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EMPLOYEE RETENTION: DIFFERENTIATION AND PROFIT SHARING

02/17/2011

Introduction
Having good, potential, loyal employee in the business company is very important for the future of the company. It is the source of power for the company to make improvement and advancement. However, keeping that kind of employee is really challenging in this global market.
This paper will discuss about the meaning of employee retention and some activities which could be used to support employee retention. Another point will discuss about the idea of retaining employee as discussed by Jack Welch with Suzy Welch in his book Winning and Michael Bergdahl in his book The 10 Rules of Sam Walton. Both writers give us inspiration how to prevent employees from leaving their job in our company. The last part, how these two ideas would be possible to apply in the school setting.

The meaning of employee retention

As quoted by S.Shiny Nair from Get Les Mckeown’s employee retention is define as “ effective employee retention is a systematic effort by employers to create and foster an environment that encourages current employees to remain employed by having policies and practices in place that address their divers needs. .( http://www.articlesbase.com). Important point here is creating environment and giving benefit to the employee so that they get satisfaction from their job and they remain loving their job in the future
Shiny Nair give some activities which we could do to support the employee retention. First is communication. Communicate any new policies or initiatives to the employees and make them all part of the policies because nobody wants to feel they are being excluded. Second, Include employees in decision making. Including the team members in the decision making is very important; they could be source of new ideas for the company. Third, Allow team members to share their knowledge with others. The company should create and facilitate the knowledge sharing among the employee and the team so that they feel valuable to the organization. Fourth, shorten the feedback loop. By shortening the feedback loop it will help to keep performance level high and will reinforce positive behavior. Fifth, Balance work and personal life: the company should give opportunity to the employee to take care of the family and give opportunity to enjoy time with the family in certain occasion. Sixth, Provide opportunities for growth and development. The company needs to offer opportunities for team members to acquire new skills and knowledge useful to the organization and give refreshment to the team. Seventh, Recognize team members for their hard work and let them know they are appreciated; this can be one of the single greatest factors affecting employee retention.
Differentiation and profit sharing for employee retention

Jack Welch with Suzy Welch the author of WINNINH book and Michael Bergdahl in his book The 10 Rules of Sam Walton also give us perspectives on how to retain employee and encourage them to do their best for our company. Jack Welch discusses his controversial values on differentiation of the employees in his company.

Differentiation is compulsory for the company operates in this global and competitive world. Through differentiation, the company will create competitive product lines. Welch noted that differentiation is the most successful practice in his company which transforms “company from mediocre to outstanding and it is as morally sound as a management system can be”. (Welch, 2005, p.37).
What should be differentiating?

According to Welch a company has software and hardware. The software is people and the hardware is the different business in your portfolio, or if the company is small the hardware is the product line. Differentiation on the hardware means that the managers should know which business or product line he should invest on. The managers will not give his/her investment on the weak product lines. It will be sold or closed and move its investment to strengthen the other product line.

In differentiating people Welch used the formula 20 – 70 – 10. He categorized his employee based on the performance. The top 20% of the employee will receive bonuses, stock options, praise, love, training, and variety of rewards. The middle 70% of the employee are managed differently. It’s the majority of the company employees who need much concern from the manager to make them always engage and motivated to work for the company. Managing the 70 % employees means that the managers should looks at the potential people there and encourage them to move up. Therefore managing the 70% employee is about training, giving positive feedback, and thoughtful goal setting. Next the 10% employee should leave the company.

According to Welch, it is not easy to ask them leave the company. To overcome this difficulty, the company should have clear performance expectation and a performance evaluation process. This performance expectation and performance evaluation process should be everyone goals so that the 10% employee will know who they are and they will decide to leave the company before the manager ask them to leave.
Differentiation is good in running business but many people still argue about it. They have criticism on the differentiation practice. What are their objections? First, they think differentiation is unfair because it’s always corrupted by company politics 20-70-10 is just a way of separating the people who kiss the boss rear from those who don’t. Second, differentiation is mean and bullying. It’s like the play ground in the worst possible way –weak kids are made into fools, outcast and object of ridicule. Third, differentiation pits people against one another and undermines teamwork. Fourth, differentiation is possible only in the united stated. Because of cultural values, people in other country won’t accept it. Fifth, differentiation is fine for the top 20 % and the bottom 10% because they know where they are going. But it is demotivating to the middle 70 %, who end up living in an awful of limbo. Sixth, differentiation only for people who are energetic and extroverted and undervalue people who are shy and introverted, even if they are talented. (Welch, 2005. P. 44-51).

