Recent studies indicate that the attraction and retention of valued employees is one of the most critical issues faced by organizations. Replacement costs for employees can be higher than the salary of the person departing. In addition, the social relationships formed by employees inside and outside the organization are believed to create social capital, a resource that is being increasingly recognized as crucial for success in today’s organizations. When a valued person leaves a firm, the social network is disrupted and presumably some of the social capital leaves as well.
Mounting empirical evidence also points to the importance of developing human capital as a strategic means for increasing firm value. While understanding this relationship can be difficult when attempting to cut across multiple industries, understanding the logic in the context of a single firm is not. Please consider the following example. Wegmans, a Rochester, New York- based grocer, was 2005’s Fortune Best Company to Work For. As a private firm, they don’t provide extensive financial data for analysis. Suffice it to say that the firm’s operating margins are about 7.5%–double what the big four grocers earn—and its sales per square foot are 50% higher than the industry average. While its stores are larger than average and they stock more products than most other grocers, top consultants point to Wegmans employees as the key to their success. Darrell Rigby, head of consultancy, Bain & Co.’s global retail practice, notes that the reason Wegmans is a shopping experience like no other is that it is an employer like no other. You cannot separate their strategy as a retailer from their strategy as an employer.
While Wegmans salaries and benefits are at the high end of the market, employees say this isn’t the whole story. The firm makes strategic investments in their people. Before opening their Dulles, Virginia store, Wegmans spent more than $5 million to train their new employees there. Moreover, initial training is supplemented in many ways including sending employees on company-sponsored trips; staffers merchandising wine and cheese might travel to France and Italy to see the vineyards and observe the cheesemakers. While much of the investment is directly related to Wegmans core business—people who know how to group wine, crackers and cheese tend to sell more product than those who don’t—Wegmans has also contributed $54 million for college scholarships to more than 17,500 full-time and part-time employees over the past 20 years. While it may be difficult to calculate the near term return on this investment, it appears to pay generously as employees see a future with Wegmans—over half of the store managers started working for Wegmans as teenagers. About 6,000 (20%) Wegmans employees have 10 or more years of service and over 800 have 25 or more years. Not surprisingly, its annual turnover is just 6%, a fraction of the 19% figure for grocery chains with a similar number of stores. This has a substantial impact when you consider that the supermarket industry’s annual turnover costs can exceed its entire profits by more than 40% according to the Coca-Cola Retailing Research Council.
The key point to take away from the Wegmans example is not that companies should sponsor wine and cheese excursions if they want to keep their best and brightest. The key point is that Wegmans invests strategically in its people and that investment communicates to the people important messages that influence their desire to stay with the firm. For more than a decade we have carefully researched the reasons why people stay with or leave their employers. We have not found one universal key to success. However, after interviewing hundreds of people, surveying thousands more and then analyzing tens of thousands responses, we have developed a framework for understanding how a company can increase the probability its employees will continue to contribute to the firm’s success for the long term.
Not all firms will use the same methods to attract and retain top talent—even firms in the same industry. What firms can do to keep their people will depend in part on their business strategy, organizational culture and systems, and the people themselves. As demonstrated by a number of leading HR scholars over the past decade, it is imperative that a firm’s HR strategy be aligned with its business strategy. Firms that follow an operational excellence strategy (e.g., Federal Express, Nucor, Wal-Mart, McDonalds) need a workforce that identifies with business processes, is trainable, can learn rapidly, willingly follows the battle plan, is short-term focused, seeks to minimize waste and is driven by incremental improvement. In contrast, firms that concentrate on product (or service) leadership—such as Merck, 3M, Intel, Apple, Nike—create competitive advantage through innovation. Consequently, their workforce must value discovery and excel at the creative process. The best employees will challenge the status quo, have a longer-term focus, love learning and are willing to take risks. Still different, firms that compete successfully through valuing customer intimacy (e.g., Four Seasons, Home Depot, and Dell) offer unique solutions customized for their clients. This workforce identifies readily with customers, shares ideas easily, is adaptable and flexible as well as seeks out customer intelligence.
As should be clear from the foregoing discussion, employee competencies vary across business strategies and it is likely that their needs, desires and values also vary. Thus, practices that promote retention for one firm may not be as effective for another. The key issue is alignment between the business strategy, the workers, the culture and HR systems (e.g., selection, performance appraisal, compensation).
The purpose of this paper is to draw on research findings and extensive real world examples to demonstrate the practical benefits of implementing our ideas in an organization. We will first discuss traditional approaches to employee retention. Then we will discuss our framework—job embeddedness. Finally, we will provide many examples of how firms apply job embeddedness theory.
