CHAPTER 14

ENGAGEMENT AND
RETENTION
THE OBJECTIVES OF THIS CHAPTER ARE TO:

1 Debate the meaning of the term ‘engagement’ in the context of

work and employment
2 Discuss the benefits associated with engaging people
3 Identify concerns about engagement
4 Outline the main reasons for voluntary resignations
5 Assess the arguments for and against investing resources in labour
turnover reduction programmes
6 Explore approaches that can improve engagement and retention
Part 3  Performance: success through individual and collective achievement

While the search for an agreed definition of ‘engagement’ in the context of work and
employment continues, there is a widely held view that an engaged workforce is more
likely to deliver higher performance than one that is disengaged, although better under-
standing of the engagement/performance relationship is needed (Truss et al. 2013).
Nevertheless, the increased emphasis on this relationship has led us, over recent editions,
to move engagement from the section dealing with resourcing (with a focus on employee
retention) to this section, which deals with performance. We retain discussion of employee
retention, positioning it as a key performance outcome of engagement. Both engagement
and retention are critical issues for HR practitioners and line managers seeking to effec-
tively manage the workforce and its performance.
Engagement and retention are closely linked in a number of ways. First, it is clear from
published research that relatively high levels of engagement tend to correlate quite strongly
with relatively high employee retention rates. In other words, engaged employees are a
good deal less likely to resign and seek alternative employment than disengaged employees.
Indeed, it is often disengagement that leads to resignations. Second, it is apparent from
research into both areas that there is a good deal of similarity between the types of HR
intervention that are commonly associated with high levels of engagement and low levels
of unwanted turnover. It follows that implementing the same broad suite of initiatives is
likely to have a positive effect on both turnover rates and the extent to which people in an
organisation are positively engaged. We discuss these initiatives in more detail later.

Defining engagement

The term ‘employee engagement’ has become very widely used in recent years. This is
because ‘engagement’ seems to capture concepts that other commonly used terms such as
‘motivation’, ‘satisfaction’ and ‘commitment’ do not quite manage to so well. Credit for
inventing the term ‘employee engagement’ is often given to the American psychologist
W.A. Kahn (1990) who conceived of its being made up of two distinct elements:

• emotional engagement: a situation in which employees have strong emotional ties to their
managers, feel their opinions count and feel that their managers have an interest in their
development;
• cognitive engagement: a situation in which employees know what is expected of them,
understand their purpose or mission, are given opportunities to excel and grow, and
are given information about how to improve their progress.
Subsequent researchers have taken up the idea of engagement and have carried out many
significant studies, refining their definitions of the term but creating a situation where we
lack any kind of clear, precise, concise and widely agreed definition of engagement (see
Purcell 2014, for a more detailed discussion). A recent study presents a helpful comparison
of several well-recognised definitions (Bailey et al. 2017) and argues that the so-called
‘Utrecht Group’ one is most widely adopted in research surveys. This defines engagement
as ‘a positive, fulfilling, work-related state of mind’ and consists of vigour, dedication to
and absorption in work activities’ (Schaufeli et al. 2002: 74). Indeed, this is the basis of
the well-known Gallup survey on employee engagement.

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Nevertheless, as Peccei (2013) points out, when it comes to defining ‘employee engage-
ment’ we do not really even have agreement on the fundamentals. For example, he asks,
when we use the term, are we referring to engagement with our work or to engagement
with our organisations? Purcell (2014) develops this to argue that, for HR purposes, work
engagement should be disregarded and it is behavioural (‘employee’) engagement that is
the focus of our interest. Further debate continues as to whether ‘engagement’ is a long-
term state, some being more engaged than others, or a state that we can move in and out
of depending on our mood or the tasks we are working on at a particular time. More
fundamentally, Peccei (2013) asks, is employee engagement properly conceived of as a state
at all? Guest (2014) is blunter still in his assessment, expressing confusion about whether
‘employee engagement’ is an attitude, a behaviour, an outcome or a combination of the
three, going on to argue that we should abandon the term altogether unless these very
basic definitional questions can be answered.
As matters stand, however, we are far from abandoning the term. Instead its usage
continues to grow, as demonstrated by Purcell (2014) who cites research showing the many
thousands of publications on the topic in recent years. In truth, engagement is now seen
as one of the key aims of HRM and people management more generally in organisations.
The absence of a clear definition is not perhaps perceived as being problematic because,
as several interviewees who contributed to the government-commissioned Macleod Report
(MacLeod and Clarke 2009) said, an ‘engaged workforce is something that you know
when you see it’.

ACTIVITY 14.1
What is your understanding of employee engagement? How important is an
agreed definition?

