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High Turnover Rate Essay

1. Key issue

High labour turnover rate is prevalent in the insurance industry and especially in prudential. Thus, the firm may have to incur more costs and time to train new employees.

http://business.asiaone.com/Business/My%2BMoney/Building%2BYour%2BNest%2BEgg/Insurance/Story/A1Story20090821-162517.html

2. Causes

The main cause of the high turnover is the organisation culture. Observable Artifact

Every Monday, all employees are required to wear white as a symbol of unity and recite the firm’s pledge, which is to place their family’s interest before their own.

While expecting the employee to perform his best, the firm should also provide adequate welfare for its employees. Otherwise, employees may feel discontented and choose to leave, thus, increasing the turnover rate.

Espoused Values

The firm espouses the value of family. Family in this case, refers to one’s own family as well as the firm. Everyone has an obligation to work hard for their family.

It is taboo for the employee to raise their point of view during meetings, as they have to respect the “seniors” in the “family”. Top performing employees are rewarded handsomely while underperforming employees are pressured to hit their quota or be forced to leave the firm.

Based on the Blake-Mouton Managerial Grid, Prudential has an autocratic leadership, characterised by high concern for production and low concern for people.

http://www.mindtools.com/pages/article/newLDR_73.htm

http://www.kean.edu/~lelovitz/docs/EDD6005/humansideofenterprise.pdf Enacted Values

The espoused values are not exhibited boldly. Some meetings are on the weekends, preventing employees from spending family time. This discrepancy can cause higher turnover rate.

Basic Assumption

The firm adopted the Taylorism theory, which attempted to increase productivity by motivating its employees through monetary incentives.

Sales ranking charts are commonly seen in the office. Top employees are rewarded and highly regarded in the company, while the rest are neglected. By assuming that employees are only motivated by money, the employees’ morale is ignored.

Herzberg’s motivation-hygiene theory states that an employee’s satisfaction is dependent on “hygiene” issues and “motivators”. In Prudential, the hygiene factors like work/life balance and good inter-personal relationship with the superiors are lacking. Thus, employees are more inclined to leave the firm, contributing to its high turnover rate.

http://research-methodology.net/frederick-hertzbergs-two-factor-theory/ http://www.businessballs.com/herzberg.htm
3. Analysis of the theories
1.
2.
3.

3.1 Taylorism’s theory

This theory assumes that each employee will maximise his productivity in order to earn the bonuses. When interviewed by Kurt Nelson in his study of pharmaceutical sales teams, all of them stated that the incentives for the top achievers were very motivational. This theory corresponds with a research done by Michele Marchetti in 1998, which indicates that commission encourage salespeople to perform. However, Kurt Nelson’s study involved only four employees, of which all of them worked together as a team. The small number of the employees is insufficient in proving that monetary incentives can motivate them to perform. Furthermore, this study is based on a sales team, where the motivation to perform can be different from that of an individual salesperson.

3.2 HerzBerg’s Motivation-Hygiene theory

Herzberg’s theory can be used to detect issues that need to be mitigated. In a study conducted by Jones and Lloyd, employees who contribute ideas in a meeting usually exhibit the following motivations: a) A desire for recognition from a line manager

b) The desire for recognition from colleagues

For instance, the use of this theory can help Prudential in strengthening its family culture and allow the voices of the employees to be heard.

However, there are also several limitations too. Herzberg’s theory is still a generalization which cannot be applied to all individuals. It is also based on interviews with accountants and engineers. An accountant may be motivated by increased pay while the Prudential employee may be more motivated by flexible work timings. Furthermore, giving an employee responsibility they are not ready for can be overwhelming and become a demotivator. 4. Author’s perspectives

To rectify this issue, the management at Prudential should adopt a healthy balance of the Taylorism theory and Herzberg’s theory. Providing incentives for the employees to perform in the Taylorism’s theory is merely a hygiene factor in Herzberg’s theory. The management need to incorporate other factors to encourage lower turnover. Studies have shown that to predict voluntary turnover, an increase in individual values enactment corresponds with a decrease in turnover. [citation] Another study which includes 2,622 employees from a hospital located in the US, found that the organization’s incorporation of a values enactment measurement system into the formal performance evaluation process benefited the organization by retaining employees more likely to conform to the organization’s espoused values. [citation] Hence, Prudential should first boldly exhibit its espoused values. Incentives should also include things like family trips.

Performance measures should not only be linked to sales quota only, but the number of trainings conducted by the senior employees to the junior employees, the amount of time spent with their own family and more. While recruiting employees, Prudential need to conduct a thorough interview, to screen the employees with the same values as the firm, as they would be more likely to stay in the firm. While such recommendations can motivate employees, it is difficult to measure the amount of time one spends with his family as the data could be easily fabricated. The cost of recruiting new employees must be equivalent to the increase of sales made from this new strategy, for this change to be justifiable. Resistance to change will also be expected from the management as the previous system has been very successful in ensuring high profits for the firm, despite the high employee turnover rate.

In a study conducted by Caliper Human Strategies Inc., a human resource consulting firm in Princeton, NJ, and Automotive News magazine, reveals that top salespeople in 3000 car dealerships have several personality traits (Sawyers, 1997). Some of the strong personality traits are: Ego drive( the need to motivate people), Ego strength (ability to handle rejections), Self structure( a strong ability to organise one’s own work), Assertiveness(persuading others to adopt a different point of view). Prudential can use these traits listed in order to hire the right person for the job. Perhaps a job trial can be conducted for the candidate rather than the standard interview.

5. Conclusion

6. Appendix

* A newcomer should not be employed with the same compensation system as the veteran. (us automobile ) * Changing the compensation system to a more comfortable and predictable system such as the salary based payment will greatly increase the retention rate of the salespeople. This has been proven in different dealerships throughout the country.Abetter alternative is to allow the salespeople to switch between the two compensation methods. During a lean period, the dealership would allow the salespeople to switch to salary based, and during the boom period to switch to risk based compensation method.

* Foster a more-family like culture;

http://www.businessballs.com/herzberg.htm
http://www.managementstudyguide.com/herzbergs-theory-motivation.htm


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