Though an employee may feel some immediate relief when severing employment, the choice to leave a job is often a stressful and difficult one. The personal cost can be high in terms of uncertainty, transition adjustments and disrupted social networks. Further, the cost to the organization can be enormous. Knowledge or expertise may be lost, customer service may suffer, and communication and coordination may be diminished. Replacements need to be recruited, selected, trained, gain experience, and become socially integrated before they make substantial contributions. Consequently, failure to systematically address retention issues is likely to have a negative long-term impact on corporate performance.
Retaining highly skilled workers who transmit and combine complex information is important to organizations; however, it is important to retain lower skilled workers as well. Given that 82% of the jobs in our economy are in the service sector and that the majority of those jobs require relatively low-skill workers, we believe it is important to understand the value of social capital and job embeddedness in organizations that employ large numbers of workers providing service.
Over the past half century, psychologists and management researchers have focused on two major factors as causes of employee retention: job satisfaction and job alternatives. People who are satisfied with their jobs (e.g., evaluate positively their pay, supervision, chances for promotion, work environment and tasks they do) will stay and those who aren’t will leave. Also, given the same level of dissatisfaction, people with more alternatives will be more likely to leave than those with fewer alternatives.
Considerable research has explored these relationships in detail. There are many causes of job satisfaction such as job enrichment, good supervision, clear roles and met expectations. Dissatisfaction is associated with job stress, repetitive work, role ambiguity and role overload. Economic factors such as pay, benefits, and other financial rewards influence job satisfaction as do structural and procedural factors reflecting autonomy or fairness. In terms of what initiates the turnover process, job dissatisfaction has been described as the most important and frequent cause. Thus, it is good, solid advice to design jobs and manage work environments to maintain a high level of job satisfaction.
Once dissatisfaction sets in, an employee presumably looks around for other work alternatives. The employee may conduct a job search and uncover some interesting options. Both perceived and actual alternatives can influence this process. At this point, it appears that the underlying thought is “I intend to leave.” If alternatives are judged to be favorable in comparison to the present job, the person is predicted to leave. If not, the person stays. Thus, attitudes about one’s current job and the availability of alternatives are seen as the antecedents for voluntary turnover. Satisfied employees will be less attracted by alternative jobs.
Even though the research results have been relatively weak, this prevailing wisdom has remained relatively unchanged for fifty years. In sum, a person’s perceptions about alternative job prospects combined with his or her job satisfaction and organizational commitment represents the dominant approach to understanding voluntary employee turnover.
One final comment on the academic literature is necessary. In most cases, staying is seen as the simple obverse of leaving. That is, people who are satisfied with their jobs and/or have few alternatives will remain on the job. A relatively recent and influential review article concluded that “relatively less turnover research has focused specifically on how an employee decides to remain with an organization and what determines this attachment.” This point is critical for our work because we believe that staying and leaving involve different psychological and emotional processes. Put differently, we believe that accumulated social capital and job embeddedness is a critical reason why people stay in firms, and it may be as important–or more important–than “staying due to job satisfaction.”
On the basis of findings from prior research coupled with extensive individual interviews, focus groups, and surveys of thousands of individuals, we have developed a theory of employee retention, which we call job embeddedness. Job embeddedness represents a broad set of influences on an employee’s decision to stay on the job. These influences include on-the-job factors such as bonds with co-workers, the fit between one’s skills and the demands of the job, and organization-sponsored community-service activities (e.g., your plant sponsors quarterly neighborhood clean-up days). It also includes off-the-job factors such as personal, family and community commitments. Research in a variety of settings (ranging from a community hospital to a Fortune 100 bank to a state Department of Corrections) has demonstrated the value of the job embeddedness concept. In brief, job embeddedness is a stronger predictor of important organizational outcomes such as employee attendance, retention and performance than the best well-known and accepted psychological explanations (e.g., job satisfaction and organizational commitment).
Job embeddedness captures a broad range of ideas that influence employee retention. One way to think about a person’s life is to visualize a net or a web created by strands connecting the different parts of one’s life. A person who has more roles, responsibilities, and relationships would have a more complex web than someone who had fewer. We would say that the person with the more complex web is more embedded in a situation; a person with more strands connected to her job would be more “job embedded.” The person with the more complex web would experience more disruption in the web if she severed ties at a central intersection in the web. For example, when a person quits a job where she has many close friends, has children enrolled in on-site, employer-provided day care, and is the lead manager on a critical project, she is likely to encounter considerable disruption in her web. Leaving that job will likely entail making multiple adjustments to her life and routine; these switching costs are real and more than simply economic. Consequently, the decision to leave will likely require extensive deliberation and the act of leaving immense effort. In contrast, a person who has a job that is relatively isolated, with few friends or connections to other projects or people will experience considerably less disruption in his web if he chooses to leave. Deliberation about leaving as well as the actual act of leaving will be relatively easy.
