Mgmt 383Mgmt 383

Chapter 3Chapter 3

Organizational and Individual Organizational and Individual RelationsRelations

Fall 2008Fall 2008

Psychological ContractsPsychological Contracts

• The unwritten expectations that employees The unwritten expectations that employees and employers have about the nature of and employers have about the nature of their work relationshipstheir work relationships• Quid pro quoQuid pro quo• Loosely defines what actions are “fair” in the Loosely defines what actions are “fair” in the

workplace.workplace.• Both tangible items and intangible items can Both tangible items and intangible items can

affect the psychological contract.affect the psychological contract.

Psychological ContractsPsychological Contracts

• Generally, Generally, employersemployers expect expect employeesemployees to to provide:provide:• Make continuous improvementMake continuous improvement• Increase productivityIncrease productivity• Tenure (stay a reasonable time with the Tenure (stay a reasonable time with the

organization)organization)• Provide extra effort when needed. Provide extra effort when needed.

• If the psychological contract is If the psychological contract is notnot altered, altered, the employer may expect greater employee the employer may expect greater employee commitment (loyalty).commitment (loyalty).

Psychological ContractsPsychological Contracts

• Generally, Generally, employeesemployees expect expect employersemployers to to provide:provide:• Competitive wagesCompetitive wages• Competitive benefitsCompetitive benefits• Career development opportunitiesCareer development opportunities• Flexibility to balance family and workFlexibility to balance family and work

Factors Adversely Affecting Factors Adversely Affecting Individual & Organizational Individual & Organizational

RelationsRelations• Mergers and acquisitionsMergers and acquisitions• Self-employment and contingent workSelf-employment and contingent work• Less management job tenureLess management job tenure• Job insecurity (economic anxiety)Job insecurity (economic anxiety)

• DownsizingDownsizing

• Global competitionGlobal competition

• Job obsolescenceJob obsolescence

Factors Adversely Affecting Factors Adversely Affecting Individual & Organizational Individual & Organizational

RelationsRelations

• Executive pay v. the plight of the Executive pay v. the plight of the workers.workers.

• Some executives appear to be rewarded Some executives appear to be rewarded for downsizing.for downsizing.

• As wages stagnate or decline, executive As wages stagnate or decline, executive pay appears to be increasing.pay appears to be increasing.

• Lack of reciprocityLack of reciprocity..

Factors Affecting Satisfaction Factors Affecting Satisfaction and Commitmentand Commitment

Individual Characteristics Ability

Motivation Support

Job Satisfaction

The Job • Design • Job elements

Organizational Commitment

Absenteeism/Turnover

Individual MotivationIndividual Motivation

• MotivationMotivation - the inner strivings that initiate - the inner strivings that initiate a person’s action.a person’s action.

• MotivationMotivation - stimulating goal-directed - stimulating goal-directed behavior.behavior.

• We can either motivate our employees to We can either motivate our employees to stay or to leave.stay or to leave.

Organizational CommitmentOrganizational Commitment

• Organizational CommitmentOrganizational Commitment – the – the degree to which an individual believes degree to which an individual believes in and accepts organizational goals, in and accepts organizational goals, and the degree of desire to remain a and the degree of desire to remain a member of the organization.member of the organization.

Types ofTypes of Organizational Organizational CommitmentCommitment

1.1. Normative CommitmentNormative Commitment - the - the responsibility that the individual feels responsibility that the individual feels toward the organization and its goals.toward the organization and its goals.

2.2. Affective CommitmentAffective Commitment - how strongly an - how strongly an individual identifies with the organization.individual identifies with the organization.

3.3. Continuance CommitmentContinuance Commitment - how strongly - how strongly the individual judges the consequences of the individual judges the consequences of leaving the organization.leaving the organization.

Low Organizational Low Organizational Commitment ConsequencesCommitment Consequences

LowLow organizational commitment has two organizational commitment has two consequencesconsequences • Higher absenteeismHigher absenteeism (costs about $505 (costs about $505

per employee per annum) per employee per annum) • Higher turnoverHigher turnover and related costs and related costs

• Recruiting costsRecruiting costs• Orientation costsOrientation costs• Lost productivityLost productivity• Separation costsSeparation costs

EffortMotivation

Attendance/turnoverJob designWork ethic

Individual Performance FactorsIndividual Performance Factors

AbilityKSA

InterestsPersonality traits

Individual Performance

SupportTraining & Development

EquipmentPerformance Standards

RetentionRetention

• Again, one of the factors contributing to Again, one of the factors contributing to organizational effectiveness.organizational effectiveness.• HR must to focus on keeping the people with HR must to focus on keeping the people with

the critical KSA the organization needs to the critical KSA the organization needs to accomplish its objectives.accomplish its objectives.