Despite problems of definition, there is a sufficient degree of common ground between

them to make the concept of ‘employee engagement’ useful from a practical management
point of view. There is, for example, a shared understanding that ‘engagement’ repre-
sents a step beyond ‘job satisfaction’ and ‘commitment’ or even ‘motivation’. Engaged
employees have an emotional attachment to their work and/or their organisations which
leads them to expend greater energy. There is thus a link to other widely used terms in
HRM such as ‘organisational citizenship’, ‘going the extra mile’, ‘working beyond con-
tract’ and ‘discretionary effort’. Second, there is general agreement that being a posi-
tively engaged employee is beneficial both to the organisation and to the individual
concerned. Engaged staff do not demonstrate enthusiasm and effort because they are
forced to, but because they want to. Finally, it is abundantly clear that ‘employee engage-
ment’ can only be usefully defined as a multidimensional concept that encompasses a
variety of different elements. Indeed, it is quite likely that the antecedents of employee
engagement vary from person to person, let alone workplace to workplace and country
to country. In the following Window on Practice, we consider the difficulties of measur-
ing engagement.

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WINDOW ON PRACTICE
Measuring engagement levels
We have so far discussed the importance of employee engagement but that should not be
taken to mean that engagement levels are high. Indeed, in a 2018 survey Gallup, an organ-
isation recognised as leading the field in employee engagement research, found that only
13% of employees worldwide were highly engaged. Further, the UK has the most disen-
gaged workers, outnumbering engaged ones two to one.
Yet Armstrong questions how meaningful these survey figures are and argues that
they do not actually measure engagement, particularly given the dynamic nature of most
businesses. More regular pulse surveys attempt to address this fast pace of change, but
some nevertheless argue the surveys are a waste of time and, worse, employees are cyni-
cal as to whether they actually lead to any action or change. Armstrong argues that the
picture is often more complex than ‘engaged’ or ‘disengaged’ and that there is benefit to
considering engagement at the team level. Here her work found varying patterns of
engagement, including complacency and ‘pseudo-engagement’, which created much
deeper insight into attitudes. Despite a dizzying array of measurement tools, we have a
way to go in fully understanding the most effective ways to measure engagement.

Source: adapted from Armstrong (2018).

The benefits of employee engagement

The Gallup surveys we refer to above draw on data collected internationally over many
years and are by far the biggest and most cited research studies on employee engage-
ment and its impact, taking in several thousand organisations and hundreds of thou-
sands of employees. The survey uses a simple twelve-question instrument comprising
statements such as:
I know what is expected of me at work.
In the last seven days, I have received recognition or praise for doing good work.

Respondents are asked to indicate the extent of their agreement with statements and the
sheer size of this dataset gives the analysis a strong credibility. Furthermore, it enables
statistically significant correlations to be sought between the extent of employees’ emo-
tional and cognitive engagement and other variables such as profitability, productivity,
customer satisfaction and, importantly for our purposes in this chapter, employee reten-
tion. Some of the key findings are as follows:
1 There is greater variation in terms of the level of employee engagement between different
business units within the same organisation than there is between organisations. This is
significant because it implies that the variability in levels is not related to the type of indus-
try or characteristics of employees – it is in most cases due to the quality of management.

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2 Impressive correlations have been demonstrated between relative levels of employee

engagement in a business unit and the success of business units. Business units with
the highest rates of employee engagement are twice as successful as those with the
lowest when measured against indicators such as productivity, customer responses and
profitability.
3 A particularly strong relationship has been found between levels of employee engage-
ment and retention, that is, rates of labour turnover, that is higher levels of engagement
are strongly associated with lower levels of turnover.
Other key headline findings from the Gallup studies demonstrate the potential advantages
of employee engagement from the perspective of employees:

• engaged employees ‘very often feel happy at work’;

• engaged employees ‘get a great deal of their life happiness from work’ much more often
than who are disengaged;
• actively disengaged staff are much more likely than engaged staff to state that ‘work
stress has caused them to behave poorly with friends or family in the past three months’;
• actively disengaged staff are much more likely to report that their work lives ‘are having
a negative effect on their physical health’.
Bailey et al.’s work (2017) is a meta-analysis of engagement research and evidence that
studies repeatedly show that engagement is associated with improved individual morale,
task performance, extra-role performance and organisational performance, the relation-
ships with task performance being particularly strong. Other recent studies that evidence
the benefits of employee engagement include Carter et al. (2018), who demonstrate its
benefits for job performance and CIPD (2018a) who also support this, but additionally
argue that it improves employee well-being. An important stream of emerging research
considers how engagement might differ by employee group, and we discuss this in the
following Window on Practice.

WINDOW ON PRACTICE
As research continues, so understanding develops as to how engagement might differ
across employee groups. Recent studies have focused in particular on gender and age,
and this is of interest as thus far engagement has tended to present employees as an
homogenous group. Banihani and Syed (2017) studied engagement in telecommunica-
tions companies in Jordan and found that, while engagement is typically presented as
gender neutral, this is far from the case. In fact, they argue that organisational inequality
frequently prevents women from reaching engaged states. Kim and Kang (2017)
researched employment across differing age groups and demonstrated that the resources
that older workers accrue across their working lives typically underpin higher levels of
engagement. It is early days for this area of research, but it is an important field for HR
practitioners to be mindful of. As the work force becomes increasingly diverse, so too will
interventions to enhance engagement need to be more complex and varied.