We believe a person can become embedded in a situation in a variety of ways; factors influencing embeddedness will come from both on and off the job. The critical aspects of job embeddedness are the extent to which the job is similar to, or fits with the other aspects in their life, the extent to which the person has links to other people or activities, and what they would give up if they left—the perks, benefits and other aspects of the job they value such as a safe or pleasant work environment. These dimensions are called fit, links and sacrifice.
Fit is defined as an employee’s perceived compatibility or comfort with an organization and with his or her environment. According to the theory, an employee’s personal values, career goals and plans for the future must “fit” with the larger corporate culture and the demands of his or her immediate job (e.g., job knowledge, skills and abilities). In addition, a person will consider how well he or she fits the community and surrounding environment. Job embeddedness assumes that the better the fit, the higher the likelihood that an employee will feel professionally and personally tied to the organization.
Links are formal or informal connections between an employee and institutions or people. Job embeddedness suggests that a number of threads connect an employee and his or her family in a social, psychological, and financial web that includes work and non-work friends, groups, the community, and the physical environment where they are located. The higher the number of links between the person and the web, the more an employee is bound to the organization.
Sacrifice represents the perceived cost of material or psychological benefits that are forfeited by organizational departure. For example, leaving an organization may induce personal losses (e.g., losing contact with friends, personally relevant projects, or perks). The more an employee will have to give up when leaving, the more difficult it will be to sever employment with the organization. Examples include non-portable benefits, like stock options or defined benefit pensions as well as potential sacrifices incurred through leaving an organization like job stability and opportunities for advancement. Similarly, leaving a community that is attractive and safe can be difficult for employees. Appendix 1 contains sample items from the job embeddedness instrument.
In sum, job embeddedness is theorized to be a key mediating construct between specific on-the-job and off-the-job factors and employee retention. It represents the accumulated psychological, personal and professional reasons why an employee would stay on a job. In our first publication addressing job embeddedness, published in the Academy of Management Journal (AMJ), embeddedness was presented conceptually and shown to predict voluntary employee turnover over and above job satisfaction and organizational commitment in a grocery store chain and community hospital. In the next publication, conducted with employees in a large bank (also published in AMJ), regression analyses revealed that off-the-job embeddedness was significantly predictive of subsequent employee turnover and volitional absences, whereas on-the-job embeddedness was non-significant. Also, analysis showed that on-the-job embeddedness was significantly predictive of organizational citizenship and job performance, whereas off-the-job embeddedness was non-significant. In addition, embeddedness moderated the effects of absences, citizenship and performance on turnover. His work essentially confirmed and extended our research findings.
Some follow up research was presented by David Allen who suggested that socialization tactics influence newcomer turnover by embedding newcomers more extensively into the organization. His ideas were tested with a sample of newcomers in a large financial services organization. Results revealed that socialization tactics enable organizations to actively embed new employees; collective, fixed, and investiture tactics were positively related to on-the-job embeddedness. Results also indicated that on-the-job embeddedness is negatively related to turnover and mediates relationships between some socialization tactics and turnover.
In addition to looking at why people stay on a job, we also have developed new ways of thinking about why people leave organizations. Our approach to how people leave, called the Unfolding Model, was presented conceptually in 1994 in the Academy of Management Review. It was then tested and refined in tests involving nurses and Big Five accountants (1996 & 1999 articles in the Academy of Management Journal). The important implications of that work for the present proposal is that the unfolding process of leaving over time is often initiated by particular events called “shocks” (instead of job dissatisfaction) and these events occur both on the job (e.g., fight with a coworker or boss) or off the job (e.g., unsolicited job offer or spouse relocation).
In more recent work, we have integrated the unfolding model of turnover (why people leave) and job embeddedness (why people stay) to obtain a more comprehensive picture of organizational attachment. In a large national study of stayers and leavers across hundreds of employers, we found that stayers were found to have the highest levels of job embeddedness as expected. We also found that job embeddedness tended to buffer an individual from shocks. Given a particular shock (e.g. restructuring) employees who were embedded were less likely to leave than those who were not embedded.
In sum, there is ample evidence that the reasons why people stay in a job are not the simple obverse of the reasons why they leave. Thus, while we believe that firms should seek to understand and address the reason why people leave, in an effort to help firms look forward to the future to strategically increase the probability that people will stay, we strongly encourage their using the knowledge generated by the job embeddedness framework. In the next section we present examples of efforts to embed employees that we believe address the six sub-dimensions of job embeddedness.
