Reducing Employee Turnover Through a Positive Work Environment

Studies from the US suggest that the most important factor in determining whether an employee stays with a company or leaves for something better is the work environment. A positive, 'emotionally healthy' work environment, one in which employees feel part of a team with shared values and goals, is a prerequisite to keeping people beyond the shorter-term attractions of schemes and programs.

With the post-war baby boomer generation now starting to retire, North America, Japan and much of Europe will face a worsening labor shortage over the next ten years. In what will be a sellers' market, the competition for skilled, experienced employees will become more and more intense, and holding onto valuable staff will become an ever greater challenge.

In the past, most larger Japanese companies retained employees as a matter of course through the 'job for life' culture. It wasn't something that required any particular strategy, so long as the economy was strong enough to support it and so long as all sides understood the rules. Only relatively recently have Japanese companies started to realize that hanging on to their staff is something that might require a plan of action.

It's quite easy to make a list of the reasons why employees leave a company for another job – declining motivation, long working hours, conflicts with managers, concern about the future of the company can all play a part – but it's not so easy to formulate strategies to get people to stay.

Many companies in Japan are taking a 'program' approach to the problem: incentive-based pay systems, training and development programs, flex-time schemes, and other such initiatives that, while appreciated by employees, miss a more fundamental point.

Studies from the US suggest that the most important factor in determining whether an employee stays with a company or leaves for something better is the work environment. A positive, 'emotionally healthy' work environment, one in which employees feel part of a team with shared values and goals, is a prerequisite to keeping people beyond the shorter-term attractions of schemes and programs.

So what is an 'emotionally healthy' work environment? According to Dr. Mary Riley, an MBA course lecturer at three Northern California universities, it's one which cultivates "human qualities of fairness, trust, communication and team spirit." In other words, it's something that goes right to the heart of an organization. She contends that the task of fostering such an environment used to fall to HR departments, but that recently they are forced to spend most of their time on employment law issues and, of course, recruitment. It now falls mostly to middle management to try and create the right environment for employees in an ad hoc way.

According to organizational commitment theory, there are three types of commitment that people feel towards an organization: Affective Commitment, Continuance Commitment and Normative Commitment. The first of these is an emotional commitment that results from a person identifying with the values and objectives of the organization. Continuance Commitment is based on the idea that there are costs – both economic and social – to leaving an organization. Normative Commitment is a feeling of obligation towards the organization that stems from, for example, the time and money an organization has invested in the individual.

Successfully fostering a positive workplace environment increases a company's stock of both Affective and Continuance Commitment from its employees – most importantly, people will feel they want to stay because they feel they belong, but they will also feel that they risk losing the intangible but difficult-to-replace benefit of an emotionally healthy workplace. In contrast, the 'program' approach to reducing staff turnover tends to address Continuance Commitment only in terms of easily replaceable economic loss, and, in today's marketplace, the weaker Normative Commitment.

In the coming years, the value of an HR department that has the skills and resources to develop and maintain a positive work environment will be greater than ever, particularly within Japan's changing culture of work in which younger employees feel a much weaker sense of obligation to their companies than did their baby boomer parents.