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In this section, we have presented extensive evidence of the benefits of employee

engagement. It should also be noted that engagement has a number of criticisms. We have
already discussed the lack of an agreed definition and Guest (2014) develops this to argue
that engagement is essentially a meaningless term and a management fad. Purcell (2014)
also argues that engagement can lead to work intensification and can be problematic.
Employees are encouraged to engage and ‘go the extra mile’ to the extent that they may
become stressed and burnout. The extra performance delivered via their engagement is
not then sustainable. In any event, with high levels of UK employees being disengaged, it
appears that much further research is required to address both the desirability and feasibil-
ity of achieving employee engagement.

Employee retention

As we note above, employment engagement has a number of important performance

outcomes. Retention is one of these outcomes and we discuss it in some depth in the
remainder of the chapter. Retention is typically measured by labour turnover rates which,
in their simplest form, measure employee departures from an organisation’s employment
(for information on calculating labour turnover rates, see Chapter 15c). Within this wide
definition, however, turnover can take many forms. For example, employees may resign,
retire, be dismissed or be made redundant. It is important to understand the reasons
behind turnover in order to reduce it: labour turnover is extremely costly and most organ-
isations work to reduce turnover levels to minimise these costs. The focus is typically upon
labour turnover that is not employer-initiated and is avoidable, mainly employee
resignations.

The impact of labour turnover

There is some debate about the level at which labour turnover becomes problematic. The
answer varies from organisation to organisation. In some industries, it is possible to sus-
tain highly successful businesses with turnover rates that would make it impossible to
function in other sectors. Some chains of fast food restaurants, for example, are widely
reported as managing with turnover rates in excess of 300%, which means that the average
tenure for each employee is only four months. Yet the companies concerned are some of
the most successful in the world. By contrast, in a professional services organisation,
where the personal relationships established between employees and clients are central to
ongoing success, a turnover rate in excess of 10% is likely to cause damage to the business.
A recent report by CIPD (2017) suggests that average UK turnover rates are around 16.5%
and have been increasing over recent years.
There are sound arguments that can be made in favour of a certain amount of labour
turnover. First, it is fair to say that organisations need to be rejuvenated with ‘fresh blood’
from time to time if they are to avoid becoming stale and stunted. This is particularly true
at senior levels, where new leadership is often required periodically to drive change for-
ward. More generally, however, new faces bring new ideas and experiences which help

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make organisations more dynamic. Second, it is possible to argue that a degree of turnover
helps managers to keep firmer control over labour costs than would otherwise be the case.
This is particularly true of organisations that are subject to regular and unpredictable
changes in business levels. When income falls, it is possible to hold back from replacing
leavers until such time as it begins to pick up again. In this way organisations are able to
minimise staffing budgets while maintaining profit levels during leaner periods. Redun-
dancy bills are also lower in organisations with relatively high labour turnover because
they are able to use natural wastage as the main means of reducing their workforce before
compulsory lay-offs are needed. Third, it can be plausibly argued that some employee
turnover is ‘functional’, that is, it benefits the organisation, rather than ‘dysfunctional’
because it results in the loss of poor performers and their replacement with more effective
employees.
The arguments against labour turnover are equally persuasive. First, there are the sheer
costs associated with replacing people who have left, ranging from the cost of placing a
recruitment advertisement, through the time spent administering and conducting the selec-
tion process, to expenses required in inducting and training new employees. On top of
these, there are less easily measurable losses sustained as a result of poorer performance
on the part of less experienced employees. For larger organisations employing specialist
recruiters, these costs can add up to millions of pounds a year, with substantial dividends
to be claimed from a reduction in labour turnover levels by a few percentage points. Inter-
estingly, CIPD (2017) research suggests that over 50% of organisations do not calculate
these costs. The second major argument in favour of improving staff retention results from
a straightforward recognition that people who leave represent a lost resource in whom the
organisation has invested time and money. The damage is all the greater when good people,
trained and developed at the organisation’s expense, subsequently choose to work for
competitors. Finally, it is argued that high turnover rates are symptomatic of a poorly
managed organisation. They suggest that people are dissatisfied with their jobs or with
their employer and would prefer to work elsewhere. It thus sends a negative message to
customers and helps create a poor image in the labour market, making it progressively
harder to recruit good performers in the future.
We may thus conclude that the case for seeking to reduce labour turnover varies from
organisation to organisation. Where replacement employees are in plentiful supply, where
new starters can be trained quickly and where business levels are subject to regular fluctua-
tion it is possible to manage effectively with a relatively high level of turnover. Indeed, it
may make good business sense to do so if the expenditure required to increase employee
retention is greater than the savings that would be gained as a result. In other situations,
the case for taking action on turnover rates is persuasive, particularly where substantial
investment in training is required before new starters are able to operate at maximum
effectiveness. Companies that achieve turnover rates below their industry average are thus
likely to enjoy greater competitive advantage than those whose rates are relatively high.