Fit in the Organization:
The first place to focus in building fit in the organization is in the recruitment and selection process. Faced with annual turnover of 127% among patient intake specialists, Little Rock’s Arkansas Children’s Hospital sought to improve its hiring methods. By focusing on the most important skills (in this case people skills rather than typing speed) and then using role-play exercises to gauge how well applicants liked working with the public and whether they had a personality that would reassure frightened children and anxious parents, they were able to improve the fit between the specialists and their job, reducing turnover to 15% annually in the process.
Another example of building fit into the organization into the entry process is the use of pre-employment surveys. Chickfil-A, a $2 billion dollar a year company that has posted 38 consecutive years of system-wide sales gains, use existing technology to systematically capture information about the characteristics of their best employees and then use that data to guide future hiring. The pre-employment surveys capture information about personality, motivation and honesty. Chickfil-A also conducts and captures information from exit interviews to learn how to improve in the future.
The Container Store tries to develop a company culture that makes people eager to come to work everyday. One of the keys to that for the Container Store is providing their people with industry-leading training. A full-time employee will receive 241 hours of training in her first year. A part-time worker will get 152 hours, including a two-hour philosophy course on customer service. Store employees train for at least two weeks before they get to wear the uniform apron. Once trained, however, they are given extensive autonomy. Every salesperson in the store has a key to the till and can make any decision a customer needs. No manager is needed to approve exchanges or refunds—a clear sign the organization doesn’t trust the judgment of its salespeople. In short, the Container Store trains its people so that they clearly have the skills and requisite abilities to do their job (a good fit) and trusts them to demonstrate it.
Quicken Loans, the largest online mortgage lender in the U.S., has been on the Fortune 100 Best Places to Work For list a number of times. According to its founder and chairman, Dan Gilbert, the key to the company’s success is a culture that emphasizes communication across the board and in which everyone shares ownership of the goals. All new team members attend a world-class, intensive two-day orientation to introduce them to the company, its history and philosophy. Gilbert speaks at every orientation. His message is consistent, “We empower our team members to take action and make decisions; to do what’s right on behalf of our clients. But in order to do this, they need to understand our culture and our philosophy because once you understand that it makes your decisions easier.” The training and socialization are designed to increase an employees understanding of, and fit with, the culture.
Richer Sounds is an electronic retail chain in the U.K. Its success depends on knowledgeable staff who support products by enthusiasm rather than a hard sell. So, it goes to great lengths to develop and keep staff with industry knowledge and passion. Richer Sounds deliberately promotes from within at every opportunity. They also provide financial rewards to employees who refer a new staff member to the company. This ensures a flow of like-minded music and video technology enthusiasts. Not only does Richer Sounds enjoy a low level of turnover, their stock shrinkage averages less than .5% compared to an industry average between 3-4%.
Despite market-competitive salaries, Nordavionics—a Canadian aerospace company—was losing talented engineers. So, it conducted a study to find out what it could do to keep them. The study revealed that the most significant impact on satisfaction and retention could be made by providing challenging work and professional growth. So, its leaders designed a strategy to spread the high value work to all engineers. Then, after an engineer has completed a specific assignment, he or she evaluates the work to validate the categorization and difficulty level assigned by the manager. Using this information, Nordavionics can start to match tasks and engineers in a way to foster both efficiency and employee retention. The same system also is linked to training and development plans. In short, Nordavionics pays close attention to the career aspirations of its people and helps them to find a way to meet their long-term career goals.
Similarly, Kraft Canada has created an Individual Development Plan (IDP) for each of its employees. The IDP helps employees map out future career moves and provides managers with comprehensive documentation of employee progress within the company. At least twice per year, employees and their managers meet formally to discuss career objectives and build development plans. During those meetings, they discuss what sort of training the employee wants and where they would like to make their next career move.
Fit in the Community:
North Shore Bank, a community bank operating in Wisconsin, has reduced its turnover among customer service representatives and personal bankers by recruiting mostly heavily in neighborhoods closest to its branches. By hiring people primarily from the local communities, North Shore has also increased its ability to provide services in the first language of non-native customers who often live in the ethnically concentrated neighborhoods. Additionally, North Shore has sought to provide employees with information about as well as encouraged involvement in community activities such as parades and festivals. This involvement in the local communities not only serves to help employees feel integrated into their communities but also helps customers identify important differences between their local bank and the large national banks.
Sandata, a computer software company in New York, seeks to help its employees get settled in their community. For example, it offers assistance to foreign employees as they wade through the Immigration and Naturalization Service process to obtain visas and green cards. It also provides courses in English as a second language. Sandata also holds drawings for tickets to local fairs and shows as well as professional sporting events.
