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1. Lecture 12
Strategic HRM

2. Case Analysis Report Submission

3. Employee Motivation and
Retention

4. Importance of Employee
Retention

5. • The cost of losing an employee can range from
25 percent to 200 percent of that employee’s
salary.
• Voluntary and Involuntary Turnover

8. It Will Cost You $4,000 to Replace
Just One
$8 per Hour Employee!!

11. Hawthorne Studies

12. Retention Strategies
• Retention plans outline the strategies the
organization will use to reduce turnover and
address employee motivation.

13. • Effective high-performance work systems
(HPWS) is the name given to a set of
systematic HR practices that create an
environment where the employee has greater
involvement and responsibility for the success
of the organization.

14. • A high performance work system is a strategic
approach to many of the things we do in HR,
including retention.
• HPWS gets employees involved in conceiving,
designing, and implementing processes that
are better for the company and better for the
employee, which increases retention.

16. • Salary and benefits
• Training and development
• Performance Appraisals
• Succession Planning
• Work life balance
• Career growth

17. Most important factor !!

18. Reward Strategy

19. Rewarding Employees
• Major strategic rewards decisions:
– What to pay employees
– How to pay individual employees
– What other benefits to offer

20. Reward Management
• Formulation and implementation of
strategies and policies, the purposes of which
are to reward employees fairly, equitably and
consistently in accordance with their value to
the organization.
• It deals with design, implementation and
maintenance of reward systems (processes,
practices, procedures) that aim to meet the
needs of both the organization and its
stakeholders.

21. Philosophy of Reward Management
• Strategic sense: long-term focus & it must be
derived from the business strategy
• Total Reward approach: considering all
approaches of reward (financial or not) as a
coherent whole; integration with other HRM
strategies
• Differential reward according to the
contribution
• Fairness, equity, consistency, transparency

22. Transactional
(tangible)
rewards
Relational
(intangible)
rewards
Base pay
Contingent pay
Employee benefits
Learning and development
The work experience
Total
remuneration
Non-financial
rewards
Recognition, achievement, growth
Total reward
Components of Total Reward (Armstrong 2009)

23. Components of Total Remuneration
• Base pay: Base pay is the fixed compensation paid to an
employee for performing specific job responsibilities. There is a
tendency towards market orientation and the increasing role of
qualifications.
• Contingent pay: Individual contingent pay relates financial
rewards to the
– individual performance, organisation or team performance,
– competence,
– service,
– contribution or
– skill of individual employees.
• Employee benefits: Elements of remuneration given in addition
to the various forms of cash pay.

24. Team based pay
• Pay is related to team performance
• It can encourages teamwork, loyalty and co-
operation

25. Organizaton-wide schemes
• Profit-Sharing Plans – organization-wide
programs that distribute compensation based
on an established formula designed around
profitability
• Employee Stock Ownership Plans (ESOPs) –
plans in which employees acquire stock, often
at below-market prices

26. Main types of Employee benefits
• Personal (and family) security: different types of insurances
• Financial assistance: loans, house purchase schemes, discount
on company services
• Personal needs: holidays, child care, recreation facilities,
career breaks
• Company cars and petrol
• Intangible benfits: quality of working life
• Other benefits: mobile phones etc

27. 4Ps of Rewards

28. The 4Ps of Reward
• Pay
– Salary, bonus, shares, etc.
• Praise
– Positive feedback, commendation, staff-of-the-
year award, etc.
• Promotion
– Status, career elevation, secondment, etc.
• Punishment
– Criticism, etc

29. Reward Strategy
• A declaration of intent that defines what the
organization wants to do in the longer term to
develop and implement reward policies, practices
and processes that will leads to the achievement of
its business goals and meet the needs of the
stakeholders.

30. • Reward strategy provides a sense of purpose
and direction and a framework for developing
reward policies, practices and processes.
• It is based on an understanding of the needs
of the organization and its employees and
how they can best be satisfied.

31. Developing Reward Strategy

32. 1. The diagnosis phase
2. The detailed design phase
3. The final testing and preparation phase
4. The implementation phase

33. Top 5 Employee retention Strategies
1. Working Environment
2. Employee relationship strategies
3. Employee support strategies
4. Employee growth strategies
5. Employee compensation strategies

34. Following is a list of some possible
retention strategies. Rank each
one in order of importance to you as
an employee !!

35. 1. Salary
2. Opportunity for bonuses, profit sharing
3. Social Recognition
4. Flextime scheduling
5. Sense of empowerment