ACTIVITY 14.2
Why do you think labour turnover rates are so much higher in some industries
than others? Make a list of the different factors that you consider may account
for variations.

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Analysing labour turnover

There is little that an organisation can do to manage turnover unless there is an under-
standing of the reasons for it. Information about these reasons is notoriously difficult to
collect. CIPD (2018b) recommend exit interviews (i.e. interviews with leavers about their
reasons for resigning), but the problem here is whether the individual will feel able to tell
the truth, and this will depend on the culture of the organisation, the specific reasons for
leaving and support that the individual will need from the organisation in the future in
the form of references. Despite their disadvantages, exit interviews may be helpful if
handled sensitively and confidentially, perhaps by the HR department rather than the line
manager. In addition, analyses of turnover rates between different departments and dif-
ferent job groups may well shed some light on causes of turnover. Attitude surveys can
also provide relevant information.
People leave jobs for a variety of different reasons, many of which are wholly outside
the power of the organisation to influence. One very common reason for leaving, for
example, is retirement. It can be brought forward or pushed back for a few years, but
ultimately it affects everyone. In many cases, people leave for a mixture of reasons, certain
factors weighing more highly in their minds than others. Below we outline one approach
to categorising the main reasons that people have for voluntarily leaving a job, each requir-
ing a different kind of response from the organisation. While functional turnover benefits
the organisation, all other categories, typically categorised by ‘push’ and ‘pull’ reasons
(CIPD 2018b) can be detrimental and organisations typically work to reduce turnover in
these categories.

Functional turnover
Functional turnover includes all resignations which are welcomed by both employer
and employee alike. The major examples are those which stem from an individual’s
poor work performance or failure to fit in comfortably with an organisational or
departmental culture. While such resignations are less damaging than others from an
organisation’s point of view, they should still be regarded as lost opportunities and as
an unnecessary cost. The main solution to the reduction of functional turnover lies in
improving recruitment and selection procedures so that fewer people in the category
are appointed in the first place. However, some poorly engineered change-management
schemes are also sometimes to blame, especially where they result in new work
pressures.

Outside factors
Outside factors relate to situations in which someone leaves for reasons that are largely
unrelated to their work. The most common instances involve people moving away when
a spouse or partner is relocated. Others include the wish to fulfil a long-term ambition
to travel, pressures associated with juggling the needs of work and family and illness.
To an extent such turnover is unavoidable, although it is possible to reduce it somewhat
through the provision of career breaks, forms of flexible working and/or childcare
facilities.

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Push factors
With push factors, the problem is dissatisfaction with work or the organisation, leading
to unwanted turnover. A wide range of issues can explain such resignations. Insufficient
development opportunities, boredom, ineffective supervision, poor levels of employee
involvement and straightforward personality clashes are the most common precipitating
factors. Organisations can readily address all of these issues. The main reason that so
many fail to do so is the absence of mechanisms for picking up signs of dissatisfaction. If
there is no opportunity to voice concerns, employees who are unhappy will inevitably start
looking elsewhere. Holland et al.’s (2017) study demonstrated this, evidencing the rela-
tionship between effective voice mechanisms, strong engagement and reduced turnover.

Pull factors
The opposite side of the coin is the attraction of rival employers. Salary levels are often
a factor here, employees leaving in order to improve their living standards. In addition,
there are broader notions of career development, the wish to move into new areas of work
for which there are better opportunities elsewhere, the chance to work with particular
people, and more practical questions such as commuting time. For the employer losing
people as a result of such factors, there are two main lines of attack. First, there is a need
to be aware of what other employers are offering and to ensure that as far as possible this
is matched – or at least that a broadly comparable package of pay and opportunities is
offered. The second requirement involves trying to ensure that employees appreciate what
they are currently being given. The emphasis here is on effective communication of any
‘unique selling points’ and of the extent to which opportunities comparable with those
offered elsewhere are given. Refer to Chapter 8 where we discuss establishing an effective
employer brand.

What are the most common reasons for labour turnover?