Other firms consider locating offices so they are convenient for commuting or near affordable housing. An excellent example of this is Northwestern Mutual, which is a financial-services firm based in Milwaukee, Wisconsin. Its leaders mapped where the employees lived and used that as a key input when deciding where to locate its second corporate campus so as to reduce commute times.
The underlying theme for both the on the job and off the job examples is a better fit between the employee and their job and community. Socialization, training, having like minded coworkers and understanding and supporting the organizational culture serve this objective on the job. Helping employees get settled, involvement in community activities and location of work in compatible communities promotes off the job fit as well.
Links in the Organization:
Connections to people and projects can have powerful retention effects. One example of this comes from Citibank’s Asian banking unit. A thoughtful manager created a “pulse lunch” program that has resulted in lower turnover—a program that now operates across 102 countries. The essence of the pulse lunch is for the manager to listen to employee concerns—taking their pulse—and then act on the concerns. Interestingly, the branches that implemented pulse lunches have also shown measurable and meaningful increases in customer loyalty.
On a different continent but with a similar goal, Appleby’s International Inc.—the U.S.’s biggest casual-dining chain by number of stores—sought to reduce turnover by ranking its hourly employees and then rewarding managers for retaining their better workers. One way that the managers have addressed this challenge is by holding “get to know you dinners” for all new staffers. This helps to create a personal connection with the manager. Also, managers have sought to provide employees with a say in things like scheduling. These strategies should increase an employee’s ties with the manager and with the job.
There are a variety of ways to help employees get connected to co-workers and managers. Pannone and Partners, a U.K.-based law firm recognized for its high staff satisfaction and retention rates, provides gym memberships so that employees can work out together and carpool to the office. They also sponsor social events like barbeques, shopping weekends, and “cake days.” Across the Atlantic, CPA firm Stout, Causey & Horning (SC&H), provides weekly happy hours, in-office ice cream carts, nightly dinners during busy season, and several annual employee parties. For the past nine years, all partners and employees are invited with a guest for a 5-day excursion to exotic locations. Last year’s trip was to the Atlantis resort in the Bahamas. In a field-known for its long hours and repetitive work, SC&H strives to ensure its employees feel linked to their co-workers and to the clients they work for—a group that highly values continuity in their service providers.
Other companies use technology to link people together. One example is Chase Capital Partners, a New York-based global venture capital organization. They have used an internet-based tool developed by Perform.com, a technology company that helps companies manage and develop their people. The tools primarily help keep employees connected to their mentors even when separated by great distances and unpredictable schedules.
Links in the Community:
Though there may be relatively few things that a firm can do to explicitly increase the number of links a person creates with the community, there are a number of things that the firms can do to facilitate and/or strengthen the links. A number of firms get actively involved in local charitable causes by donating materials or services, hosting events at their facilities, or sponsoring events held in community venues. Other firms provide time off to their employees to allow them to volunteer in their communities. Fleet Mortgage Group lets employees take two days off per year for volunteer work to increase community outreach. Patagonia’s School Support program allows employees to take five workdays off during the school year to participate in kids’ classroom activities. They also have an environmental internship program: a two-month paid sabbatical for employees who want to take time off to work for a non-profit environmental organization.
Some firms make it even more personal. Quicken Loans CEO, Bill Emerson, sends hand-signed birthday cards to all employees and sends their children cards and gift certificates on their own birthdays. Last year, their annual summer barbeque featured the company’s first “Pinewood Derby” contest—with more than 60 cars that participated in the race hosted in the company’s parking lot. Tickets to local concerts and events were given as prizes.
So, links are about connections. On the job, various social experiences (pulse lunch, get to know you dinners), and work experiences (team projects, technological hook up) and mentoring increase and strengthen these bonds. Similar effects can be realized off the job through community outreach, external internships and supporting pro bono or volunteer community work.
Sacrifice associated with leaving the Organization:
Great employers are often known for their great benefits. Such firms offer flexible plans, as well as generous health, dental and vision care contributions. Their retirement programs (e.g., 401(k) matching programs) help employees plan for and fund their futures. Many firms offer profit sharing or stock options or tuition reimbursement. There is no question that these benefits attract potential employees to apply at firms that offer generous benefits. Moreover, sacrifices incurred by leaving an organization are often the “issues” most mentioned by employees and employers alike when discussing employee retention. While pay clearly is an important reason why most people work, numerous studies demonstrate that pay levels and pay satisfaction explain relatively little variance in actual turnover behavior. There’s little dispute that in the short term bonuses and raises improve a firm’s ability to retain talent. However, there are natural limits on how much a firm can pay its people and remain competitive over the long run (e.g., their ability to raise prices for its products or services). Thus, wages often converge within industries. So, while helpful, paying people well is typically not enough.
