Understanding Employee Retention: Who Stays and Why

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Understanding Employee Retention: Who Stays and Why

BY Shesh Kumar Dhungana

Many employees, even top performers, may not actively consider career planning until they become dissatisfied with their current job situation

In today's fiercely competitive business world, human capital stands out as a paramount asset. Despite the continuous emergence of various technological advancements, the importance of employees remains undiminished. Technology may be evolving, but it still relies heavily on human expertise to operate effectively. Consequently, modern managers are increasingly focusing on cultivating environments that nurture employee enthusiasm and foster a strong desire to remain committed to their roles.

The reasons behind employees' decisions to stay are just as crucial as those prompting them to leave. Some employees may continue in their roles for reasons entirely unrelated to their jobs or the organisation, often resulting in minimal effort and engagement. Similarly, highly motivated employees may choose to leave for reasons that are not work-related but are within the organisation's capacity to address. This dichotomy illustrates that two individuals in identical positions may experience different outcomes, with one departing while the other remains, albeit unsatisfied.

To gain a comprehensive understanding of this phenomenon, it is imperative to determine whether employees have remained in their roles well beyond a point where they find a sense of achievement and meaning in their work or if they are merely biding their time until retirement. The distinction between staying out of choice and staying out of necessity is vital. To retain top talent effectively, organisations must also scrutinise the reasons behind retention and continuity and work towards strengthening these aspects.

So, why do employees stay? In a nutshell, it often boils down to ‘inertia’. Employees typically persist with a company until external factors force them to reconsider. Factors contributing to this inertia encompass elements within and outside the organisation. Internally, the critical factors include job satisfaction and the overall work environment, while external factors entail opportunities outside the organisation and non-work-related considerations such as financial obligations, family ties, and community connections. These elements significantly influence employees' decisions to either remain with the organisation or seek opportunities elsewhere.

Conversely, why do employees leave? The most common reasons for departure often revolve around workplace dissatisfaction, the sense of expendability within the organisation, lack of recognition for their efforts, insufficient support to fulfil their job responsibilities, limited prospects for advancement, and inadequate compensation. However, top-performing employees, who are invaluable to the organisation's success, are more likely to stay, as are employees who are a good fit for their roles and consistently perform well. Interestingly, many employees, even top performers, may not actively consider career planning until they become dissatisfied with their current job situation. This dissatisfaction can directly lead to voluntary turnover if employees lack access to information about potential career paths within the organisation.

To comprehensively address the question of who stays and who leaves, and to understand the underlying reasons, a model categorises employees into four distinct groups:

Category A: These employees are dissatisfied with their jobs primarily due to factors such as low pay and limited growth opportunities within the organisation. However, they continue to work with the organisation due to factors like job security, friendships at work, and an aversion to change.

Category B: Highly dissatisfied employees who remain primarily due to external factors such as family responsibilities and challenges in finding alternative employment. Job insecurity and strained relationships with supervisors contribute significantly to their discontent.

Category C: Motivated employees who choose to stay primarily because they find satisfaction in their work. They are characterised by their desire to participate in decision-making, feelings of responsibility, job security, and social recognition both within and outside the organisation.

Category D: Employees who are likely to remain in the long run due to a combination of job satisfaction and external factors. Job satisfaction arises from involvement in important decisions, a sense of responsibility for their work, and social recognition both within and outside the organisation. External factors include strong friendships at work, a positive organisational history, job security, and a positive relationship with their supervisor.

The decision of whether an employee continues to fulfil their duties or opts to leave an organisation hinges on factors such as job satisfaction and environmental pressures, both within and outside the organisation. Additionally, other variables, including age, education, job title, tenure, and work ethic, can also influence an employee's choice to stay or depart.

In today's competitive business landscape, talent retention is paramount for two compelling reasons: the high costs associated with turnover and the pivotal role of top performers in driving organisational success. As the younger workforce increasingly seeks new challenges within shorter time frames, organisations must actively create environments that inspire enthusiasm and a lasting commitment to their roles. Achieving this requires a comprehensive understanding of why employees choose to stay in an organisation.

To retain top talent effectively, managers should concentrate on how organisational policies and practices impact individual employees' desires to either stay or seek opportunities elsewhere. This analysis of the factors influencing employee retention can inform strategic decisions in the following areas:

Human Resource Policy: Adapt policies to enhance conditions for satisfaction, ensuring that employees choose to stay because they want to, not because they feel compelled to do so.

Individuality: Acknowledge and respect employees as individuals with unique values and aspirations that may differ from those of the organisation.

Work Environment: Cultivate a work environment that aligns with employees' personal goals and values for work and life.

Early Retirement Programs: Consider offering attractive early retirement programs for employees who no longer seek achievement or meaning in their work. Such individuals may pose challenges to the organisation and their colleagues, necessitating a strategic approach to their transition.

These efforts will not only help retain high-performing employees but also foster an internal environment that enhances employees' willingness to continue their careers within the same organisation. Ultimately, this contributes to both personal and organisational growth and fosters a culture of achievement within the workplace. 

(Dhungana is the Chief Executive Officer Nepal Hydro Developer Limited)

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