UPES

UNIVERSITY OF PETROLEUM AND ENERGY STUDIES ,

DEHRADUN

Academic Year 2023-25

Department: MBA, OPERATIONS

Name of Assignment: How should the management formulate HR policies

in order to retain manpower? Explain the
importance of talent retention and mention at least
three effective policies that could help in this
process.

Full Name: Aniket Kumar Tiwary

Roll No.:

Subject: HRM

Date of Submission: 15-05-2024

 Assignment Content

Q. How should the management formulate HR policies in order to retain manpower?

Explain the importance of talent retention and mention at least three effective
policies that could help in this process.

Employee retention definition

Employee retention is an organization’s ability to keep its employees under
contract, making for a more stable, productive workforce. Companies that are
serious about retaining their talent establish policies and programs aimed at
reducing employee turnover. Those that succeed in achieving high employee
retention rates operate at an advantage both in meeting business goals and in
recruiting new hires. A well-establish, well-executed employee retention strategy is
a key competitive differentiator, as a company’s ability to hold on to its talent —
especially in tight hiring markets — has profound ramifications for its ability to
operate at a high level, without the disruptions that employee turnover bring.

Understanding What Causes Employee Turnover

In order to learn more about employee retention, it is also important to
understand the concept of employee turnover and the reasons that cause it.
Employee turnover is a metric that measures the number of employees leaving
the organisation over a certain period. There are two types of employee turnover
– voluntary and involuntary.
In voluntary turnover, the employees leave the organisation of their will. On the
other hand, in involuntary turnover, employees are let go due to issues with
their performance or due to organisational changes.
Factors such as inadequate work-life balance, lack of growth opportunities, and
unsatisfactory compensation packages can collectively catalyse an employee’s
decision to seek greener pastures.
These causes can start right from the moment new employees are onboarding.
According to a recent study from Harvard Business Review, 60% of companies
do not set clear short-term goals for new employees.
The Goal of Employee Retention
The primary goal of employee retention is to reduce turnover or workers leaving
the organisation voluntarily (of their own will) over a specific period.
The process, however, ideally goes beyond just metrics. It looks into creating a
symbiotic-like relationship between the employee and the organisation because
none can succeed without the other.
Why Retention of Employees is More Difficult for a Startup Firm
It is particularly daunting for retaining employees in startups.
Startups operate with limited financial resources, especially during their initial
phases.
The post-COVID times have even been more difficult for startups without
outside investors. This has been due to mass lay-offs and the ‘global economy
slowing’ as stated by Crunchbase.
This can lead to constraints in offering competitive compensation packages and
comprehensive benefits that larger, established organisations may provide.
According to Anshul Lodha, head of recruitment firm Page Executive, India, on
Live Mint, “Many who left traditional firms to join startups are returning to
established companies. They are moving at the same pay scale and, in some
cases, even taking a 15-20% pay cut.”
Continuing in this logic, the fear of business failure or downsizing may lead
employees to explore more stable job options, contributing to higher turnover
rates in startups.
It is also important to note that in the early stages of a startup, the workload can
be intense as employees wear multiple hats and take on diverse responsibilities.
This can lead to burnout and impact work-life balance.
Compared to established companies with well-developed employee support
programs, startups may struggle to allocate resources for them.
How to Retain Employees: Top 5 Ways
1. Offer competitive compensation and benefits: Ensure that your employees are
fairly compensated for their work and provide benefits packages that are
attractive and competitive within the industry.
2. Provide opportunities for growth and development: Offer training programs,
mentorship opportunities, and clear career paths to help employees grow within
the organisation.
3. Foster a positive work culture: Create a supportive and inclusive work
environment where employees feel valued, respected, and appreciated for their
contributions.
4. Offer work-life balance initiatives: Implement flexible work arrangements,
such as remote work options or flexible hours, to help employees balance their
work and personal life responsibilities. You can also explore the difference
between job enrichment and job enlargement to learn about best practices related
to balancing work and life for employees.
5. Recognise and reward achievements: Acknowledge employees' hard work and
accomplishments through regular feedback, praise, and rewards, such as bonuses,
incentives, or employee recognition programs.
 Benefits of Employee Retention
Enhanced Productivity and Performance
A stable and experienced workforce contributes significantly to heightened
productivity and performance.
Retained employees have a deeper understanding of the company’s operations,
culture, and objectives. They can seamlessly navigate tasks and deliver consistent
results than new ones.
Cost Savings and Efficiency
High turnover rates can be financially draining due to the expenses of recruitment,
onboarding, training, and lost productivity during the transition period.
Effective employee retention helps organisations save on these costs. Instead, the
saved up resources work towards strategic initiatives, innovation, and growth.
Stronger Employer Brand and Attraction of Talent
Organisations with a reputation for employee retention and satisfaction are more
attractive to potential jobseekers.
Think of a positive word-of-mouth endorsement from existing employees. It is
helpful when you are drawing in top-tier talent who aspire to be part of a stable and
supportive work environment. This, in turn, leads to a stronger and more competitive
employer brand.
4 Employee Retention Metrics
Overall Retention Rate
Tracks employees retained over time, balancing turnover’s benefits and drawbacks.
Turnover Rate
Calculates separations’ percentage, revealing potential problems in management or
culture.
Voluntary Turnover Rate
Assesses voluntary departures’ impact, considering replacement costs.
Involuntary Turnover Rate
Examines lay-offs or firings, indicating hiring process evaluation needs.
How to Retain Employees
Here are some effective employee retention strategies to consider.
Foster a Positive Work Environment
Cultivate a company culture that prioritises open communication, mutual respect, and
collaboration.
When employees feel heard, appreciated, and part of a cohesive team, their
attachment to the organisation deepens.
Example: Squarespace, Inc is a website building and hosting company that has a flat
structure for easy and collaborative decision-making.
Provide Growth Opportunities
Offer avenues for professional development and advancement. Employees are more
likely to stay when they see a clear path for skill enhancement, career progression,
and personal growth within the organisation.
Example: IBM fosters a robust company culture through an innovative employee
feedback approach.
Unlike traditional 1-10 ratings, this system encourages a holistic performance
evaluation, enabling IBM to gather valuable insights into support team requirements.
Empowering employees to collect and leverage their own feedback fuels a dedicated
drive for continuous enhancement.
Recognise and Reward Achievements
Implement a robust recognition and reward system that acknowledges employees’
contributions and accomplishments.
Regularly celebrate their achievements, both big and small, to reinforce their value to
the company.
Example: Cisco cultivates ongoing employee engagement through a regular peer
recognition initiative, featuring frequent small rewards. Rooted in core values, this
program has sparked over a million recognitions in five years, averaging 600 daily
awards.
Competitive Compensation and Benefits
Provide competitive and fair compensation packages that align with industry
standards.
Additionally, offer attractive benefits, such as health insurance, retirement plans, and
wellness programs, to enhance overall employee satisfaction.
The compensations must also be beneficial in various regards.