Perks that are unique to a firm can help it differentiate itself. For example, FedEx names its planes after its employees’ children. Others, like SAS Institute, offer extensive on-site services designed to make life easier for its employees such as automobile oil changes and detailing, laundry service, massage, child care and preschool, extensive athletic facilities and medical care. Griffin Hospital provides family-style kitchens with meal service, strolling musicians, and chair massages. Adobe Systems offers a fitness center with trainer, seasonal farmers’ market, basketball and bocce courts, and a private office for almost every worker. JM Family Enterprises gives free prescriptions filled by a “pharmacy concierge,” professionally made take-home dinners, and cruises on the company yacht.
Deloitte Consulting has one of the lowest turnover rates in the professional services consulting industry. Their success is not attributable to any one program, but instead to a suite of family-friendly options. First is a 3-4-5 travel policy for consultants on out-of-town assignments. The policy promotes three nights away from home, four days at the client site and the fifth day in the Deloitte offices working on client projects. This policy ensures that consultants spend more nights at home than in hotels. The program is so critical to the firm that it is included in partner and senior manager performance evaluations. Additionally, Deloitte offers flexible work arrangements. This allows promising professionals to continue building their careers even when they may need more time for their personal lives. Deloitte also offers extended parental leave for both men and women as well as sabbaticals. Additionally, through an outside contractor, they offer resources and referrals for childcare, education, adoption, eldercare and self-care.
Flexible schedules not only encourage retention, but new research also indicates that parents who are stressed about their children’s after-school arrangements are more likely to make mistakes at work. Specifically, workers who are feeling stress are more than three times as likely to report high levels of job disruption. Further, parents with high stress levels miss about eight days of work a year compared to low-stress parents who miss only about three days. So, while organizations must be careful about how they implement these programs so as to be able to meet business and client needs, clear evidence is emerging to confirm the expected benefits of providing workers flexibility in scheduling their work hours.
Accounting firm Ernst & Young recently announced that it is extending four three-day holidays to include a fourth day and Thanksgiving was extended to five days off to give people an opportunity to relax and spend more time with family and friends. Its vacation policy was also amended to offer more flexibility to people in managing the diverse demands on their time.
Sacrifice associated with leaving the Community:
One of the most on-point examples of a firm seeking to connect its employees with their community is Northwest Community Hospital in Arlington Heights, Illinois. It allows full-time employees who earn less than $70,000 a year to get $5,000 toward a down payment on a first home. Employees must stay with the hospital for five years or they will have to pay back part of the money. Homes also must be within 10 miles of work. Twenty percent of employers helped with mortgages or down payments in 2004 (up from 9% in 2000). And 19% offered rental assistance (up from 5% in 2002) according to the Society for Human Resource Management. The types of such assistance can vary from employers providing help with the down payment to credit counseling, help finding real estate agents, and partnerships with non-profits that help employees navigate the home-buying process—all benefits offered by insurance provider, Aflac.
Others, like Marriott, have provided mentors, job coaches, or some type of “buddy system” to help welfare recipients entering the job force to learn skills needed for their jobs as well as extra help with child care and transportation to and from work. The research done on these programs indicate that the returns are positive because of the high level of retention.
Thus, besides the obvious things one sacrifices by leaving a job, such as pay and benefits, there are other “softer” strategies involving perks or policies like flextime, child care, athletic facilities, meal service and medical support. Off the job help with housing, child care and transportation are benefits one would hate to give up by leaving a job.
We recognize that not all benefits discussed are viable for all companies to provide. The key is for each firm to offer the highest value for the lowest cost based on the unique and diverse needs of its people. This implies knowing what employees value (e.g., through surveys, focus groups, etc) and the long-term benefits that are expected to be derived from implementing these strategies as well as understanding the cost. A summary of our ideas for embedding people in the organization based on these six dimensions is captured in Table 2.
Fortune 100 Best Companies to Work For:
Given that many companies make considerable efforts to make their work environment excellent, we were interested in looking specifically at the outcomes associated with being a Fortune 100 Best Companies to Work For in terms of voluntary turnover. Based on our analysis of the 2005 winners, we found the following:
- The average turnover rate for all U.S. companies for the period (calendar year 2004) for all industries was 20.2%.
- The Fortune 100 Best (companies are recognized in January 2005 for 2004 results) average 10.5% turnover or just over half (52%) of the turnover rate as their industry peers (per U.S. Department of Labor data; matched by SIC code).
- In every industry represented in the 100 Best, turnover was lower than the average of industry peers.
- The Department of Labor industry averages (per SIC code) for annual turnover range from 10% (education) to 47% (accommodations and food services).
- When the data were analyzed on a weighted-average basis (by number of employees), the same basic pattern of results obtained.