• Sometimes referred to as tenure.Sometimes referred to as tenure.

RetentionRetention

• Myths about tenure:Myths about tenure:• Money is the main reason people leave. [WR Money is the main reason people leave. [WR

story]story]• Hiring has nothing to do with retention.Hiring has nothing to do with retention.• If you train people, you are training them for If you train people, you are training them for

another employer.another employer.• Don not be concerned about retention during a Don not be concerned about retention during a

merger. [You may loses your most mobile merger. [You may loses your most mobile employees]employees]

• If solid performers want to leave, the If solid performers want to leave, the organization cannot hold them.organization cannot hold them.

Drivers of RetentionDrivers of Retention

• Character of the employerCharacter of the employer• Job design and workJob design and work• Career opportunitiesCareer opportunities• RewardsRewards• Employee relationshipsEmployee relationships

Character of the EmployerCharacter of the Employer

• Cultural and valuesCultural and values• Organization culture – the shared values and Organization culture – the shared values and

beliefs of the organization.beliefs of the organization.• Working for a first rate institution, as opposed Working for a first rate institution, as opposed

to a diploma mill.to a diploma mill.

• ManagementManagement – good leadership and vision – good leadership and vision as opposed to self-serving and incompetent.as opposed to self-serving and incompetent.

• Job SecurityJob Security

Job Design/WorkJob Design/Work

• Job DesignJob Design – organizing TDR into a – organizing TDR into a productive unit of work. Reasons for productive unit of work. Reasons for systematic job design:systematic job design:• Maximize performanceMaximize performance• Enhance job satisfactionEnhance job satisfaction• Reduce adverse affects to physical and mental Reduce adverse affects to physical and mental

health.health.• Person/Job FitPerson/Job Fit – matching the characteristics – matching the characteristics

of applicants with the characteristic of the job.of applicants with the characteristic of the job.• Introvert with a sales job?Introvert with a sales job?

Job Design/WorkJob Design/Work

• Some factors in Design that have a positive Some factors in Design that have a positive impact on retention:impact on retention:• Good equipmentGood equipment• Up-to-date technologyUp-to-date technology• Good working conditionsGood working conditions• Good physical workplace environment (space, Good physical workplace environment (space,

lighting, temperature, and noise)lighting, temperature, and noise)• A safe working environmentA safe working environment

Time Flexibility ConsiderationsTime Flexibility Considerations

• Global Work Scheduling DifferencesGlobal Work Scheduling Differences• Shift WorkShift Work

• Shift differentials for evening and graveyard Shift differentials for evening and graveyard shifts.shifts.

• Compressed Work WeeksCompressed Work Weeks• FlextimeFlextime

• Core timeCore time• Many jobs are not conducive to flextime.Many jobs are not conducive to flextime.

Work Flexibility ConsiderationsWork Flexibility Considerations

• Compressed Work WeeksCompressed Work Weeks• Leave for children’s school functionsLeave for children’s school functions• Job SharingJob Sharing• TelecommutingTelecommuting• On-site child careOn-site child care• On-site elder careOn-site elder care• EAPsEAPs• Wellness programsWellness programs• Fitness faciltiesFitness facilties

Career OpportunitiesCareer Opportunities

• Training/Development and mentoring.Training/Development and mentoring.• Confidence that you can perform your job Confidence that you can perform your job

enhances job satisfaction.enhances job satisfaction.• Lack of self-confidence leads to turnover.Lack of self-confidence leads to turnover.

• Career Planning/Advancement OpportunitiesCareer Planning/Advancement Opportunities• Promotion show that you are valued by your Promotion show that you are valued by your

employer.employer.

RewardsRewards• Compensation and benefits must be Compensation and benefits must be

competitive. External inequity causes competitive. External inequity causes dissatisfaction.dissatisfaction.

• Performance-based compensation rewards Performance-based compensation rewards exceptional performance and indicates it is exceptional performance and indicates it is recognized and valued.recognized and valued.• Why work hard if everyone is paid the same.Why work hard if everyone is paid the same.• If everyone is special, then no one is special.If everyone is special, then no one is special.

• RecognitionRecognition• Tangible rewards ($)Tangible rewards ($)• Intangible rewards (plaques)Intangible rewards (plaques)

Employee RelationshipsEmployee Relationships

• Are policies and practices fair.Are policies and practices fair.• Nondiscriminatory in an EEO sense.Nondiscriminatory in an EEO sense.• Not given to favoritism or nepotism.Not given to favoritism or nepotism.• Are actions consistent?Are actions consistent?

