Employee Satisfaction And Incentives

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A highly qualified team is likely the sole key differentiator for most businesses in today's fiercely competitive corporate culture. The majority of businesses completely rely on their staff' knowledge to provide them an advantage over rival businesses. In addition to retaining talent, employee retention makes it easier to align employee behavior with business goals, fostering a productive culture (Carrie, White, & Lemmer, 2007). However, keeping highly trained people on board is a very challenging endeavor given that several companies frequently offer incentives to attract and retain this class of workers.

Staff turnover is a time-consuming and expensive process, thus employee retention has a significant impact on business performance. The costs involved in employee turnover may include lost clients and affiliates as well as irreparable damage to the company morale and spirit, loss of business patronage and, in some circumstances, failure to realize the organization’s goals. In addition, there are direct costs involved in the processes of screening, verifying qualifications, interviewing and training new staff. The costs involved employee turnover, both directly and indirectly, amount to between 70 and 200 percent of the salary of the employee being replaced (Brown & Yoshioka, 2003).

Employee retention is the implementation of strategies by employers to develop and foster a work environment that attracts employees and encourages them to stay with the organization until the completion of the current project. Employee retention strategies are critical in enabling enterprises to attract and retain staff. Once the right workforce is hired, the retention policies are responsible for providing the tools and conditions to support them.

Employee satisfaction is one of the main factors in employee retention. Especially during these periods of high rates of unemployment, research has shown that businesses, whose workforce is unsatisfied, spend a lot of corporate resources exploring options to increase the retention rate of their workforce. According to a research on the link between employee satisfaction and retention, reflections of job satisfaction were evident in the indicators of employee retention- whether or not the employees were looking to resign from their workplaces in the coming 12 months, whether or not they were currently scouting for new jobs and their commitment to their current employer (Mobley, 1977).

Motivational variables or incentives are widely regarded as a wholesome panacea to the problem of employee turnover. However, there has been debate over the kind of motivational variables sure to help in employee retention. The two-factor theory has found widespread acceptance among researchers forming the theoretical background for most studies. According to this theory, job motivation in the workforce is generated intrinsically and is propelled by a variety of variables intrinsic to their jobs. These motivational variables, referred to as motivators by Herzberg, include intrinsic factors like the job itself, advancement, growth and progression, achievement and recognition (Herzberg, 2005).

According to the theory, a few extrinsic factors cause dissatisfaction in the workforce. Although they have little or no value as motivators, these non-job related factors are an absolute necessity in the workplace to keep the employees happy and satisfied (Herzberg, 2005). These extrinsic factors include leadership styles of supervisory staff, organizational policies, compensatory packages and how the employees related with coworkers.

Empirical studies have since found out that key extrinsic factors such as a conducive working environment, co-worker packages and remuneration were cited by employees as key motivational variables influencing turnover and retention in companies. Some factors such as renumeration are more important than others such as working environment and organizations’ missions in realizing employee satisfaction (Brown & Yoshioka, 2003). From these findings, one can safely conclude that successful employee retention and job satisfaction improvement strategies should rely on a combination of both intrinsic and extrinsic motivation variables.

In discussing effective employee retention and satisfaction strategies, it is important to keep in mind that career progression- the main reason for employee turnover- is driven by motivation. The most popular motivation theory, proposed by Abraham Maslow in 1943, suggests that all human actions are invariably goal oriented (Sunil, 2004). The theory asserts that the attainment of this goal is only through the satisfaction of needs -which were conveniently stratified in the form of a pyramid. This hierarchical arrangement demonstrates that basic needs must be satisfied before moving to meet needs in the next tier. Effective employee retention strategies should seek to address employee needs in this hierarchical pattern.

Effective Employee Retention Strategies

Competent companies are experts at hiring and retaining talent. Organizations adept at employee retention are keen to cater opportunities for their talented employees to grow and accomplish within the organizations. However, not all employee retention strategies are successful. It is, therefore, important to map out effective retention techniques to avoid the resource wastage that comes with embarking on counterproductive strategies.

Effective strategic initiatives put forward to help boost job satisfaction and improve employee retention include the following.

Working Environment

The crux of most employee retention strategies is the establishment of an attractive and nourishing work environment. Workers scoring low in the job retention indices in most studies cite unconducive work environments as one of the leading contributive factors. The work environment covers quite many issues ranging from a value system ensuring a safe and all-inclusive work environment with sound policies and regulations on the creation of a strategic mission statement and a supportive office culture.

A sound work environment retention strategy is based on three key pillars; the values and ethics underpinning the organization, the policies and procedures outlining the day to day implementation of these values and the physical workplace. The overall goal of this particular strategy is to make the office place an environment where people enjoy working.

Overall employees want to stay regularly informed therefore a culture of openness and transparency is vital. Employees want to know the company's strategic plan and any future expansion or reshaping plans. Some want clarity on how their roles fit into the grand scheme of the business's mission and vision. The working environment can only be adequately assessed by a third party, so it is essential that the organization routinely engages consultants to give an objective assessment of the works satisfaction levels.

Performance Management and Appraisal

Performance management is the process by which organizational strategies are put in place to maximize the output of employees and the organization at large. Performance management involves consistently improving the workforce value through tools like incentive goals and their relevant incentive values. Performance management ensures that the effort of each of the workers is directed towards the achievement of the organization's strategic objective. Performance appraisal is an indispensable part of the process as it is the process by which organizations reward hard work.