- The percent of national average turnover per category for the 100 Best ranges from 16% (other services) to 89% (finance and insurance). Most of the 100 Best Companies averaged about 48-58% of the national rate.
- Fifty of the 100 Best have turnover rates in the single digits (less than 10%).
- Among some large service-industry employers in the sample (leisure and hospitality; accommodation and food services) the turnover rates averaged approximately 32-36% of national rates. This creates a huge competitive advantage for companies like Marriott and Four Seasons.
So what is it that these companies do to create low rates of turnover? Table 3 provides extensive examples of companies and their programs to address specific dimensions of job embeddedness theory. To us what is most impressive about this list is the diversity of programs. The best response from one firm on a given issue may not fit well with another’s strategy, its culture or its people.
Most modern lives are complicated. When employees feel that their organization values the complexity of their entire life and tries to do something about making it a little easier for them to balance all the conflicting demands, the employees tend to be more productive and stay with those organizations longer. Job embeddedness captures some of this complexity by measuring both the on-the-job and off-the-job components that most contribute to a person’s staying. Research evidence as well as ample anecdotal evidence (discussed here and other places) supports the value of using the job embeddedness framework for developing a world-class retention strategy based on corporate strengths and employee preferences.
To execute effectively their corporate strategy, different organizations require different knowledge, skills and abilities from their people. And because of occupational, geographic, demographic or other differences, these people will have needs that are different from other organizations. For that reason, the retention program of the week from international consultants won’t always work. Instead, organizations need to carefully assess the needs/desires of their unique employee base. Then, these organizations need to determine which of these needs/desires they can address in a cost effective fashion (confer more benefits than the cost of the program). Many times this requires an investment that will pay off over a longer term—not just a quarter or even year. Put differently, executives will need to carefully understand the fully loaded costs of turnover (loss of tacit knowledge, reduced customer service, slowed production, lost contracts, lack of internal candidates to lead the organization in the future, etc. in addition to the obvious costs like recruiting, selecting and training new people). Then, these executives need to see the expected benefits of various retention practices. Only then can leaders make informed decisions about strategic investments in human and social capital.
Job Embeddedness Definitions:
|Job Embeddedness||Job embeddedness represents a broad array of influences on employee retention. The critical aspects of job embeddedness are (a) the extent to which the job and community are similar to or fit with the other aspects in a person’s life space, (b) the extent to which this person has links to other people or activities and, (c) what the person would sacrifice if he or she left. These aspects are important both on (organization) and off (community) the job.|
Fit-organizationFit-organization reflects an employee’s perceived compatibility or comfort with an organization. The person’s values, career goals and plans for the future must “fit” with the larger corporate culture as well as the demands of the immediate job (e.g., job knowledge, skills and abilities).
Fit-communityFit-community captures how well a person perceives he or she fits the community and surrounding environment. The weather, amenities and general culture of the location in which one resides are relevant to perceptions of community fit.
Links-organizationLinks-organization considers the formal and informal connections that exist between an employee, other people, or groups within the organization.
Links-communityLinks-community addresses the connections that exist between an employee and other people, or groups within the community. Links-community recognizes the significant influence family and other social institutions exert on individuals and their decision making.
Sacrifice-organizationSacrifice-organization captures the perceived cost of material or psychological benefits that may be forfeited by leaving one’s job. For example, leaving an organization entails personal losses (e.g., giving up colleagues, projects or perks). The more an employee gives up when leaving, the more difficult it is to sever employment with the organization.
Sacrifice-communitySacrifice-community is mostly an issue if one has to relocate. Leaving a community that is attractive, safe and where one is liked or respected can be difficult. Of course, one can change jobs but stay in the same home. But even then, various conveniences like an easy commute or flextime may be lost by changing jobs.
