A study of the different aspects of staff retention strategies

MA-Thesis / Master von Arne Becker-Carus

Introduction:

The main capital of knowledge companies is the knowledge of their employees. More and more staff working in knowledge companies do not work ‘physically’ at the company’s office. Very often, this staff stays at offices provided by the customers. In certain cases, the staff does not see their employers organisation for months and sometimes they do not even have contact with their employer’s organisation or their ‘real’ colleagues for months This is especially true for consultancy and insurance companies. The result is that these kind of knowledge workers tend to develop a bigger commitment and psychological bonding with the customer’s organisation than with the employing company that pays their salary.

The same process of commitment can be seen from the customers’ perspective in consultancy companies. Very often a customer ‘buys’ a knowledge worker for a special task. Often the knowledge worker stays much longer than the original task lasts. After a certain time the knowledge worker is integrated in the customer’s organisation and has taken responsibility for things other than the original task. He becomes ‘part of the furniture’. It is not unusual in such cases that the customer tries to entice away the knowledge worker. This happens regardless of contract penalties. For knowledge companies, as for companies in similar business environments it is therefore of vital importance to develop and implement a strategy of staff retention.

The focus of this research is to examine the different tools used in strategies in staff retention in different companies and how successfully they are implemented in knowledge companies. Three different types of companies will be investigated as case studies. They are different in size and their main field of business activity. The case studies focuses on three different organisations, the ACT AG a middle-sized consulting company, which is specialised in IT consulting organisations in the financial and public sector, the Kreissparkasse Koeln (KSK) a local Bank with about 160 branches and the Deutsche Krankenversicherung (DKV) a international insurance company.

The aims and objectives of this research will be investigated from both viewpoints, the management and the workforce. It will be of interest how the different tools used in staff retention strategies work and what their main drivers are. All three companies will be compared regarding these matters.

From the feedback received, any suggestions for the future use and implementation of tools used in strategic of staff retention will be evaluated and suitable conclusions will be drawn and appropriate recommendations made.

Aims and Objectives.

Research Aim:

To identify, investigate and compare the tools of staff retention on a small, medium and a large knowledge organisations in different industrial sectors, and draw recommendations for future staff retention strategies based on the findings of the research.

Objectives:

Identify the different staff retention tools used in different size companies.

Investigate the most important drivers in the different staff retention strategies in a comparison of the selected companies.

Compare the different companies in respect of the implementation of tools of staff retention.

Draw conclusions and make recommendations for future staff retention strategies based on the findings of the research.

Justifying the study.

Increasing Competition for the Best Employees:

Figures published by the ‘Statistisches Bundesamt Deutschland’ suggest that the number of youths will decline from currently 17 Million, (21 percent of the total population) down to 12 Million, (16 percent) in 2050 in Germany. This trend is not new and can be seen in the last 30 years. But with the increase in lifetime expectation the group of people aged 60 or over will double to 28 Million or 37 percent.

In order to maintain the current worker/pensioner ratio, the minimum annual growth rate required is 3,6 percent. This suggests both an aging population and also the inability of Germany to replace its workforce in the long-term.

If the birth rate continues to decline and the number of pensioners increases, it is also important for the workforce that the skilled workforce increases. This implies the supply in the labour market is lower than the demand in the economy. The importance to all successful organisations is the need to attract, retain and develop the knowledge of employees in order to protect the future downside of increased competition in the labour market. Systematic retention strategies are central to both, the retention of the workforce and the retention of knowledge within the organisation.

Employment turnover rates:

Warwick suggests the emergence of a ‘nomadic workforce’, in particular, graduate workers especially in the first 10 years show a trend towards changing jobs every two years. The five-years rule suggests if an organisation can retain a worker for five-years, they are more likely to remain with the company over the long-term. Therefore the development of systematic retention strategies to nurture and develop workers throughout their organisational lifetime would ensure maximum return from these workers.

Tendency towards early retirement:

Even so there is a actual debate in Germany to extend the work life time and set the retirement age to 68, Germany is facing a scenario where the number of people aged over 60 will begin to surpass the number of under thirty year olds. If this trend is coupled with the increasing tendency towards early retirement, the most senior, experienced and skilled employees will be leaving the organisation and taking their extremely valuable industry knowledge with them. Consequently the German economy will suffer from the knowledge deficit. This necessitates a review of the strategic approaches to keep skilled workers in the organisation.

Summary:

There has been an emerging trend towards developing the human side of organisations for competitive advantage.

Key to this is the leveraging of worker knowledge and expertise to increase productivity and profitability. Keeping a skilled and motivated workforce and not loosing built up knowledge to competitors is of increasing importance to organisations.

The key justifications for this study are: increasing competition for the best employees; increasing employee turnover rates; and a tendency towards early retirement creating organisational loss of knowledge.

