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What makes an employee stay with an organisation?

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Tim Osborn-Jones

How can HR take advantage of the changing ‘psychological contract’ between employer and employee to retain staff? Tim Osborn-Jones looks at the issue of retention by drawing on research from Henley Management College.



The talent war
The challenge of managing talent from the viewpoint of the employee, and the employer, critically dubbed as the ‘talent war’ in recent years, is an issue of growing corporate concern.

In a world where technological development and global competition are driving widespread change in organisational structure and patterns of employment, the traditional ‘psychological contract’ between employer and employee has been widely undermined. No longer do employers offer a lifetime of job security in return for loyalty and commitment from the employee, and so companies can no longer take employee loyalty and commitment for granted – it must be earned.

With the labour market tightening such that the number of unemployed people has now fallen to a 30-year low, quantitative solutions, big salaries, golden handcuffs and golden hellos are no longer enough in themselves to secure the retention of valuable staff. They are too easily matched and topped by competitors leading to endless rounds of poaching.

Big salaries, golden handcuffs and golden hellos are no longer enough in themselves to secure the retention of valuable staff.

Instead companies must look to explore how best to utilise qualitative (non-financial) elements, such as managerial attitudes, corporate culture and benefits, to form the basis of a new psychological contact between employer and employee.

So how can the critical, but generally unspoken and unwritten, set of expectations that exists between employer and employee be best redefined to encourage employees to commit to and apply their talents in the interests of the organisation to which they are employed?

Independent values
According to Henley Management College research, the traditional values maintaining the relationship between individual and organisation have been replaced by more independent values. Employees surveyed cited ‘self-fulfilment’, ‘sense of accomplishment’ and ‘fun and enjoyment’ as being their top three values, ranking ‘security’ and ‘sense of belonging’ as being amongst the least important factors.

Employees are therefore most inclined to stay with a company that that offers opportunity for personal development, meaning that companies concerned with retaining staff are best advised to consider the values, beliefs and culture of the organisations that they are asking employees to buy into.

Employees surveyed cited ‘self-fulfilment’, ‘sense of accomplishment’ and ‘fun and enjoyment’ as being their top three values.

Self-esteem should be regarded as a resource to be harnessed with mentors appointed to support individuals’ personal development plans. The overriding aim being to engage the workforce through encouraging communication and putting in place the right mix of HR management, policies and practice to ensure that a good fit between individuals ambitions for self-fulfilment can be carefully aligned with corporate needs and targets.

Critical to this approach is encouraging management to release talented individuals to do the work that they do best, in a way that supports the business, so that they do not have to leave the organisation in order to develop.

Organisations able to embrace such responsiveness and flexibility will not only be in a far stronger position to retain staff but they will also have a far more engaged and committed workforce than those companies merely committed to substituting pay for attention.

The new underlying contract between employer and employee is no longer one of security in return for loyalty, but rather one of opportunity for self-development and personal reward in return for work done well in accordance with the employer’s needs and values.

Important steps can be taken by HR towards achieving strong commitment from employees under this new contract:

  • Revisit corporate values and culture – what is there to inspire people to really want to work for the company?

  • Look at how well both HR and management support the alignment of individuals’ personal ambitions with corporate needs – what can be done to improve this?

  • Is there sufficient flexibility in place for freeing up talented individuals to work on the projects and in the areas of most interest to them?

  • Are there open communication channels and support processes in place?

  • How do you identify and reward well performing individuals?

  • Are staff being continuously developed and is the management prepared for and committed to this?

  • Finally, don’t forget – is this a company where people have fun?

Related item
Managing the psychological contract

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