High employee turnover rate has been considered as one of the highest drivers for direct and opportunity cost to rise for companies. In the Coca Cola Retailing Research, Blake (2000) estimates that about US$5. 8 billion annually are lost in the supermarket sector alone due to employee turnover. More importantly, this figure significantly reduces the profitability of firms to as much as 40%. Hence, the mantra that human resources or people are still the most important factor of production considering the improvements in technology is still a prevalent notion among scholars and businessmen alike (Buckingham and Vosburgh, 2001).
With this in mind, human resources management is driven to attract and retain employees that have proved valuable in the company over periods of time. Essentially, employee retention and the reduction of employee turnover rate had been studied in the literature and in company case studies. However, despite the numerous studies provided to us, there are still debates that need to be resolved on the most potent factors that would make employees stay.
This paper presents a case study of Coca Cola Company particularly its program on employee retention, the issues and challenges that it faces in terms of employee turnover, its impact on the company both financially and operationally, and the improvements that can be made in order to enhance the employee retention program and reduce turnover rates. Employee Retention: Factors and Drivers Employee retention on a macro-scale had generally been impacted by the external economy in general and the trends in the business sector (Frank and Taylor, 2004).
On a micro-scale however, employee retention are affected by programs/policies of the company, wages and benefits in relation to its competitors, skills, training and promotion, employee motivation and satisfaction as well as other factors that are internal to the company. For instance, while the US economy had been considered at a low level in recent years, employee turnover had been maximal in the periods 2002-2003 because of the downsizing that had been prevalent in US companies.
Add to this factor, employee discontent according to the survey of the Conference Board (2003) had been highest since 1995 and that employees are only waiting for a market recovery to look for other jobs (Kaihla, 2003). Hence, aside from these factors that needs to be considered by companies, employee turnover affects the cost of the US economy by at least US$5 trillion annually (Journal of Business Strategy, 2003) and reduces stock prices and earnings to about 38% (Sibson, 2000).
Consequently, aside from the financial impact of employee turnover, employee retention has been directly correlated by Dresang (2002) to increase productivity as well as customer loyalty. Employee retention had been attributed to several factors; let us first analyze the factors identified in the literature to contribute employee retention and reduction of turnover. In Coca Cola, the top retention drivers between hourly employees and management employees were identified as follows.
For the hourly employees, providing directions, availability of equipment and supplies and immediate supervision were identified as drivers for retention while for managers, it would be organizational direction, training and advancement (Frank, 2000). These factors validate earlier studies that front-line leaders play a critical role in the retention of employees (SHRM Retention Survey, 2000). This is because poor management would drive employees away because of their perceived lack of importance accorded to them by the company.
Consequently, this result implies that managers being critical factors in employee retention would need to be improved in terms of training and professional development programs by the company (Gantz Wiley Research, 2004). Hence, Frank (2000) asserted that organizational and management practices as drivers for retention have specific and identifiable goals. First, for employees working by the hour, tactical practices in accomplishing their jobs effectively are considered to be important.
This is because these employees derive their satisfaction and motivation from the feedback that they receive from their immediate supervisors. Hence, their execution of their specific tasks is important in order to make them feel important in the company. However, management retention had been attributed to the strategic direction of the company as well as their professional training and advancement. This implies that managers are more likely to stay in a company with a training program that would encourage professional growth as well as a program with concrete promotion guidelines.
Coca Cola Employee Retention Program Coca Cola, the leading manufacturer of carbonated drinks had been considered as one of the top employers not only in terms of providing hundreds of jobs worldwide but also in strategically managing its employees turn over rate. The advocacy of Coca Cola rests on the productivity and skills of its employees in providing quality products and assuring quality control of its merchandise.
In return, Coca Cola incorporates in its core policies the Workplace Rights Policies which includes a holistic view of its workers ensuring that its policies serves up to the promotion of a holistic employee growth (The Coca Cola Company, 2008). Unlike PepsiCo, Coca Cola allows unions and provides for a collective bargaining in order to protect the rights of its employees. This has led to the unorganization of the employees of PepsiCo compared to that of Coca Cola- while there is a high level of collective bargaining in Coca Cola, PepsiCo has not provided its employees the venue to air its grievances.
