To have and to hold: Retaining and utilising skilled people

By Andrew Smith, Eddie Oczkowski, Chris Selby Smith Research report 24 October 2008 ISBN 978 1 921412 62 2 print; 978 1 921412 63 9 web

Description

This report examines the ways in which Australian employers retain skilled staff and the ways in which employers enhance their ability to use the skills of their people. The study found that while strategies such as increasing wages and family friendly policies may increase an employee's job satisfaction, the key driver in employee retention is if they feel they are learning and progressing in their careers.

Summary

About the research

Not being able to hire people with the required skills is an obvious impediment to the productivity and prosperity of any organisation and, ultimately, to a country's economy. An equally important concern for employers is how to keep skilled employees and how to use their skills fully.

This report, To have and to hold: Retaining and utilising skilled people by Andy Smith, Eddie Oczkowski and Chris Selby Smith, examines the ways in which Australian employers retain skilled staff at a time of low unemployment and skills shortages. It also considers the ways in which employers enhance their ability to use the skills of their people. The study analysed retention and utilisation at the organisation level. Its focus is on the role of human resource management practices, including training and high-performance work practices, in enabling employers to retain and utilise the skills of their staff.

Key messages

  • The key driver for both skills retention and utilisation is the presence of a learning orientation in the organisation. People stay in organisations if they feel they are learning and progressing in their careers.
  • Retention or utilisation of skilled people is not necessarily improved through strategies such as increasing wages, adopting family-friendly working policies, and the use of non-monetary rewards. These things help make people feel satisfied, but they are not sufficient to retain skilled people in a tight labour market.
  • What does facilitate retention is the application of high-performance work practices, such as a commitment to learning, open-mindedness and shared vision. More widespread adoption of these practices would benefit employers and workers alike.
  • Training as part of an overall learning culture, particularly nationally recognised training, is also important in retaining skilled people and making better use of their skills. This also offers opportunities for registered training organisations to work with employers to improve retention and utilisation strategies for employees.

Tom Karmel
Managing Director, NCVER

Executive summary

The factors that affect whether employees choose to remain in jobs and organisations or look for opportunities elsewhere have been the focus of much research. However, these labour turnover studies have been predominantly focused on the individual (what makes someone quit or intend to quit), rather than on a consideration of what organisations can do to retain and better use skilled people. Previous research has pointed to the importance of job satisfaction and to employees having a sense of organisational commitment in ensuring more permanent attachment to organisations (Winterton 2004). This suggests that there are many things that employers might do to increase the retention of skilled people, including implementing different approaches to human resource management.

The research has also highlighted the importance of high-performance work practices, such as working as a team, information-sharing and extensive training, in reducing levels of employee turnover and achieving higher levels of productivity through the better use of employee skills. This study examines the role of human resource management and high-performance work practices in the retention and utilisation of skilled people in organisations.

Method

This study comprised three phases. Phase 1 involved a series of expert interviews with employers, employer and employee associations and other bodies such as national skills councils. Responses and discussion from these interviews relating to retention and utilisation of skilled staff informed the development of the survey. A national survey of employers carried out in late 2006 constituted the second phase of the project. The survey asked about the human resource management and high-performance work practices of employers and questioned the retention and utilisation of employees. The results of the survey were statistically modelled to allow conclusions to be drawn about the practices that improved retention and utilisation and those that did not. The third phase of the project involved eight case studies with organisations, in which some of the issues arising from the survey were pursued in more depth and more detailed information was gained on retention and utilisation practices. The organisations that participated ranged in size from 13 to over 25 000 employees and were drawn from the manufacturing, health and community services, finance and insurance, and retail sectors.

Results of the research

This report examines the results of the survey and the case studies. The most important finding from the study was that the 'learning climate' of an organisation determines the extent to which skilled employees are retained and how their skills are used to greatest effect in organisations. For the purposes of the study, 'learning climate' refers to organisation-wide activities of creating and using knowledge to enhance competitive advantage. The learning climate consists of three components: commitment to learning; open-mindedness; and shared vision. Learning climate was the strongest factor in the modelling of the survey results, where its presence reduced the level of employee turnover and increased the utilisation of employee skills more than any other factor.

