Human Capital Management

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3. Problem Statement

The Employee turnover rate of IT department in Amaze is 1.0 median tenure (2014). Therefore the operating cost increases with respect to the employee turnover which impacts the profit of the business as shown in the figure given below.

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Figure 1: Analysis of Turnover Rate (Source: Market Watch, 2015)

4. Analysis

Most multinational Corporations often take a deep interest in their employee turnover rates as replacing workers can be an expensive job in the business. When a company must replace a worker, it incurs direct and indirect expenses through training and recruitment. All of the tasks that must be performed during the process cost money, take time or do both. In addition, there can be a loss of productivity during the time after the former employee leaves and the new employee has been fully trained. Hence in this part of the study we analyze the reasons for Employee turnover in Amaze in order to find a solution for the employee turnover problem

The top 5 reasons given by employees who quit their jobs are (Kenexa, 2011): (with percentage agreement)

- Lack of Opportunities for Professional Development (30%)

- Inadequate Compensation (28%)

- Boredom/Lack of Challenge (27%)

- Poor Work/Life Balance (20%)

- Job Stress and Unfair Treatment (20%)

From the above analysis it assumed that the main reason for the turnover can be attributed to the lack of opportunities in the organization and compensation which are not adequate these two factor contribute to about 58% of the reason for the employee turnover. These two factors can be directly related to the organizations performance management systems, as the company appraisal system is directly responsible for the increase in compensation of the employee every year and it relates to the promotion of the employee. “(Some) 90 percent of performance appraisal processes are inadequate.” – Salary.com

4.1 Performance Management System in Amaze

Now let us see how the performance management system is currently in practice in Amaze. Amaze uses a stack ranking system to rank its employees based on the performance evaluation by the superior this is a180o appraisal system. After ranking the employee using the stack ranking method Amaze has an approach called OLR which they use to decide for decide the promotions and also they this approach for MSS (Mandatory Separation Scheme).

Stack Ranking System:

Stack Ranking is a method of forced ranking system. The Employees in Amaze are ranked based on the performance by their superior and ranked they are usually fitted into three groups of employees, 20% are categorized as top performers ,70% are categorized as average or good performers and the remaining 10 % are categorized as low performers. The top performers are eligible for promotions, the good performers will get the average increase in the compensations and the low performers are either let go or asked to perform better in the next performance evaluation process.

The use of stack ranking, which has been almost ubiquitous at large companies for years, has recently plummeted, since many companies now realize it can actually hurt performance (Business Insider, 2013). According to Cliff Stevenson, senior human capital researcher at the Institute for Corporate Productivity (i4cp). When i4cp asked companies in 2009 how many of them used stack ranking systems, 49% said yes. By 2011, only 14% used them. Thus we can assume that the stack ranking system used in Amaze is one of the main reason for employee dissatisfaction which in turn results in employee turnover.

OLR:

OLR (Organization and Leadership Review) is a term used in Amaze for the process of giving promotions to their employees. This process is also used for letting go the employee. OLR is a biannual meeting held by the senior managers in each department to debate about the strength and weakness of their subordinates. This approach was initially devised to make the promotions across the organization without any bias. Yet many employees feel that the system is actually creating the situation for which the process was designed to avoid. Therefore the process is creating a lot discontent among the employees of Amaze thereby causing to change the company which results in high employee turnover.

From the above analysis we can find that the performance management system especially the appraisal process is a main cause of concern for the employees of Amaze as this results in the large amount of employee turnover.

5. Alternative Actions

As discussed in the analysis part the performance management process is found to be the main reason for the employee turnover in Amaze. So in order to attain better employee retention the following alternate models of performance Management systems are discussed.

5.1 Assessment Centre

Montather R. (2014), describes assessment centers as a process where managers use to evaluate the performance of an employee based on job related activities. It examines the candidate’s ability to perform and the interpersonal skill possessed in the given situations measured using several methods such as role playing, interviews, case studies, group exercises and presentations. It is an alternative approach to traditional promotional appraisal method (Hale, 2005).

Advantages of this method are materials used for assessment are connected directly to the job for which candidates are being evaluated. Thus, performing well in the assessment will provide them bright chance to be selected for the job. The assessment center is suitable for all types of jobs as the assessments are designed by the employers themselves from various backgrounds. A well-conducted assessment center allows candidates to assess on their skills and abilities that they have from the feedback they received regarding their strengths and weaknesses (Hale, 2005).

Based on Hale (2005), costs of setting up assessment centers would be higher than traditional approach because it is labor-intensive. It is also time consuming as assessment requires much time to be spent over evaluating the candidates. Some candidates feel dissatisfied as their past achievements like qualification,

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