However, compared to PepsiCo’s Taste to Success employment brand statement and its numerous programs for employee retention such as “Culture of Shared Principles”, “Ability to Make an Impact”, “Quality People” and “Passion for Growth”, Coca Cola’s campaign for employee retention is still in the process of evolving. For one, the 2000 research employed by Coca Cola to determine the cost and the opportunities for employee retention, the company had redeveloped its corporate strategy to specifically address its management and rank and file retention issues by changing its strategy.
For instance, Coca Cola has the “talent magnets” program in celebration of managers who are able to attract outstanding talents in their team. This is done by Coca Cola in order to provide advancement not only for managers but for rank and file employees as well. Consequently, Coca Cola in its mission statement includes four components indicating the responsibility of managers to develop the rank and file employees.
For example, in Coca Cola’s Competency/Success Model, it targets the self and others, rank and file employees would provide the necessary feedback on their manager regarding their development success and compensation based on their skills. Based on these criteria, the managers are then judged by upper management (Olian, et al, 1998). Hence, the focus of Coca Cola is on teams and not on individuals alone. This is similar to the practices in PepsiCo but to a lesser extent. For instance, PepsiCo still values individual achievement and skills in its promotion and advancement.
In terms of compensation and pay, both PepsiCo and Coca Cola had been criticized by foreign countries by providing below level compensation for employees. In the United States, typically, the wage of same level employees is the same for both. Consequently, the benefits for regular and part time employees are comparable with one another. Moreover, both companies provide training and development programs, diversity and multi-cultural work environment as well as programs for advancement. However, the primary difference is that Coca Cola had been considered to fundamentally more sound strategically than that of PepsiCo.
For instance, while PepsiCo offers different variety of products in the beverage and snack sector and have declared bankruptcy in the past, Coca Cola’s sound management fundamentals have prevented it from investing in risky ventures. While both PepsiCo and Coca Cola had been fraught with workers issues particularly in low salaries and wages as well as the issues of better rights for workers, Coca Cola had fared well better in retaining its employees because it is more stable than PepsiCo (which had closed 4 plants in New Jersey) and because of the presence and tolerance of unions.
To a large extent, unions in Coca Cola had perennially protected the rights of its workers and hence, led to lower employee turnover in Coca Cola. Valid and Effective Employee Retention Program Employee retention programs while it should consider external aspects of its operations such as the economic performance of the country, the wages and salary in that specific country as well as competition, internal factors within the human resource sector would also needed to be re-examined particularly in determining the means to retain employees.
It should be noted that skillful employees and managers are considered to be precious and scarce commodities in today’s employment world. This is the reason why companies such as Coca Cola reserves rewards for its top performers in selling and marketing its products. For instance, those who have shown superior performance than others are given career advancements readily, trainings and professional development growths are available and they have better bargaining power.
Hence, these workers can demand for better work conditions particularly in balancing their work-family life. This however, does not only apply for managers but also for rank and file employees. While priorities would differ for the two classes, the need to be valued by the organization is important. This is manifested in terms of pay and wages, benefits, promotions, advancement, work condition as well as the need to know their role in the organizational mission.
Hence, employee retention programs should focus on the internal and external factors of employees: pay, benefits and promotion as well as the working relations of the employees on their immediate superiors and co-workers as well as in providing a better consideration for themselves as a person and not just a worker. For instance, feedback from the manager are important considerations from rank and file employees (Frank, 2000) implying that it is no longer the salary and compensation that matters for retention but also on the relationship of subordinates to superiors.
Hence, programs on employee retention should focus on managers’ ability to improve their subordinates and drive their team to achieve. This would imply that advancements would also focus on the ability of the managers to train and improve the position and compensation of their employees. Finally, the ability of companies such as Coca Cola to provide a better balance in the life of the employees by providing opportunities for better working conditions such as work-life balance can improve the loyalty of the employees as well as enhance their productivity (Younger, Smallwood and Ulrich, 2007).
Method in Determining Effective Employee Retention Program The Coca Cola Study had proposed thirteen (13) scales for management and organizational practices that can serve as a benchmark in evaluating the employee retention program: 1) organizational direction; 2) immediate supervision; 3) providing directions; 4) providing feedback; 5) equipment and supplies; 6) working conditions; 7) work organization; 8) pay administration; 9) pay and benefits; 10) advancement; 11) impact; 12) training; and 13) capacity (Frank, 2000). These scales serve as a benchmark in evaluating current employee retention programs in Coca Cola.