UK-based studies focusing on people’s reasons for leaving organisations are few and far
between, but those that have been published tend to emphasise that a mix of different
factors applies and that these vary from industry to industry. Nevertheless, it is generally
accepted that push factors are a great deal more prevalent than pull factors as causes of
voluntary resignations. Very few people appear to leave jobs in which they are broadly
happy in search of something even better. Instead the picture is overwhelmingly one in
which dissatisfied employees seek alternatives because they no longer enjoy working for
their current employer.
Pay is less of a push factor than is commonly supposed and other more prominent fac-
tors include dissatisfaction with the conditions of work, especially working hours, lack
of career development and, often most influentially, a poor relationship with immediate
supervisor (CIPD 2018b). In an interesting study, Samuel and Chipunza (2009) looked at
why long-serving staff had remained in their jobs, rather than focusing on why leavers
had left. Their study took place in four large South African organisations: two in the
private sector and two in the public sector. They found that the four key factors that served
to retain staff were:

• training and development;

• challenging and interesting work;

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• freedom for innovative thinking;

• job security.
Another recent study in the Philippines has also identified mismatch between employee
and organisation values as a key reason for labour turnover (Presbitero et al. 2016).
It would follow logically that organisations must address these issues to reduce labour
turnover.

ACTIVITY 14.3
Think about jobs that you or members of your family have left in recent years.
What were the key factors that led to the decision to leave? Was there one
major factor or did several act together in combination?

Engagement and retention strategies

Engagement has been linked with improved performance in a number of areas, not least
improved retention (Truss et al. 2014). Bailey et al. (2017) argue that drivers of engagement
include a positive psychological state; good job design; and effective leadership. CIPD
(2018b) draws on the MacLeod Review to summarise ‘enablers’ of employee engagement:
leadership; line managers; employee voice and organisational integrity. Unsurprisingly
then, a number of researchers, including Eldor and Harpaz (2016), have demonstrated
that engagement mediates between HR practice and retention and Presbitero et al. (2016)
propose a number of HR practices that provide employees with a better deal, in the broad-
est sense, than they perceive they could get by working for alternative employers to help
engage them. It is much more than a question of getting the terms and conditions of
employment right. There is also a need to provide jobs which are genuinely satisfying,
along with career development opportunities, as much autonomy and involvement as is
practicable and, above all, competent line management. Indeed, it can be argued that most
of the practices of effective HRM described in this text can play a part in enhancing
engagement and reducing labour turnover. Despite this, CIPD (2017) evidence that only
40% of organisations in their survey took specific actions to address retention challenges.
Below we look at five interventions that can be shown to have a positive effect.

Managing expectations
For some years, research evidence has strongly suggested that employers benefit from
ensuring potential employees gain a ‘realistic job preview’ before they take up a job offer
(see Chapter 8 for further information). Its purpose is to make sure that new staff enter
an organisation with their eyes wide open and do not find that the job fails to meet their
expectations. A major cause of job dissatisfaction, and hence of high labour turnover and
low levels of employee engagement, is the experience of having one’s high hopes of new
employment dashed by the realisation that it is not going to be as enjoyable or stimulating
as anticipated.

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We also know from extensive research carried out into the nature of ‘psychological
contracts’ that failing to meet expectations, and hence managing them effectively, can
have serious de-motivational effects. The establishment of the concept of the ‘psychologi-
cal contract’ is one of the most significant recent developments in the study of HRM
(Conway and Briner 2005). The core idea is that employers and employees have a relation-
ship that is much more complex and sophisticated than is set out in formal contracts of
employment. The legal contract sets out the expectations and obligations each side has
towards the other in respect of pay and terms and conditions of employment, but the
reality of the relationship consists of much more than this. The ‘psychological contract’
can thus be defined as comprising expectations and obligations that the two sides have
of one another and their relationship above and beyond what is formally agreed in any
legal contract.
When an employer breaches the legal contract of employment there are legal conse-
quences. For example, if pay is cut or the work location changed without contractual
authorisation the employees who are affected can go to court to get injunctions or to sue
for damages. If an employee breaches the legal contract (e.g. by going on strike), the
employer responds by cutting wages. By contrast, when the psychological contract is
breached the consequences are psychological – reduced commitment and loyalty, lower
levels of motivation and reduced levels of trust both individually and collectively. The
result is reduced employee engagement and higher levels of unwanted labour turnover.
Recent work has developed the concept of ‘i-deals’, that is, an individualised employment
deal tailored to a specific employee in order to retain them. There is some evidence to
suggest that works by improving their engagement (Wang et al. 2018).

Pay
There is some debate in the literature about the extent to which raising pay levels either
reduces labour turnover or improves job satisfaction to any significant degree. On the one
hand, there is evidence to show that, on average, employers who offer the most attractive
reward packages have lower attrition rates than those who pay poorly (Gerhart 2013), an
assumption which leads many organisations to use pay rates as their prime weapon in
retaining staff (White 2008). On the other, there is evidence which suggests that pay is a
good deal less important than other factors in a decision to quit one’s job and recent CIPD
(2017) research suggests that less than 50% of organisations use pay as a retention strat-
egy. The consensus among researchers is that pay has a role to play as a satisfier, but that
it will not usually have an effect when other factors are pushing an individual towards
quitting. Raising pay levels may thus result in greater job satisfaction, and hence employee
engagement, where people are already happy with their work, but it will neither deter
unhappy employees from leaving, nor re-engage many disengaged employees.
Recent research findings thus appear to confirm the views expressed by Herzberg (1966)
that pay is a ‘hygiene factor’ rather than a motivator. This means that it can be a cause of
dissatisfaction at work, but not of positive job satisfaction. An employer who pays badly
or is perceived to pay people inequitably will be unlikely to benefit from a highly engaged
workforce. But higher pay will not generally lift levels of engagement if other factors such
as the quality of the work or the management are poor. Similarly, people may be motivated
to leave an employer who is perceived as paying badly, but once they are satisfied with
their pay, additional increases tend to have little effect on turnover intentions.

