Welcome to the third instalment in our series on employee retention here on Fridays in the blog. This week, we’re going to look at “the employee equity approach”, which is one implementation strategy you can use to help curb turnover in your workplace today.
The employee equity approach comes from Robert L. Cardy and Mark L. Lengnick-Hall’s paper, “Will They Stay or Will They Go? Exploring a Customer-Oriented Approach to Employee Retention.” In essence, the employee equity approach is a simple theory that holds that organizations should treat and think of employees like customers and recognize that long-term employee relationships are valuable commodities, just like strong customer relationships. Cardy and Lengwick-Hall argue that the bulk of research on turnover to date has asked the question: “will they go?” which focuses on keeping low turnover, as opposed to asking: “will they stay?” which focuses more on creating high retention. Central to the employee equity model is that the employer-to-employee relationship is assessed the same as the business-to-customer relationship.
The Employee Equity Model
In an organization, employees will have a level of “perceived equity,” which is how the employee perceives what they get from the organization in comparison to what they could get at other organizations. Perceived equity is divided into three groups: value equity, brand equity, and retention equity. We will look at these in more detail shortly to understand employee equity better.
However, we can also liken perceived equity to the idea of opportunity cost; in this case it is the opportunity cost of working at one place over another. Employees weigh that decision throughout their time at a given organization, and once the opportunity cost is no longer in their favor, they’re at a high risk of leaving. Therefore, organizations will benefit from a closer analysis of perceived equity to create higher retention rates.
Organizations usually segment customers based upon their value and the amount of business they bring to the organization. For instance, long-term customers are highly valued and treated preferentially because of their loyalty and repeat business, whereas short-term customers are less valued and account for a smaller proportion of business to the organization. With the employee equity approach, the same notion is applied to employees: long-term employees that have maintained high job performance and increased productivity for the organization should be valued and treated preferentially, so that they will continue to maintain their strong commitment to the organization.
Value Equity
As customers compare the price and value of a product against other products, employees compare the value of their position to other employment opportunities. It is up to employers to provide this value to employees. That is why it is important for organizations to determine precisely what their employees want — for example, this could be flexible workplace practices or career advancement opportunities, etc. — and to deliver these wants when possible and reasonable. Employers need to show commitment to the employee, and just as a business doesn’t want their customers to feel cheated by their products, employers need to ensure employees don’t feel cheated by their work.
Brand Equity
This is the emotional connection and attachment employees feel toward to the organization. Employee identity is aligned to the organization’s culture and brand, and if they feel a connection to this they are more likely to stay. By understanding what is important to employees, organizations can communicate relevant aspects of the organization’s mission and take relevant action. For example, if employees are concerned about the environment, an organization could engage in waste-reducing practices. Celebrate relevant achievements with employees, so they feel a satisfaction that they are working to achieve goals and the company is succeeding.
Positive organizational characteristics such as ethical standards, corporate social responsibility, and community involvement are great ways to get employees proud of their position and workplace. Use marketing strategies to increase your employer brand and generate desire among your employees. Each industry is different, so think of workplaces that do employer branding well and what makes that organization attractive to employees.
Retention Equity
The final factor of the employee equity model, retention equity, refers to the degree that the organization has mechanisms in place to retain quality employees. This incorporates brand equity and value equity to strengthen the attachment of employees to an organization. Retention equity is about developing and maintaining the relationship between human resources and employees. The techniques in place keep employees satisfied with their positions and the organization. Are there career planning resources? Is there room to advance? Are there incentives for employees to remain with the organization? Assessing employees to see how they view retention factors will help to identify weak parts of the system, and in response, organizations can develop tailored strategies that remedy the weak parts.
The Essential Equation:
Positive value equity + Positive brand equity + Positive retention equity
= Greater employee satisfaction and high retention!
Cardy and Lengwick-Hall’s idea of a customer orientated approach to employee retention is a groundbreaking revelation on retention. Too many organizations are more concerned with using employees as reusable labor sources; however, employees are what make the organization work, and therefore, they should be treated and valued no different than customers. This can go a long way to improving your employee retention and saving you big on associated time, loss of business, and costs.
Join us next week as we look into another tip to help retain your employees, employer branding.
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