Accordingly, these factors would be critically assessed in the next section using the Coca Cola study in order to determine the areas where Coca Cola had improved since the study was completed in 2000 and the areas that would need improvement. It should be noted that this scale system is specific to supermarket products and may not reflect with other companies. Discussion and Recommendations for Effective Employee Retention Program in Coca Cola Traditional conception on employee retention had been that: increase the pay and employees will stay.
However, in current business environment where skilled workers are offered with numerous job offers, the scope of employee retention had also broadened. First, employees now consider the organizational direction of the company. As shown in the survey of Coca Cola, organizational direction is important for managers in order to determine their goals in line with that of the company. A company with good fundamental organizational goals is more likely to retain managers who align themselves within the organizational direction. However, this is not only the case for managers as implied in the second factor which is immediate supervision.
Managers and supervisors are tasked with the need to improve on the quality of its supervisory capacity in order to retain rank and file employees. In Coca Cola, managers who are in charge of a team are judged not on their individual performance but on how the team had performed. Hence, effective supervision and management are critical in determining the success of employees both in the managerial as well as the rank and file level. The principle is no longer that managers will rise alone but rather, rank and file employees will rise alongside their manager.
This is also the core policy of Coca Cola’s self and others program wherein one is not only responsible for his or her self but for the team as well. Third, providing directions is no longer the monopoly of supervisors and managers. Typically, the vertical or line hierarchy within business firms had been replaced by horizontal and a more interactive workplace. Rank and file employees now have the freedom for better independence as well as in providing input to the management. In Coca Cola, this is no longer prohibited but is encouraged in order to gain fresh and better insights to improve on performance.
The principle behind this is that those who do the work are better equipped with the knowledge on how to improve it. Along this line is the recognition that rank and file employees can provide direction to the organization as well which is the fourth factor in the item- providing feedback. The feedback system in Coca Cola does not rest solely on the discretion of the managers but also on the records of the employee. However, the feedback given by the immediate supervisors are important in determining the capacity and skills as well as the importance accorded to an employee.
At Coca Cola, since teams are driven to produce, supervisors and managers can provide immediate feedback. Positive feedback gives the sense of accomplishment for employees as well as the feeling that they are valued members of the organization. This in essence, increases employee motivation and satisfaction. The fifth and sixth factors include availability of equipments and supplies as well as working conditions of the employees. It should be noted that in order to accomplish a task, materials necessary would have to be available.
For rank and file employees, the management that ensures that these materials are available is tantamount to the perception that the work they accomplish is important in the organization. This leads us to the sixth factor which is working condition. The work environment has been considered as one of the more important determinant of employee motivation and hence, employee retention and turnover. Those employees whose work is not recognized are more likely to be unmotivated. Coca Cola for its part has better working conditions than PepsiCo.
However, working conditions outside of the United States would need to be improved because of their poor managerial and plant support. In the United States, these issues are less pressing. Thus, it is the responsibility of the top management to ensure that despite the need of workers in third world countries of work, its improvement would cut the rate of employee turnover and increase the possibility of retention. Seventh, one good way to improve employee retention is for the Coca Cola management to use a slogan that will serve as the company’s goal similar to that of PepsiCo.
Many corporations use the slogan, “People are our most important asset. ” Similarly, many companies contend that their values support teamwork, integrity, respect, and dignity. While this may sound good, it takes hard, consistent work in policies, statements and actions for employees to believe it. Eight, the classic pay philosophy is to provide wages that will attract and retain qualified employees. Being aware of the wage rates in an organization’s external market place is critical to Coca Cola’s success for retaining employees.
The case of the Coca Cola’s wage scale is low; the company has already lost employees to other sectors that pay a higher rate. Hence, there is a need for improvements in the compensation by improving on performance pays. For instance, lump sum merit awards on the other hand provide financial recognition for an individual’s job performance in lieu of merit-based salary increases. This is an effective way to provide financial recognition, especially to those individuals whose base salary is already relatively high.