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While pay rates and benefit packages may play a relatively marginal role in the engage-
ment and retention of good people, reward in the broader sense plays a more significant
role. If employees do not find their work to be ‘rewarding’ in the broadest sense of the
word, they will be much more likely to start looking for alternative jobs. This is a good
deal harder for managers to achieve because different people find different aspects of their
work to be rewarding. There is thus a need to understand what makes people tick and to
manage them as individuals accordingly. It is far harder for would-be competitors to
imitate the effective motivation of an individual than it is for them to increase the salary
that a person is paid.

ACTIVITY 14.4
The case for arguing that pay rates have a relatively minor role to play in
explaining individual resignations rests partly on the assumption that other ele-
ments of the employment relationship are more important. It is argued that
people will ‘trade in’ high pay in order to secure other perceived benefits and
that consequently low-paying employers can retain staff effectively.

1 What other factors do you think employees consider to be more important

than pay?
2 What role can the HRM function play in helping to develop these?

WINDOW ON PRACTICE
As with employee engagement, turnover and retention research is beginning to focus
more closely on particular employee groups, rather than assuming that employees are a
homogenous group. This is producing some thought-provoking results. Naim and Lenka
(2018), for example, explored retention strategies in relation to Generation Y (younger)
employees and found that mentoring, strategic leadership, social media and knowledge
sharing were important. Stirpe et al. (2018) conducted research with older workers and
found that flexible working, while important to all groups, was particularly important to
this group. Finally, Fernando et al. (2018) explored what factors supported the retention of
female engineers and argued that care and support, feedback, high-level opportunities
and role models were central to this. As workforce diversity grows, Wang et al.’s (2018)
proposition that i-deals will be needed to effectively support retention grows in
importance.

Training and development

Both induction and ongoing training and development can influence engagement and
reduce turnover. Induction processes play an important role in establishing expectations
at the start of the employment relationship. It is very easy to overlook the importance of
induction in the rush to get people into key posts quickly and it is often carried out badly.
But it is essential, particularly if avoidable early turnover is to be kept to a minimum and
departures due either to poorly managed expectations or to ineffective inductions reduced.

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Induction has a number of distinct purposes, all of which are concerned with preparing
new employees to work as effectively as possible and as soon as is possible in their new
jobs. First, it plays an important part in helping new starters to adjust emotionally to the
new workplace. Second, induction provides a forum in which basic information about the
organisation can be transmitted. This may include material about the organisation’s pur-
pose, its mission statement and the key issues it faces. Third, induction processes can be
used to convey to new starters important cultural messages about what the organisation
expects and what employees can expect in return. It thus potentially forms an important
stage in the establishment of the psychological contract, leaving new employees clear
about what they need to do to advance their own prospects in the organisation. All these
matters will be picked up by new starters anyway in their first months of employment,
but incorporating them into a formal induction programme ensures that they are brought
up to speed a good deal quicker, and that they are less likely to leave at an early date.
Ongoing training is also a key issue. There are two widely expressed, but wholly
opposed, perspectives on the link between training interventions and employee turnover.
On the one hand, there is the argument that training opportunities enhance commitment
to an employer on the part of individual employees, making them less likely to leave vol-
untarily than they would if no training were offered. The alternative view holds that
training makes people more employable and hence more likely to leave in order to develop
their careers elsewhere. The view is thus put that money spent on training is money wasted
because it ultimately benefits other employers. Nelissen et al. (2017) explore this paradox
and find limited support for the argument that training increases turnover. They argue
that an employer can develop a workforce which is both ‘capable and committed’ by
combining training interventions with other forms of retention initiatives.
The evidence linking training and career development opportunities to employee
engagement is much less unambiguous. Meta-analyses investigating the antecedents of
relatively high levels of employee engagement place ‘opportunities for development’ close
to the top of the list of factors that have a positive influence (Peccei et al. 2013: 348). This
is unsurprising because, in financing courses and training events, employers are sending
a very clear signal to the employees concerned that their contribution is valued sufficiently
for money to be invested in their personal development and potential career
advancement.