Performance appraisal is a system of individual and team performance evaluation (Longenecker, Sims, & Gioia, 1987). Good appraisal systems have been seen to improve job satisfaction. Employee appraisal is central to the determination of employee motivation. The performance of employees is very closely linked to their perception of how much the organization appreciates them that the appraisal process has often been made a political process by which the managers alter results to maintain the employees (Longenecker, Sims, & Gioia, 1987). Departure from the almost obsolete controversial forced ranking system to the arguably fairer and representative commitment rating has been seen to improve workplace morale and raise the probability of employees choosing to remain with their current employer until the completion of the projects they are involved in. A major ancillary issue with the forced ranking system was its failure to promote team building. The increased focus on individual performance and subjective person-to-person comparison were ultimately detrimental to workplace morale.

A good case study is the situation at Microsoft Corporation. When then-CEO Steve Ballmer took over in 2000, he abolished the company’s forced ranking system, a controversial subjective method of ranking employees from best to worse, for the commitment rating where all employees had an equal chance of getting incentives (Carrie, White, & Lemmer, 2007). This system has a lot of benefits to it, in addition to fairly rewarding the staff's hard work and exemplary service, it also helped boost long-term stability and promote employee identification with the corporation as the incentives were in the form of equity compensation.

Competitive Salaries and Benefits

Financial incentives as a source of motivation provide more security, privilege, and sustenance than any other motivating variable. Uncompetitive pay is one of the biggest reasons for employee turnover in most companies. Many workplace-change decisions are informed by the knowledge that the new workplace will pay better. In addition to providing the employee's sustenance, income is also significant by being a tangible and commensurate indicator of an individual's performance in a company.

Performance-based pay systems, as opposed to employers paying their employees for their time, are increasingly finding acceptance in today's corporate culture. Studies have established that the perception among high performers of receiving less pay than they deserve is one of the biggest reasons behind employee turnover. Under this performance-based compensation systems, job promotions and pay rises are also awarded based on performance in contrast to in the past where seniority was the determinant. Performance based remuneration systems come in a variety of variants, but all involve two essential functions; defining the job expectations and relating performance to predetermined expectations. This system is however not applicable for complex jobs requiring rudimentary cognitive skills as it ends up being counterproductive instead.

The inclusion of worker benefits in the total pay package also helps to rekindle worker satisfaction and motivation. Analysis of employee behavior reveals that satisfaction is a function of the opportunity cost for every employee (Mobley, 1977). When it is high, the job satisfaction becomes low. Benefits such as medical and dental cover, child related benefits, transportation and other kinds of benefits go a long way in impressing on employees that their current work environment is a great experience. The inclusion of added benefits also helps large enterprises minimize any attritions damaging their public image and in the presence inspire pride in their employees over their relationship.

It is, however, important to keep in mind that compensation packages need to be accompanied by other strategies to aid the organization in seeking to attain its strategic plan. In the absence of support and growth, environmental and relationship strategies, competitive compensation will only eat into the company’s corporate resources. At all times, however, the focus of an organization should be on its workforce and never on the profit margins.

Employee Growth and Support Strategies

Employee support initiatives involve giving the employees all the tools they require for their respective job tasks. There is a dramatic improvement in job motivation and employee retention when employees feel that they have the equipment they need to perform their duties. Employee support initiatives are based on three core principles.

Most employees have the need to excel

Most employees need the necessary equipment to fulfil their tasks.

Most employees need the mental support of their superiors

Employee support initiatives start from the attitude of the managers towards their staff; whether they view them as parts of a machine or valuable resources without which the operation of the company is impossible. The belief that employees want to exceed rather than just meet the minimum basic expectations. The establishment of elaborate communications systems or the improvement of existing ones, between employees and the organization’s Human Resource Department to work towards ensuring that the sentiments of the employees are heard and acted upon. A competent and responsive Human Resource department is key in the dissemination of information which is necessary in improving employee satisfaction. Poor communications channels and an unresponsive HR are some of the common causes of employee frustration and consequently increased turnover.

Employee growth strategies are geared towards promoting the personal and professional development of the workforce. Most good employees want to regularly sharpen their existing skills and gain new ones to continue increasing both their self-esteem and value in the work environment. Training programs should, however, not be randomly implemented but should make sense for the organization and workforce.

Ineffective Employee Retention Strategies

One employee retention strategy that has consistently failed to work is focusing solely on employee compensation. This strategy is an immediate response of corporates trying to anticipate and prevent losses. Research indicates that employee loss will cost an organization up to $1 million a year in training and other costs (Sunil, 2004). fIn the past, when faced with the possibility of employee dissatisfaction, most corporates reacted by increasing compensation without considering the possibility of the work environment being a problem. Also, efforts should only be put into retaining the highly skilled workers. Applying retention strategies on every worker in the workplace only serves to level productivity as the averagely skilled remain in their comfort zones. Not all employee turnovers are detrimental to the company.


Brown, W. A., & Yoshioka, C. F. (2003). Mission Attachment and Satisfaction as Factors in Employee Retention. Nonprofit Management and Leadership, 5-18.

Carrie, O., White, D., & Lemmer, I. (2007). Career Models and Culture Change at Microsoft. Organization Development Journal, 25.

Herzberg, F. (2005). "Motivation-Hygiene Theory." Organizational Behavior One: Essential Theories of Motivation and Leadership,. New York: ME Sharpe Inc,.

Longenecker, C. O., Sims, H. P., & Gioia, D. A. (1987). Behind the mask: The politics of employee appraisal. The Academy of Management Executive , 183-193.

Mobley, W. H. (1977). "Intermediate Linkages in the Relationship between Job Satisfaction and Employee Turnover. Journal of applied psychology 62, 237.

Sunil, R. (2004). A Review of Employee Motivation Theories and their Implications for Employee Retention Within Organizations. Journal of American Academy of Business, 5(1/2), , 52-63.

March 02, 2023



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