
for WorldatWork. She has an MBA in Human Resource Management from Pace
University and a BS in Accounting from Rutgers University. Jennifer is
an Adjunct Professor in Human Resources at Pace University.
info@astronsolutions.com