Solved: Taking a human capital persepective on employee retention, contrast short- term gains

With the advent of globalization, the economic and business activities have made things worse. Competition has increased, and the need to attract and retaining the highly performing employees has become very difficult. Human capital is the only way to stay competitive, as people are the only remaining source of competitive advantage. The only thing that is nearly impossible to replicate, is the quality of an organization’s talent, its passion and commitment.

Strategically it is very important to have the right talent in prime and important positions of an organization, as they can make substantial difference to revenues, provide innovation, creativity and increase the organizational effectiveness. So, there is a huge need to retain talent, as this has forced organizations to rethink from the traditional human resource view that considered employees as a cost to, the organizations which consider them as an asset, and thereby exploring human resource management as a means of providing organizational success.

A direct consequence of global competition is that, employees always look for better opportunities, jobs with fat pay-checks, increased career aspirations and desire to climb the career ladder as fast as possible. All these leading to decreased retention. Also, impacting retention is the disappearing psychological contract between employer and employee, and employees no longer stay with the organization for longer period or consider that job as the one for life.

The search for satisfaction of personal needs results in a continuous churn, resulting in the detriment of the organization and its operations. Recent findings by Society of Human resource Management show that, almost one-third of all employees expect to leave for another job within the subsequent year, and while more employees look-out for new opportunities outside their organization. Only 61% of the employees worldwide plan to remain with their organization through the next year. These statistics show that retaining employees has become very difficult. And organizations are slowly losing out on best employees as well. And ultimately, decreased employee retention is the cost to the organization. It affects both short term as well as long term gains.

Now, let’s consider, an other side of the coin – Increased Employee retention by an organization. When best of the employees are retained in the organization, then organization will not have to worry about its competitive position in the market. Employees are asset to an organization, and if the employees are in pivotal positions, then they bring a lot of value to the organization. Highly empowered employees, a good organizational culture, and best employee practises help organizations to retain employees to the highest order.

When we consider short-term gains, these employees add value to the organization by providing value to their work. So, when they provide value to the organization they work, there will not be any need for an organization to hire more people. This way, it acts as short term gains and cost control. But, when we consider retaining the human capital for long period of time, allowing them to work on same profile and same work, then ir would reduce the productivity.

To understand this concept, let’s take an example. Consider an xyz company which has 100 employees. The company has good employee policies and employee empowerment and most of the employees, say 95 of them stay there for 5 years or more. Later, they feel there is nothing they are doing than doing the same thing every day. This thought cummulates to the nature of work they do, and ultimately they get depressed for not being able to get good opportunity to accelerate their career. This will reduce their efficency and productivity will be affected.

Here, initially employees are retained, and they perform extremely well. So, organization need not hire more people to fill up empty positions. So, no cost to the organization. Hence, short term gains are more to the organization. When employees are no longer interested in staying and working for the same thing day -in and day-out, their productivity will reduce by staying in the organization for a long time. This will increase the long term losses and affects the productivity of the organization.

Cost cutting is to ensure that – the unproductive and waste expenditure will reduce the bottom line (profits) and revenues of the organization. wasteful activities are always a cost to the organization. By reducin gthose activities, organizations can gain on the sustainability and productivity of an organization. We can balance both, by ensuring that we spend only at the places where it is very necessary, and cutting down the unnecessary costs. Cutting down expensive travels, luxurious office stays, huge bonus, etc. This is just an example, a company can reduce so much of non-value adding costs to improve the cost cutting on human capital and still continue its operations in an efficent manner.