Dealing with this critic, Welch stressed on the importance of the company to have clear cut performance system, well formulated expectation and goal and timelines, and a program of consistent appraisals. The people in the company should embrace this criteria and make them as guide lines in their work. By this when the evaluation due, they would know their position in the company and they know where they are. Therefore this differentiation system is fair to all employees. Next, Welch also said that through clear cut performance system and well formulated expectation, goal and timelines, it will motivate the employee to work better and it also encourage them to work in team. Dealing with the cultural issues, Welch assures us that differentiation system can work in any cultural values. But the managers should think carefully and try to infuse this system slowly until all people in the company could accept the ideas. Therefore, to implement the differentiation system in our institution we should formulate clear performance criteria, clear expectation of the company, clear goal settings and time lines and clear reward which employee would receive if they could fulfill the criteria.

This is different ideas in retaining the employee. Michael Bergdahl through his book The 10 Rules of Sam Walton discusses Mr. Sam Walton success’ in retaining the employee of Wall-Mart. Mr. Sam Walton considered people as the most important asset. They should be treated as partners so that they begin to act like partners in their interactions with customers, suppliers and their own managers. Partners are empowered people, and thus employee begins to feel empowered and take their responsibilities more seriously and enthusiastically. By treating the employee as partners and empowering them to serve the customer, they finally have the feeling of ownership. This will give positive effect on their performance.
Mr. Sam Walton creates a profit sharing system to empower and to retain the employee in the Wall-Mart Company. As told by the Michael, Mr. Sam used this system to set high standards and keep moral high and control turnover on his employee.

What is profit sharing system? It is taking a percentage of Wall-Mart profits, putting it in a pool, and disbursing it to company associates after the end of fiscal year. This sharing would create happy employees, and happy employees create positive shopping experience for the customers and that means more sales (Michael, p. 55)

The profit sharing system give the employee financial security but what does the company get from this program? As Wall-Mart needs the best people to run this business, the profit sharing program will attract and retain the best quality employees. They will have feeling of ownership on personal level. It will drive them to do what is necessary to positively impact their stores, their distribution center, their special divisions and their home office.

The employee involvement in the goal setting is very important in Wall-Mart Company. It will help the employee understand the focus of the company profitability. The managers also share about the confidential information on the financial condition of the company. It will lead to the creation of “employee owner mentality. Employees who have this mentality will work harder to reach the high expectation or goals of the company. According to Mr. Sam, high expectation is the key to everything.
What do I learn from these readings?

We realize that nowadays we run schools in competitive world. The employees, the customer (students and parents) are also aware of the quality of the education in our schools. Therefore it is also important to make our school leading in the local setting. We need to create the center of excellent in our school which could give more advantages to the students and the parents.

The school also needs to formulate clear vision and mission, goals which could direct the teachers doing their responsibility. Besides, we need to create the workplace atmosphere which enables them to feel as part of the community. Clear goal setting which involves the teachers and the parents will also help us to retain our teachers and the customers. Teachers should also be treated as the partners in realizing the goals of the schools.

The idea of differentiatiation in Welch Company may also be applied at schools with careful planning before it is implemented. Just make sure that all the members of the school (the staff, the teachers, the students, the parents) know the criteria we will apply in the school and involve them as much as possible in the decision making which affect them so that they could give support to the school policies and really work for the goals we have agreed upon.

References:
1. Bergdahl, M. (2006) The 10 Rules of Sam Walton: Success secret for remarkable Result. Share Success with those who have helped You. John Willey and Son, Inc.
2. Welch, J. (2005). Winning. Differentiation:Cruel and Darwinian? Try fair and effective. Harper Collins Pub.
3. Nair, S.S., Employee Retention, http://www.articlesbase.com/human-resources-articles/employee-retention-995426.html

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3 Comments leave one →
  1. 12/06/2011 11:55 am

    Just about all of what you point out is astonishingly precise and it makes me wonder why I had not looked at this with this light before. Your piece truly did switch the light on for me as far as this subject goes. However there is one point I am not too comfortable with so while I attempt to reconcile that with the main theme of your point, allow me see what the rest of your subscribers have to say.Well done.

    • 12/11/2011 11:59 am

      Thank you Sir for reading this article and thanks for critizing my ideas. I would be always very happy to read your respond on this writing. God Bless.

  2. 12/10/2011 6:28 am

    Its good as your other blog posts : D, regards for posting .

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