WINDOW ON PRACTICE
Jenkins and Delbridge (2014) compare and contrast soft and hard approaches to employee
engagement in two case study organisations, the softer approaches drawing on many of
the types of retention initiatives we are discussing here. Voicetel’s soft approach focused
on provision of good workplace conditions and positive manager/employee relationships
with no direct focus on improved productivity. By contrast, EnergyServ’s explicit focus was
on increasing engagement to improve performance outcomes. The softer approach saw
positive employee engagement, whereas the harder approach resulted in high levels of
employee disengagement. The authors suggest that both organisational context and the
underlying premise of engagement initiatives are central to the outcomes achieved.

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Flexible working arrangements

Family or personal reasons are key triggers of labour turnover, particularly among women
and the drive to offer flexible working to accommodate employees external demands has
gathered pace in recent years (CIPD 2019). Official statistics show that average job tenure
among women with children in the UK is over a year shorter than that of women without
children and almost two years shorter than that of men. This suggests that one of the
more significant reasons for voluntary resignations from jobs is the inability to juggle the
demands of a job with those of the family. They indicate that there is a good business
case, particularly where staff retention is high on the agenda, for considering ways in
which employment can be made more flexible. Research into the antecedents of employee
engagement also strongly suggests that the ability of people successfully to combine work
and home responsibilities is one of the most significant factors in explaining high levels
of engagement (Peccei et al. 2013).
Providing flexible working arrangements of these kinds is a very good way of retaining
and engaging staff, particularly when organisations do more than their competitors. This
is because juggling family and work responsibilities is a big issue in many employees’ lives
and support with this is highly valued. We discuss types of flexible working arrangements
in more detail in Chapter 7.

Improving the quality of line management

If it is the case that many, if not most, voluntary resignations are explained by dissatisfac-
tion on the part of employees with their supervisors, it follows that the most effective
means of reducing labour turnover in organisations is to improve the performance of line
managers. Investing in improving the quality of line management can also be shown to
improve the chances that staff will be more engaged with their work, ‘leader–member
exchange’ being a significant factor in determining how engaged any individual employee
is likely to be (Peccei et al. 2013).
Too often, it appears, people are promoted into supervisory positions without adequate
experience or training. Organisations seem to assume that their managers are capable super-
visors, without recognising that the role is difficult and does not usually come naturally to
people. Hence it is common to find managers who are ‘quick to criticise but slow to praise’,
who are too tied up in their own work to show an interest in their subordinates and who
prefer to impose their own solutions without first taking account of their staff’s views. The
solution is to take action on various fronts to improve the effectiveness of supervisors to:

• select people for line management roles following an assessment of their supervisory
capabilities;
• ensure that all newly appointed line managers are trained in the art of effective
supervision;
• regularly appraise line managers on their supervisory skills.
This really amounts to little more than common sense, but such approaches are the excep-
tion to the rule in most UK organisations.
Of particular importance in promoting both employee retention and engagement is
the need for line managers to involve people in decision making, and particularly, to allow
them as much autonomy as possible in terms of how they perform their own role. Line
managers thus need to be encouraged to stand back as much as possible to avoid

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supervising people more closely than is necessary. It is also important for line managers
to ensure, at least as far as is possible given operational constraints, that working life is
as interesting and varied as can be achieved.

SUMMARY PROPOSITIONS

14.1. Despite the lack of a clear and generally accepted definition, the term ‘employee
engagement’ is increasingly used, while the concept is increasingly perceived as
being important to improving organisational performance.
14.2. An engaged employee is someone who willingly works with greater enthusiasm and
effort than is strictly required under the terms of his or her contract.
14.3. Considerable research evidence is now being amassed which links high levels of
employee engagement to superior business performance.
14.4. Although modest levels of labour turnover can be beneficial, it is generally agreed
that too high a rate is damaging for an organisation.
14.5. In planning retention initiatives it is important to analyse the causes of turnover
among different groups of employees.
14.6. HR initiatives which lead to improved employee engagement and retention include
the effective management of expectations, fair pay, sound induction and training
opportunities, flexible working arrangements and the improvement of line manage-
ment in organisations. I-deals are likely to become increasingly important in sup-
porting retention.

GENERAL DISCUSSION TOPICS

1. Labour turnover is generally low during recessions, but it increases substantially in

firms which get into financial difficulty. What factors account for this phenomenon?
2. Why has interest in employee engagement as an idea increased so much in recent
years?

