In 2008, Kimberly-Clark changed the way it evaluates and rewards employees:
...away from backward-looking, once-a-year reviews framed largely as compliance requirements—a paper trail for potential job cuts and salary decisions—to a process that is real-time, continuous and focused on helping people meet ambitious goals, or move out of the company faster.
Turnover increased to 10% annually, and stock price doubled.
Holding workers close through good times and bad is “not sustainable” any more, said Liz Gottung, the company’s human-resources chief. “If you look at when we started implementing the big pieces of the company’s people strategy, when you map that to our stock price and our business results, you can see the clear correlation.”
Incentive pay will encourage low performers to leave, and good performers to stay.
I don't doubt eliminating workers who were opposed to the continuous review process helped to increase the value of the company; however, it would be nice to understand commodity prices and other driving factors' influence on stock price as well. A related WSJ article referenced a worker who received good reviews for years but left after receiving a poor review. While this worker may have been an exception, the implications are still interesting to think about. -Adelyn
ReplyDeleteThe sloughing off of lower performing employees aids in retaining top performers by leveraging their competitive nature. Interesting initiative from Kimberly-Clark.
ReplyDeleteI agree with the fact that holding workers close through good times and bad is “not sustainable”. Additionally, the fact that monetary incentives encourage low performers to leave, and good performers to stay is not a surprise. This is especially true for many financial institutions who offer annual bonuses. High performers bring many positive business results. When the business results are positive month after month or year after year, the firm’s stock prices increase. If at the end of the year the firm does well then the employees receive a generous bonus as the result.
ReplyDeleteHigh turnover rate is therefore not always bad, because the low performers are normally replaced by high performers. In terms of incentives I think that Golden Sachs is a good example to look at. Goldman Sachs, aims at creating the type of environment where employees can perform to their fullest potential. They achieve this by providing staff with performance feedback early in the year this way the employees have the opportunity to improve their performance if it is necessary. Such performance reviews assist in deciding the bonuses and promotions, Shen, L. (May 26, 2016). In my opinion, this is definitely an effective way of motivating employees at an organization. At the end of the day both parties are happy and business continues to prosper.
References:
Shen, L. (May 26, 2016). Goldman Sachs is about to Make Life a bit Less Stressful for Employees. Retrieved from: http://fortune.com/2016/05/26/goldman-sachs-performance-reviews/
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ReplyDeleteEmployee turnover have been frowned upon for employers especially when it is high. Instead of focusing on the negatives of employee turnover this blog post is looking at it from a different perspective. Depending on the firm, turnover can be both a positive or negative quality. For small businesses, usually start-ups, because it’s a fresh new company, employee turnover will naturally happen. As an added benefit, new ideas help shift the direction of the company which may lead to growth. Smaller or newer businesses can be more flexible and can afford shift directions easily where mistakes can be made in the early stages of a company. Opportunities are granted at a higher rate when employee turnover occurs for those types of firms because they are still growing and expanding at the start of the lifecycle. For a larger company or an older company where processes are already in place and employees tend to have seniority. Retraining someone new to fit a role can be a burden at a larger or seasoned firm. Turnover for older and larger firms especially high turnover can be a bit hard to adjust to. Then there are times when older firms need an extra boost of fresh ideas where newer employees can provide that.
ReplyDeleteWhen employees are not performing as expected, this tends to be another major reason of employee turnover. There are also concerns of ex-employees picking up and going to the firm’s competitor. There are so many pluses and minuses to employee turnover, but it depends strictly on the employer’s stability and strength along with size and tenure of a company. In turn, this ties into competing for gaining a sustainable competitive advantage. Employee turnover can help build or destroy a company’s reputation, but a company must ask itself, what is attracting customers to their business? The text points out the main key to Starbucks success. According to Schultz, the only competitive advantage that Starbucks have is the relationship that they have with their people (employees) and the relationship that they (the employees) have built with their customers (p.125). The relationship strategy that Starbucks admits to having is directly influenced by this topic of employee turnover because although product is important, but employee-customer relationship is most important.