Ways to Increase Job Embeddedness
Table 2 (continued)
Ways to Increase Job Embeddedness
Job Embeddeding Activities of the Fortune 100 Best Companies to Work For
|CarMax||CEO Q&A sessions|
|Harley-Davidson||90% of employees identify with the company’s riding culture|
|Medtronic||Creative freedom (25% of an employee’s workday can be devoted to a tech idea outside of their usual jobs)|
|Morrison & Foerster||Diverse atmosphere; 21 minority partners|
|Plante & Moran||No “partner row”; everyone is clustered by industry|
|REI||Females have high chances of promotion; female CEO|
|SEI Investments||Open floor plan to make everyone feel equal|
|Valassis||Creates new positions to accommodate special talents|
|American Fidelity Assurance||Birthday cakes each month for employee birthdays|
|Arbitron||$100 American Express gift cards for peer recognition|
|Arnold & Porter||Peer-elected committee to give everyone a voice|
|Bingham McCutchen||Strong mentor network|
|Deloitte & Touche, PWC||Referral bonuses including new cars|
|Four Seasons Hotels||Peer recognition through Employee of the Year award at each hotel|
|Marriott International||CEO flies top employees to DC to present job excellence award|
|Monsanto||Snowshoe softball, and other employee bonding activities created by “people teams”|
|National Instruments||Talent show, using specially built applause-o-meter|
|Perkins Coie||Stresses collaboration but peers can single out employees for outstanding performance|
|Procter & Gamble||Reverse mentoring with junior female employees and senior managers|
|S.C. Johnson & Sons||Peer performance reviews|
|Stew Leonard’s||Pie eating contests, hayrides, and ski trips|
|Valero Energy||Executives only receive their bonuses if everyone else does|
|W.L. Gore||Team members evaluate each other to determine compensation|
|Whole Foods Market||Salaries limited for top executives|
Table 3 (continued)
Job Embeddeding Activities of the Fortune 100 Best Companies to Work For
|A.G. Edwards||Exercise facilities (indoor walking tack, yoga classes, & running clubs)|
|Aflac||Company will pay 100% of tuition for employees’ children and grandchildren, up to $20,000 per year|
|Alcon Laboratories||Koi pond, jogging trails|
|American Cast Iron Pipe||On-site medical centers with 20 doctors and nursing staff, 11 dentists and hygienists, and four pharmacists; wellness center|
|Baptist Health Care||Raffle for free rides on the company helicopter|
|Booz Allen Hamilton||2/3 of staff report a flexible work arrangement|
|Cisco Systems||Fun Workplace (“Nerd Lunches” and movie-themed food)|
|Container Store||Special schedules for employees with children; 9 A.M to 2 P.M Monday through Friday; part timers get health coverage|
|Four Seasons Hotels||Employee of the Year Award (week vacation & $1,000 shopping spree)|
|Genentech||Lavish thank-you parties|
|General Mills||Tuition reimbursement at 100% up to $6,000 per year|
|Goldman Sachs||On-site children’s center, 20 days free backup care|
|Hot Topic||Reimbursement for concert tickets if employee writes a concert fashion report; fun environment where employees can dress like rock stars|
|IKEA North America||Tuition allowances for spouses|
|J.M. Smucker||Complimentary bagels and muffins every day|
|MBNA||Child-care centers; reimbursement for tuition; $20,000 per child for adoption; paid week off for new grandparents|
|Men’s Warehouse||Three-week paid sabbatical after five years|
|Network Appliance||Bonuses for patents filed, and stock grants for multiple patents|
|Pfizer||On-site child care and an elder-care program that includes counseling|
|Plante & Moran||Massages and miniature golf in the office; Saturday child care|
|Publix Super Markets||Bonus of an extra week paid vacation; health benefits for part-timers|
|Quicken Loans||CEO gives sports/concert tickets to those who sing songs over the PA|
|Roche||College classes on-site|
|Starbucks||Expansive health coverage (part-timers; same or opposite-sex partners)|
|Station Casinos||Full-service on-site dentistry and 24-hour child care|
|Texas Instruments||Spa and periodic on-site driver’s license renewals, parents’ nights out, and holiday parties|
|Vanguard Group||Staffers get room with a view, officers get inside spaces; On-site MBA– free if you get an A or B|
|Wm. Wrigley Jr.||Ten percent of first year cost savings from employee suggestions|
|MANY||Extensive health, dental and vision care benefits|
|MANY||Restricted stock grants or stock options|
Table 3 (continued)
Job Embeddeding Activities of the Fortune 100 Best Companies to Work For
|Adobe||Seasonal farmers market|
|Bingham McCutchen||Box seats at Fenway|
|John Wiley & Sons||When relocating, Wiley asked employees what perks they wanted and followed through by providing a pristine river location, on-site exercise room, café, and free shuttle service|
|Arnold & Porter||Opportunity to work six months at a public interest organization|
|David Weekley Homes||Entertaining annual company meetings that are attended by spouses and relatives|
|Intuit||Incentive plan to lose weight that donates $1 to charity for each pound lost|
|Microsoft||Matches local charitable donations|
|Morrison & Foerster||Pro bono work opportunities|
|Principal Financial Group||Employees given days off to do community service|
|Qualcomm||Donations to victims of forest fires (including employees) matched by company|
|Station Casinos||Charity fundraiser, including an auction for the GM’s job for one day|
|Texas Instruments||Sponsors day camps for kids|
|Timberland||6 month paid sabbatical to fulfill community service dream|
|Marriott||Local transportation assistance|
|SAS Institute||Home-buying assistance; country club membership (90% discount)|
|Vision Service Plan||Can extend eye service to friends|