Motivation

and

Retaining

Talent

Dr. Ian O. Williamson

Session Goals

• The strategic value of employee engagement and

retention

• Understanding the factors that motivate employee

behaviour

Cost of Voluntary Turnover

• Administrative Costs

– Average estimate cost of turnover

is 122% of annual salary

– 18% of cost due to

logistic/administrative costs

– 82% of cost due to lost

productivity

• Administrative Costs

• Loss of Human Capital

– Generic and Specialized Knowledge

Cost of Voluntary Turnover

Cost of Voluntary Turnover

• Administrative Costs

• Loss of Human Capital

• Loss of Social Capital

– Relationships with Clients/Customers/Partners

• The role of a leader is to unlock the productive potential

of employees’ human and social capital

• Employee Engagement is the key

– Employee Commitment

– Discretionary Effort

– Goodwill

Leaders create the conditions that

engage employees

Engagement

Retention of Talent

=

Retention of

Organizational Wealth

Effort Performance

(Behavior) Satisfaction

Value of

Reward

Effort Performance

(Behavior) Satisfaction

Typical Reward

• Pay, Pay and Pay

• Benefits of this Approach • Pay is important to employees

• Easily and quickly adjusted

• Easily differentiated and customized

• Can produce immediate short-term impact

• Limitations of Pay • Does not have the same value to all employees

• Diminishing returns

Example of Diminishing Returns of Pay

• After analyzing pay and employee-engagement scores for

about 5,000 workers who left the company, Caesars

Entertainment Corp., the Las Vegas casino chain found

attrition was as high as 16% for corporate employees who

earned less than the midpoint of their salary range.

• Bringing an employee's salary up to the midpoint reduced

attrition to 9%.

• However, going higher than the midpoint, it turned out, had

no benefit.

Silverman, R.E. Sept 12, 2012. Big Data Upends the Way Workers Are Paid, Wall Street Journal

Total Rewards Perspective

• Employees work to fulfill a variety of needs

• Employers may benefit from using a portfolio of rewards

to motivate employees

– Extrinsic Rewards

– Intrinsic Rewards

– Social Rewards

Three Categories of Rewards

• Social Rewards – Rewards obtained from social interaction

• Co-worker relationships • Supervisor relationships • Interaction with customers/clients

• Intrinsic Rewards – Rewards obtained from performing work

• Challenge • Achievement • Accomplishment

• Extrinsic Rewards – Rewards obtained directly from organization

• Pay • Promotion • Benefits

Total Reward Perspective and Retention:

IT Workforce Example

• Research Question: How does a total rewards approach affect IT employee engagement

and turnover?

• Theoretical Prediction: Offering a full spectrum of rewards increases retention by enhancing IT

employees’ Perceptions of Organizational Supportiveness (POS)

• Sample: 193 IT professionals in a U.S.-based, Fortune 500 firm

Career

Development

Opportunities

Pay Level

Satisfaction

Work-Family

Support

Supervisor

Relationship

Perceived

Organizational

Support

Organizational

Commitment

Turnover

Intentions

Felt

Obligation

Performance

.13

.39

.49

.08

.62

-.42

.38

.25

Total Rewards Perspective in Action

• SAS Institute • Privately held software company with 13,000 employees

world wide

• No. 1 in the advanced and predictive analytics market, with a market share more than twice that of its closest competitor.

• Named one of FORTUNE magazine's "100 Best Companies to Work For" every year since 1998 (#1 in 2010 and 2011, #3 in 2012, #2 in 2013, #2 in 2014).

• Salary levels are at roughly the median for the industry

• Utilizes a “lifestyle benefits” approach

• Achieved a turnover rate of 3.7% when IT industry average was 20%

• This translates into annual savings of about $60-70 million

Google Gears Down for Tougher Times1

“Google's share price has fallen to $275.11 in trading Tuesday on the Nasdaq Stock Market, less than half its record close of $741.79 in November 2007.”

“Google has also begun chipping away at perks. In recent months, it reduced the hours of its free cafeteria service and suspended the traditional afternoon tea in its New York office. A Google spokesman says its core culture is not changing. "Our unique culture is an essential part of what makes Google Google," he says.”

“Earlier this summer, when employees first learned of a Google plan to upgrade and dramatically raise the price of its day care program, they wept, according to an article in the New York Times.”2

1Vascellaro, J.E., Marrison, S. (Dec 3 2008). Google Gears Down for Tougher Times The Wall

Street Journal, A1. 2'Don't Touch My Perks': Companies that Eliminate Them Risk Employee

Backlash: Knowledge@Wharton (http://knowledge.wharton.upenn.edu/article.cfm?articleid=2019)

Marriott International

2,600 operations worldwide

75% in North America

US workforce is highly diverse

Employees have 80 different native languages

Views it’s workforce as the key to guest

satisfaction and the company’s success.

