Training

1
Training Compensation

• Strategies for Retention
• LRS 500

2
Major Issues

• Is employee retention a major human resource
  problem?
  
• What are the strategic issues and current trends
  associated with training and development?
  
• What are the strategic issues and current trends
  associated with compensation?

3
Employee Turnover
Voluntary (employee initiated)
Involuntary (organization initiated)
Avoidable
Unavoidable
Discharge
Downsizing
Try to prevent?
Number of employees leaving
X 100
Average number of employees
Turnover Rate
4
Retention Strategy Development

• Is turnover a problem?
• How do we attack the problem?
• Reasons for leaving, ease of leaving, and
  alternatives must be considered
  
• What do we do to stem turnover and how should we
  proceed?
  
• How should we evaluate the initiatives?

5
Is turnover a problem?

• Rate of turnover
• 2002-2003 19.2 overall
• 83 of employees say they will likely seek new
  employment once economy improves
  
• Rate of turnover compared to benchmark companies
  or past internal rates
  
• Cost of turnover
• Managerial complaints about losing talent
• Employee engagement indicators
• Who is leaving?
• Poor vs. good performers
• Certain demographic groups

6
What are retention drivers?

• SHRM study (2000) 473 U.S. organizations
• Pursuit of better career opportunities (78)
• Better pay and benefits package (65)
• Poor management (21)
• Relocating spouse/partner (18)
• Return to school (15)
• Retire (14)

Unemployment 4
7
What are retention drivers?

• Career Systems International (2002) 7457
  respondents
  
• Exciting work and challenge (48)
• Career growth, learning and development (43)
• Working with great people and relationships
  (42)
  
• Fair pay (32)
• Supportive manager/boss (25)

Unemployment 5.7
8
What can we do to stem turnover?

• Retention drivers need to be considered
• How can we make work more interesting and
  challenging?
  
• How can we improve career advancement and
  opportunities?
  
• How can we improve pay and benefits?
• How do we improve management and culture?
• How do we incorporate flexibility?
• How do we improve employee satisfaction?

9
Training as Retention Strategy

• Nature of employee careers continuous evolution
  and individual responsibility
  
• Performance management process, rather than
  programmatic training events (continuous learning
  is the focus)
  
• Focus on enhancing competencies rather than just
  isolated KSAOs
  
• Focus on organizational development and
  effectiveness

10
Strategic Issues in Training

• Focus on selection or training systems (or both)
  to produce a quality workforce
  
• Link training with firm strategy
• Decisions to outsource training or maintain
  in-house training capability
  
• Focus of training efforts
• Individual or teams
• Managers or non-managers

11
Training in U.S. Industry

• 70 of all employees receive training
• Average U.S. company spends 5 billion on formal
  training (about 2 of payroll)
  
• Most training is for nonexempt employees and most
  is on technical and interpersonal skills
  training
  
• Most training is done in the classroom and most
  organizations are NOT using new learning
  technologies
  
• FIRE, transportation and public utilities, and
  high tech spend MOST on training
  
• Durable manufacturing, health care, agriculture,
  mining, and construction spend LEAST on training

12
Training in U.S. Industry

• Typical training expenditures in 2002 per
  employee 734
  
• Health care industry trains the most employees,
  but spends the least on training
  
• Training Investment Leaders
• Train almost all employees (
• Spend double the amount on training (2 vs. 4,
  1647 per employee)
  
• Use more learning technologies and use less
  classroom training

13
Major Trends in TD

• Increasing pressure to show that training has
  ROImore rigorous evaluation
  
• Training must be designed and delivered in a
  shorter time frame
  
• Although basic classroom training is still the
  most frequent training, e-learning strategies
  growing
  
• Learning is focus, not training (Chief Learning
  Officers at Vice President level)
  

14
Common Areas of Training

• Broader Programs
• Socialization
• Cultural Training
• Career Planning
• Counseling
• Stress/Fitness
• Performance Coaching
• Outplacement

• Specific Areas
• Basic Competencies
• Technical Skills
• Professional Skills
• Supervisory and Management Skills
• Interpersonal Skills
• Team Skills
• Safety Training

15
Instructional Systems Design Model
Implement Training Program
Prioritize Needs
Design Training Program Evaluation Strategy
Evaluate Training
Assessment Of Training Needs
Reactions Learning Behaviors Results
16
Strategic Issues in Compensation

• Compensation should link to the business strategy
  and overall long-term goals
  
• Consider both external and internal factors
• External and internal equity considerations
  factored into the system
  
• Methods of compensation must be considered
• Individual-, group-, organization-based pay
• Seniority, merit, skill-based, competency-based,
  performance-based
  
• Evaluation cost, retention, goal attainment,
  etc.
  

17
Current Issues in Compensation

• Fair Labor Standards Act changes exempt vs.
  non-exempt employees (see FairPay)
  
• Use of variable pay is growing
• Benefit costs are becoming a more significant
  factor of compensation costs
  
• Executive compensation
• FASB rule changes in accounting for stock
  options
  
• Shareholders more active in approving executive
  compensation
  
• Aiming for the middle in executive pay (50 of
  market for base pay while 75 for bonus pay)
  

18
How Employers Establish Pay Rates

• Conduct a salary survey of what other employers
  are paying for comparable jobs
  
• Employee committee determines the worth of each
  job in your organization through job evaluation
  
• Group similar jobs into pay grades
• Price each pay grade by using wage curves
• Fine-tune pay rates

www.salary.com
19
Non-contingent Compensation

• Employee health benefits
• Pay for time not worked holiday, vacation,
  leaves, sick days, military duty, etc.
  
• Severance pay
• Workers compensation and disability
• COBRA
• Long-term care insurance
• Retirement benefits
• Employee services (EAP, work/life programs,
  etc.)
  

These account for a third or more of total
compensation packages
20
Concerns about Pay Systems

• Pfeffers myths about pay
• Labor rates labor costs
• Cutting labor rates lowers your labor costs
• Labor costs constitute significant proportion of
  total costs
  
• Low labor costs are a sustainable competitive
  advantage
  
• Individual incentive pay improves performance
• People work for money

21
Concerns about Pay Systems

• Contingent pay systems are only as good as the
  performance measurement systems (individual,
  team, organizational) upon which they are based
  
• More individualized pay for performance systems
  and skill (competency) based pay will be
  utilized
  
• Cost of non-contingent compensation may promote
  societal-wide changes in health care and
  retirement policies