Content:

1	Abstract	2
2	List of Figures and Tables	3
3	Content	4
4	Introduction	7
5	Aims and Objectives	9
5.1	Research Aim	9
5.2	Objectives	9
5.3	Justifying the study	9
5.3.1	Increasing Competition for the Best Employees	9
5.3.2	Employment turnover rates	10
5.3.3	Tendency towards early retirement	10
5.3.4	Summary	11
6	Literature Review	13
6.1	Introduction	13
6.2	Explicit vs. Tacit knowledge	14
6.3	The knowledge chain	15
6.4	Knowledge Management	15
6.4.1	Knowledge Acquisition	16
6.4.2	Knowledge Innovation	17
6.4.3	Knowledge Protection	18
6.4.4	Knowledge Integration	19
6.4.5	Knowledge Dissemination	19
6.5	Components of the knowledge management infrastructure	20
6.5.1	Knowledge worker recruitment	20
6.5.2	Knowledge storage capacity	20
6.5.3	Customer/supplier relationship	21
6.5.4	Summary	21
6.6	Herzberg's two factor theory	22
6.6.1	Satisfaction (Motivation)	22
6.6.2	Dissatisfaction (Hygiene)	23
6.6.3	Two Dimensions	23
6.7	ERGO Theory	25
6.8	X and Y Theory	26
6.9.	Summary	28
7	Methodology	30
7.1	Introduction	30
7.2	Research Philosophy	30
7.3	Research Strategy	34
7.3.1	Case Study approach	34
7.3.2	Research Design	35
7.3.3	Investigation Procedures	36
7.3.4	Secondary research	36
7.3.5	Interview Analysis	38
7.3.6	Summary	39
8	Analysis	41
8.1	Objective one: The retention strategies	41
8.1.1	ACT AG (Angewandte Computer Technologie AG)	41
8.1.2	Kreissparkasse Köln	46
8.1.3	DKV (Deutsche Krankenversicherung)	49
9	Conclusion	51
9.1	Objective two: The retention strategies in a comparison	51
9.2	Objective three: Drivers of staff retention	53
9.2.1.	Retention strategies and Herzbergs two-factor theory	54
9.2.2	Knowledge chain and value analysis	54
10	Recommendations	58
10.1	Objective four: Future staff retention strategies	58
11	References	60
12	Bibliography	63
13	Appendix	65
13.1	Appendix 1: The hierarchy of needs theory	65
13.2	Appendix 2: Shared Vision	68

Textprobe:

Chapter 2.4, Herzberg’s two factor theory:

Herzberg developed a two-factor theory that is known as the Motivation-Hygiene Theory, and was derived from a study designed to test the concept that people have two sets of needs:

1. their needs as animals to avoid pain.

2. their needs as humans to grow psychologically.

It appeared, from his research, that the things making people happy on the job and those making them unhappy had two separate themes. This the themes are motivation and hygiene.

Satisfaction (Motivation):

Five factors stood out as strong determiners of job satisfaction:

Achievement, Recognition, work itself, responsibility , advancement.

The last three factors were found to be most important for bringing about lasting changes of attitude. It should be noted, that recognition refers to recognition for achievement as opposed to recognition in the human relations sense.

Dissatisfaction (Hygiene):

The determinants of job dissatisfaction were found to be:

company policy, administrative policies, supervision, salary, interpersonal relations, working conditions.

It appears that the central theme of the satisfiers is one having to do with the relationship the employee has with his or her job; job content.

The theme of the dissatisfies appears to be related to the environment or context of the job. These dissatisfies seem to have little effect on positive job attitudes.

Two Dimensions:

At the psychological level, the two dimensions of job attitudes appear to reflect a two-dimensional need structure:

one need structure for the avoidance of unpleasantness, and a parallel need system for personal growth.

According to Herzberg motivation results from personal growth and is based on an innate need to grow. People find satisfaction in work that is interesting and challenging. A desire to fulfil our potential drives us to seek growth and provides the incentive to achieve.

From a philosophical perspective, it is Herzberg's position that it is the responsibility of society's dominant institutions to provide for the growth and well being of people. The dominant institutions in most societies are the business institutions. Therefore it is the responsibility of business and industry to provide the means for growth and self actualisation.In Herzberg's theory there are two different kinds of factors that influence motivation; intrinsic factors and the extrinsic factors. The intrinsic factors were also called the motivator factors and were related to job satisfaction. The extrinsic factors were called hygiene factors and were related to job dissatisfaction. Intrinsic factors led to job satisfaction because of a need for growth and self-actualisation, and extrinsic factors led to job dissatisfaction because of a need to avoid unpleasantness.

Another nice approach to employee motivation by Herzberg is the ‘kick in the a’ or KITA that can be negative or positive. In fact, to call it an ‘approach to motivation’ is to clearly misunderstand motivation, as Herzberg understood it. KITA yields movement -- the avoidance of pain -- not motivation.

Given that a physical KITA is not a normal form of interaction in society today the KITA has to apply in a different manner. Psychological KITA is the method that seems to be used more often to deliver the motivation. The other method of motivation employed by management is positive KITA. Essentially, ‘you do this for me and I'll give you this’. Herzberg claims in this case the motivation remains with the employer. Where KITA was a push, positive KITA is a pull.

‘.negative KITA is rape, and positive KITA is seduction. But it is infinitely worse to be seduced than to be raped; the latter is an unfortunate occurrence, while the former signifies that you were a party to your own downfall…’.