Learning climate does not simply mean training (which was also important in its own right), but rather the extent to which the organisation gives employees opportunities to learn, grow and develop through their work. The importance of this learning climate was expressed by an employee working as a call centre operator in a large national bank. When asked why he stayed with this organisation he commented:

Yeah, just learn new things every day. I do like to be challenged; so advancement, progression. Of course money does come into it. I want to be secure and that also comes into it and also a few things like that. But to add to what I was saying, the thing that generally people would want is something that challenges them, keeps you stimulated, keeps you interested so that you want to keep doing the job and to be able to have the opportunity to learn while you're doing that.

Challenge and opportunity for employees is a priority, and the case studies and survey results reflect this.

The level of unionisation also played a role in increasing the utilisation of skills, but its strength varied across the groups of workers. Not surprisingly, unionisation is highest in the intermediate skilled workers area, which includes the trades, traditionally the most unionised segment of the workforce.

Training was also important. However, this is different from the learning climate identified earlier and refers more to specific training initiatives conducted by organisations. The survey and the case studies found that training was widespread, with training opportunities available to most groups of employees. As previous research in Australia and overseas has demonstrated, organisations use training programs in a variety of ways and for many reasons. However, few training initiatives have a direct impact on the retention and better utilisation of skills, the major exception to this being nationally recognised training. (See footnote) In both the survey and, more emphatically, in the case studies, the use of nationally recognised training was strongly linked to employees deciding to stay with their organisation and with employers claiming that they were better able to use the full range of their employees' skills. This seems to be related to the value placed by employers and employees on qualifications. Employees regard the acquisition of a qualification as a significant benefit of working for an organisation, while employers see it as a confirmation of the level of skills possessed.

The traditional responses of organisations to the problems of retention have included such measures as increasing pay levels and improving working conditions; they also make use of non-monetary rewards. The study found that, although these measures were popular with employers, many using a combination of them, they had very little effect on retention. This bears out the findings of previous research - that these measures are 'hygiene' factors (Herzberg 1966). That is, these factors need to be present in the workplace to avoid dissatisfaction amongst employees, but they are not the factors that persuade and motivate employees to stay or to give more. Motivating factors are more closely linked to issues of learning, growth and development.

Similarly, many modern human resource management practices are designed to increase employee retention and loyalty to organisations. Policies such as flexible work time arrangements, time off for personal reasons and family-friendly policies, which have become the staple of advanced human resource practice, did not seem to reduce turnover or increase the organisation's ability to utilise the skills of employees. The reason for this was revealed in the case studies, where employees identified how important these policies were for their level of satisfaction with their job or organisation, but which did not appear to influence their decision to stay or leave. Good human resource practices are a necessary backdrop to increasing retention and utilisation of skilled people but they are not sufficient to guarantee this outcome.

High-performance work practices do seem to have a more direct impact. The notion of the learning climate incorporates a number of high-performance work practices and was identified in this study as the strongest factor in improving retention and utilisation. Teamwork was also considered to be important. The case studies, where human resource management and high-performance work practices were probed in more depth, also revealed that organisational culture plays a very important role in retaining and using skilled people. This seems to be particularly true in smaller organisations, where feelings of employee commitment are often related to the informal culture of smaller organisations or loyalty to family-owned firms. The broader issue of fashioning a high-performance 'culture' can be very powerful in motivating skilled people to stay in an organisation and to use their skills to the fullest extent.

Lessons for employers

Clear lessons for employers who wish to improve the retention and utilisation of skilled employees emerge from this research.

  • Create an organisational climate in which employee learning, growth and development are fostered and where people feel that their best opportunities and experiences for the future will be realised.
  • Training is a critical component of the learning climate of an organisation, but equally important is ensuring that training is mutually beneficial. Nationally recognised training is an important way of achieving this. This is good news for registered training organisations and the vocational education and training (VET) system, because nationally recognised training can provide an effective platform for working closely with employers on these issues.
  • The old ways don't work. Pay, working conditions and a happy workplace are all important factors in making employees feel satisfied, but they have to be part of a broader approach that combines good human resource management and the use of high-performance work practices to give employees opportunities for growth and development.

1 - Nationally recognised training is an accredited program of study leading to vocational qualifications that meet the requirements agreed under the National Training Framework. The framework is a system of vocational education and training that applies nationally. It is made up of the Australian Quality Training Framework (AQTF) and nationally endorsed training packages. It can apply to a whole course (qualification) or components of a course (units of competency and modules).

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