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The small businesses identifie

This study focuses on small business enterprises and their employee retention measures. The study investigates the relationship of retention strategies to company productivity. Which includes the different retention strategies of the selected businesses of the study and productivity of the company is based on sales of the company.

The small businesses identified in this study are local enterprises that have 15 or less employees and directly produce goods and sell it. This study attempts to determine the relationship of employee retention strategies to business productivity and not as a function of identifying productive workers, but rather as a group effort.

As the issue of employee retention and performance falls under the umbrella of human resource practices, a discussion of the background of retention strategies necessitates a discussion of HR practices and its relation to performance. The early studies on HR practices and organizational performance were met with anticipation and researchers and practitioners reported that the findings of these studies were convincing and solid (Richardson and Thompson, 1999).

The findings reported by the studies backed the HR practitioners’ claims that people management strategies and policies affected the employees and organization’s performance by reporting statistical evidence (Huselid, 1995). Employers were urged to shift from employee

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control to employee commitment (Walton, 1985). The notion of control was to minimize labor costs and improve efficiency by implementing rules and regulations that employees had to adhere to and by giving out rewards based on worker performance (Eisenhardt, 1985; Walton, 1985).

Commitment on the other hand focused on shaping employee behavior and attitude that will carry out their tasks in the best way they can. Employee retention, productivity and financial gains for the company are strategies linked to high performance and high commitment goals. The idea is that employees who are committed work towards increasing productivity (Chiu, et. al. , 2002). 9

However, those who believed in the importance of HR practices (Huselid, 1995; Guest, 2000) and those who did not (Pfeffer, 1994) have both recognized the inherent limitations of the researches conducted in the issue and the valid criticisms related to the earliest work on the topic (Richardson &Thompson, 1999). HR practices include recruitment, selection, retention, compensation, performance evaluation, training and career planning.

Of the HR practices, the most important in ensuring productivity and performance is retention management of talented workers. The company must be able to keep its best workers satisfied and reduce the rates of turnover (Cappelli, 2001; Mitchell et al. , 2001; Steel et al. , 2002). The study of retention management however had been an off shoot from the study of turnover, and most studies on the topic have always treated turnover as a result of mismanagement of retention practices (Johnson, 2000).

The study on retention strategies also is not complete without the variables of compensation and benefits as this are largely used by companies to hold onto employees. In the past, if a prized employee wanted to leave the company, he/she will generally be offered a pay raise in order to keep the employee from leaving. Retention strategies are costly as it would entail the use of operating funds to ensure that each employee enjoy the same standard benefits, but turnover is more expensive (Chiu, et.

al, 2002) and must be avoided at all costs, more so in small businesses were an employee who doesn’t show up for work may adversely affect the days operation of the business. The provision of an attractive compensation package is one of the most widely discussed factors in the study of retaining productive employees. The compensation package is a combination of financial and non-financial benefits that may fulfill all of his/her financial and material needs.

The salary level of an employee is also socially meaningful; the salary level is an 10 indication of the employee’s position in the organization in terms of power and status. Recent research has however found that there is a greater degree of individual differences in the importance of financial rewards for employee retention (Pfeffer, 1998; Woodruffe, 1999). A study revealed that only ten percent of people who had left their employer gave dissatisfaction with pay as the major cause of leaving the company (Bevan, 1997).

Similarly, with the trend towards benchmarking, companies are now having difficulty to market themselves as the company with the best compensation package and in turn reduce the impact of financial rewards on employee retention (Cappelli, 2001). On the other hand, despite the evidence that financial rewards may be a poor motivating factor for staying with the company, it is still is a widely used tactic to commit their employees to the organization by offering attractive compensation packages (Cappelli, 2001; Mitchell et al.

, 2001; Woodruffe, 1999). In a recent study by Horwitz, et. al. (2003), found that the most popular retention strategies HR managers employ to retain productive employees is still related to compensation. In survey of UK firms, the most common employee retention program is tuition reimbursement, followed by competitive vacation and holiday benefits and competitive pay (Collison & Burke, 2003). In other countries like India, the major method of retaining workers is through wage increases.

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