During the late 1990s the firm faced high levels of

employee turnover and staff shortages

Payroll was in excess of $2 billion, the largest

single item in Marriott’s budget

Marriott International

• Goal: Reduce payroll by 4-5%

Reduce turnover

• Solution: “Value Proposition Project”

Utilize:

Internal Measurement and Organizational Context not

External Benchmarking

Empirical Evidence (e.g., surveys and company records) not

Manager Hunches or Anecdotal Evidence

Marriott International

• Findings of Marriott Study:

Base pay a strong predictor of retention,

however, that was not all

Lifestyle benefits, assistance with home

buying, child care, and career

opportunities were also key factors

Marriott International

Need to develop an infrastructure that supports the distribution of rewards tailored to individuals’ needs

“Signature Accounts” Individual Accounts where employees receive performance-

related points that can be redeemed for a variety of rewards (e.g., adoption costs, parking, apartment security deposits)

Employees receive extra bonus points based on tenure with the company

Issues Associated

with Tailored Approach

Legal Issues

Fairness Concerns

Employee

Confusion

Hofstede Dimensions of National

Culture

• Power Distance – Extent to which the less powerful members of organizations and

institutions accept and expect that power is distributed unequally

• Individualism - Collectivism – The degree to which individuals are integrated into groups

• Masculinity vs. Femininity – The distribution of roles between the genders – Focus on competition vs. well-being of others

• Uncertainty Avoidance – Tolerance for uncertainty and ambiguity

• Long Term Orientation

– Strong propensity to save and invest, thriftiness, and perseverance in achieving results

See the following website for more information: http://www.geert-hofstede.com/index.shtml

Collectivism, Rewards and

Employee Engagement

• Research Question: How does employees’ level of collectivism influence the formation of

organizational commitment/employee engagement?

• Theoretical Prediction: Employees’ collectivism will cause them to respond more or less

favorably to certain types of rewards, in turn shaping perceptions of the organisation

• Sample: Sample of US based young professionals

Interaction of Collectivist Orientation and Pay on Employee Organizational Commitment

4

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

5.8

6

6.2

Low Pay High Pay

Percieved Level of Pay

Org

an

izati

on

al C

om

mit

men

t

High Collectivism

Low Collectivism

Williamson, I.O., Burnett, M.F., & Bartol, K.M. (2009). “The interactive effect of collectivism and organizational rewards on

affective organizational commitment.” Cross Cultural Management: An International Journal, 16, 28-43.

Interaction of Collectivist Orientation and Job Autonomy

on Employee Organizational Commitment

4

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

5.8

6

6.2

Low Autonomy High Autonomy

Perceived Level of Autonomy

Org

an

iza

tio

na

l C

om

mit

me

nt

High Collectivism

Low Collectivism

Williamson, I.O., Burnett, M.F., & Bartol, K.M. (2009). “The interactive effect of collectivism and organizational rewards on

affective organizational commitment.” Cross Cultural Management: An International Journal, 16, 28-43.

Value of

Reward

Perceived

EffortReward

Probability

Effort Performance

(Behavior) Satisfaction

The Folly of Rewarding A While Hoping for B

Organizations hope for...

• Long term growth,

environmental responsibility

• Teamwork

• Setting challenging “stretch”

objectives

• Downsizing, rightsizing,

delayering, restructuring

• Commitment to total quality

• Surfacing bad news early

But they often reward...

• Quarterly earnings

• Individual effort

• Achieving goals “making the

numbers”

• Adding staff and budget

• Shipping on schedule, even

with defects

• Reporting good news,

agreeing with the boss

Kerr, S. (1995). On the Folly of Rewarding A while Hoping for B. Academy of Management Executive, 9, 7-14.

Value of

Reward

Perceived

EffortReward

Probability

Effort Performance

(Behavior) Satisfaction

Abilities

and Traits

What influences the Abilities and

Traits of your workforce?

•Recruitment and Selection Practices

•Training and Development

Value of

Reward

Perceived

EffortReward

Probability

Effort Performance

(Behavior) Satisfaction

Abilities

and Traits

Role

Perceptions

What shapes employees’ role

perceptions?

•Performance Management Systems

Value of

Reward

Perceived

EffortReward

Probability

Effort Performance

(Behavior) Satisfaction

Abilities and

Traits

Role

Perceptions

Extrinsic

Rewards

Social

Rewards

Intrinsic

Rewards

Value of

Reward

Perceived

EffortReward

Probability

Effort Performance

(Behavior) Satisfaction

Abilities and

Traits

Role

Perceptions

Perceived

Equity of

Rewards

Extrinsic

Rewards

Social

Rewards

Intrinsic

Rewards

Equity Theory

Outcome (self) Outcome (other)

Inputs (self) <, >, or = Inputs (other)

O/I (self) > other rationalization to account

for overpayment

O/I (self) < other restore equity, seek to increase

outcomes, lower inputs Comparisons may be with

(a) people inside the firm, (b) outside the firm, or (c) self (what it should be).

Value of

Reward

Perceived

EffortReward

Probability

Effort Performance

(Behavior) Satisfaction

Abilities and

Traits

Role

Perceptions

Intrinsic

Rewards

Extrinsic

Rewards

Perceived

Equity of

Rewards

Porter-Lawler Model of Motivation

Social

Rewards

Implications for your organization

• Answer these questions? – What rewards does my target population of employees value? – Do my employees believe it is possible for them to achieve rewards? – What is the skill level of my workforce? – How effective is my organization's performance feedback system? – What extrinsic, intrinsic, and social rewards can my organization

provide? – Who is the appropriate comparison other?

• Based on your answers what changes would you make to your management systems? – Recruitment and selection processes – Job Design – Performance Management – Training – Compensation policies

How you answer these questions influences the probability of engaging or losing top talent!