• Do you receive sufficient mangment and Do you receive sufficient mangment and organizational support?organizational support?

• Do you get along with your co-workers?Do you get along with your co-workers?

Types of Employee AbsenteeismTypes of Employee Absenteeism

• VoluntaryVoluntary – avoidable – avoidable• InvoluntaryInvoluntary – unavoidable – unavoidable

• Sick leaveSick leave• Death in the familyDeath in the family

Reasons for AbsenteeismReasons for Absenteeism

• Family IssuesFamily Issues - 22% - 22%• Personal IllnessPersonal Illness - 36% - 36%• StressStress - 11% - 11%• Personal NeedsPersonal Needs - 18% - 18%• Entitlement MentalityEntitlement Mentality - 13% - 13%

Source: CCH 2003 study.Source: CCH 2003 study.

Controlling AbsenteeismControlling Absenteeism

• DisciplineDiscipline• Positive reinforcementPositive reinforcement – rewards for good – rewards for good

attendance.attendance.• CombinationCombination• ““No fault” policiesNo fault” policies - reason for absence - reason for absence

does not matter after “x” absences, does not matter after “x” absences, disciplinary action is automatic.disciplinary action is automatic.

• Paid-time-off (PTO)Paid-time-off (PTO) - once they run out, - once they run out, they are no longer paid for absences.they are no longer paid for absences.

Types of Employee TurnoverTypes of Employee Turnover• Involuntary – Involuntary – employer terminates employer terminates

employment.employment.• Voluntary - Voluntary - employee terminates employee terminates

employment.employment.• FunctionalFunctional – low performers or disruptive employees – low performers or disruptive employees

leave.leave.• Dysfunctional Dysfunctional – key employees or high performers leave.– key employees or high performers leave.

• UncontrollableUncontrollable – employee moves out of area, – employee moves out of area, employee stays home to raise kids, spouse is employee stays home to raise kids, spouse is transferred, returns to school, etc.transferred, returns to school, etc.

• ControllableControllable – employee leaves due to factors – employee leaves due to factors influenced by employer (pay, level of supervision, influenced by employer (pay, level of supervision, etc.)etc.)

RetentionRetention

• Measuring the Measuring the turnover rateturnover rate

Number of employee separations per mo. Total number of employees

x 100

Turnover CostsTurnover Costs

• Separation CostsSeparation Costs• Processing costsProcessing costs• Legal fees if separation is challengedLegal fees if separation is challenged• Continued benefits (COBRA)Continued benefits (COBRA)• Accrued vacation and paid time off.Accrued vacation and paid time off.

• Replacement CostsReplacement Costs• Recruiting and selection costsRecruiting and selection costs• Employment referral feesEmployment referral fees• Lost supervisor’s timeLost supervisor’s time• Employment testing expensesEmployment testing expenses• Overtime for replacementsOvertime for replacements• Fees for temporary employees (if used)Fees for temporary employees (if used)

Turnover CostsTurnover Costs

• Training CostsTraining Costs• Orientation for replacement (this is paid time with no Orientation for replacement (this is paid time with no

production)production)• Lost supervisor’s timeLost supervisor’s time• Training staff wagesTraining staff wages• Training materials costsTraining materials costs

• Hidden CostsHidden Costs• Lost supervisor’s timeLost supervisor’s time• Lost productivityLost productivity• Missed deadlinesMissed deadlines• Decreased customer serviceDecreased customer service• Decreased morale and turnover of other employeesDecreased morale and turnover of other employees

Retention InterventionsRetention Interventions

• Better SelectionBetter Selection• Good Orientation/TrainingGood Orientation/Training• Equitable Compensation & BenefitsEquitable Compensation & Benefits• Good Talent Management (Career Planning Good Talent Management (Career Planning

& Development)& Development)• Good Employee Relations (Fair Policies Good Employee Relations (Fair Policies

and Discipline) and Discipline) • Realistic Job PreviewsRealistic Job Previews

Realistic Job PreviewsRealistic Job Previews

• A A Realistic Job Preview (RJP)Realistic Job Preview (RJP) is any part is any part of the selection process that gives the of the selection process that gives the applicant a clear idea of what it will be like applicant a clear idea of what it will be like to work at the job if they are hired. to work at the job if they are hired. • Special characteristics of the jobSpecial characteristics of the job• HoursHours• Specific requirementsSpecific requirements• ““Typical" day on the job Typical" day on the job

• Allows the candidate an opportunity to quit before he or she is hired.