THEORY INTO PRACTICE

McDonald’s UK
During the 1990s negative impressions about employment at the McDonald’s restaurant chain
were fuelled in the UK, as elsewhere, by the growth in usage of the term ‘McJob’ as a generic
label for low-status occupations. The term first appeared in 1991 in the bestselling novel
➤

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➤ Generation X written by the Canadian writer Douglas Coupland, where it is defined as ‘a low-
pay, low-dignity, low-benefit, no-future job in the service sector’. In 2003, much to the irritation
of the company, the term ‘McJob’ appeared in the Oxford English Dictionary for the first time,
which is a term used to describe low-skilled, low-paid and often insecure work, particularly
work in the retail and hospitality sectors.
The McDonald’s UK operation tended to suffer from negative connotations about its
employment practices more than was the case in most of the other countries where the com-
pany operates. This is partly because food service work in general tends to be accorded less
prestige in the UK than is the case elsewhere in the world and partly because of the extraordi-
nary growth that McDonald’s enjoyed in the country during the 1980s and 1990s when the
company opened between 50 and 100 new restaurants each year. This mass expansion was
accompanied by limited central direction as far as employment practices were concerned.
Local managers and franchisees were given responsibility for staffing up their restaurants, lead-
ing to the adoption of inconsistent approaches. They often struggled to recruit and retain
effective employees, and were not always particularly choosy when deciding who to hire. This
led to the development of the widely held view that anybody could get a job ‘flipping burgers’
at their local McDonald’s just by turning up and asking for a job.
McDonald’s UK responded by carrying out a staff attitude survey which found that the
popular characterisation of its jobs was by no means accurate. In the early 2000s, the majority
of the company’s employees reported being satisfied with their jobs, happy to ‘recommend
working at McDonald’s to a friend’, being committed to their work and happy with the training
and skills development opportunities they were given. Staff were particularly positive about
the flexibility that their jobs gave them to juggle work and home responsibilities, the career
paths that were provided for them to follow and the enjoyment they got from working as a
member of a team. The definition accorded to the term ‘McJob’ was not therefore a fair or
correct reflection of the lived reality for a good majority of people working in the company’s
1,200 UK restaurants. However, staff were generally dissatisfied with their pay and many dis-
agreed with the statement ‘I am proud to work at McDonald’s’. Labour turnover was also run-
ning at very high levels in the early 2000s, with annual rates of over 80% and ninety-day
turnover rate (i.e. the proportion of new starters leaving before they have completed three
months’ service) at around 25%. It appeared that poor hiring decisions were being made too
often and that the company was not effectively managing the expectations of new starters
about exactly what their jobs would involve on a day-to-day basis.
In the intervening years, the company has addressed these issues in a variety of ways,
investing substantial sums in initiatives that were designed to improve retention and engage-
ment, while also radically altering the company’s reputation as an employer. The investment
in retention by 2019 can be seen at the following link https://people.mcdonalds.co.uk/why-
mcdonalds/great-place-work/ and summarised in a series of initiatives:

• flexibility: genuine attempts have been made to reflect employee needs in shift patterns,
even introducing a scheme where a family member can cover an employee’s shift. The right
to ask for guaranteed, rather than zero, hours contracts has been introduced in certain
circumstances
• team work that offers support and engenders loyalty
• highly flexible training programmes and the opportunity for staff to gain a range of qualifica-
tions up to degree level; management development is a major priority ➤

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➤
• a discount scheme was set up which could save employees many hundreds of pounds on
a range of retailed products, on holidays and driving lessons
• a diverse and supportive working environment, investment being put into the organisation
of social events for staff, often revolving around raising money for charities.

Managers at McDonald’s in the UK are generally very happy with the impact that their initia-
tives have had. Staff surveys suggest that engagement levels have increased, as have the num-
bers who are proud to work McDonald’s. This has had a positive effect on turnover, with the
annual rate halving and the 90-day rate plummeting to single figures.

Questions
1 Why do you think the introduction of these HR initiatives has been so effective?
2 What other sorts of initiative might the company consider introducing in the future to
further increase levels of employee engagement and retention?
3 What wider business advantages might accrue to the company as a result of its success in
improving its reputation as an employer?

FURTHER READING
Bailey, C., Madden, A., Alfes, K., et al. (2017) ‘The meaning, antecedents and outcomes of employee
engagement: a narrative synthesis’, International Journal of Management Reviews, Vol. 19, pp. 31–53.
Bailey et al. (2017) present a review of 214 studies of engagement to think about the definition of
engagement, what drives it and what its outcomes are. They identify five drivers of engagement, which
are central to design of HR practice to improve performance. They also present compelling evidence
that engagement improves performance across several dimensions, particularly task performance.

Purcell, J. (2014) ‘Disengaging from engagement’, Human Resource Management Journal, Vol. 24,
pp. 241–54.
Purcell discusses both work and behavioural engagement, with a focus on the latter, which he argues
reflects current understanding of ‘employee’ engagement. He provides a detailed discussion of
debates in employee engagement, including issues of its definition, measurement and connection to
financial performance. He also presents an NHS case study to demonstrate how engagement can
be effective in particular contexts.

Truss, C., Delbridge, R., Alfes, K., Shantz, A. and Soanne, E. (2014) Employee Engagement in
Theory and Practice. Abingdon: Routledge.
Truss et al. provide detailed discussion of both practical and critical perspectives on employee engage-
ment. The book contains numerous detailed case studies that demonstrate the application of recent
research in contemporary business environments, written by both academics and practitioners.

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