Japan's HRM & IR Information — HRM & IR News [FY2018]

June 28, 2018 [No.51-2018]

Retention management to prevent human resources from leaving

Hiroshi Yamamoto, Ph.D., Professor
School of Business/Graduate School of Business
Aoyama Gakuin University

Part 1: The Importance of retention (human resource retention) in modern times

1. Introduction
 In Japan, the labor shortage is getting worse and worse owing to a structural decline in birthrate and increasingly aging population. Let us take a look at the concrete figures. The job offers-to-seeker ratio in April 2018 (seasonally adjusted figure) was 1.59, and the job offers-to-seeker ratio for regular workers in the same period was 1.09, while continuing to uphold high standards. Difficulty in recruiting non-regular workers such as students and homemakers who work part-time is also getting worse, particularly in urban areas. The same applies to professional jobs such as nurses, childcarers, and caregivers with labor shortages in hospitals, preschools, nursing homes, etc. becoming a serious problem. As you can see from the shortened opening hours due to labor shortages and from the “labor shortage bankruptcy” of fast food stores, the results of the aforementioned matters are creating a serious impact on organizations.
 How should organizations cope with a labor shortage? The methods for solving labor shortages are roughly divided into 2 types. The first is the recruitment of new employees, and the second is retention of currently working employees. However, how recruitment, the first method mentioned above, is considered difficult, we must focus on retention, the second method.
 In this series, we will consider the retention issue, namely, how to retain employees, and in particular high-performing employees, currently working in organizations. Together with recruitment, this issue is important for human resource management in order to cope with labor shortages.
2. An era of job changing and competitive human resource acquisition
 Also, the present day is said to be an era of competitive human resource acquisition, and organizations are scrambling for competent, high-performing personnel, and for future core personnel. In other words, this is an era in which high-performing personnel can always leave for other companies.
 Within this background, there is an increase in job changes. The annual number of people who change jobs in Japan is over 3 million, and has been increasing over time. A decade ago, it was said that changing jobs was difficult unless you were young, i.e. 20s to early 30s. This was called things like “the wall of 35.” However, the ratio of people who are over 45 and change jobs is increasing (Labor Force Survey by the Ministry of Internal Affairs and Communications). Let us take a look at the actual situation after changing jobs. First, it has been pointed out that the ratio of people who earn a higher salary after changing jobs has been increasing compared to the ratio of those who are earning a smaller salary after changing jobs (Survey on Workers who changed jobs by Ministry of Health, Labour and Welfare). Furthermore, from the results of research on work satisfaction levels after changing jobs, the difference between the percentages of those who answered “satisfied” and “somewhat satisfied,” and those who answered “dissatisfied” and “somewhat dissatisfied,” was high, and in all items “satisfied” was dominant answer (the same survey by Ministry of Health, Labour and Welfare). As stated above, changing jobs is becoming easier and more and more people have been able to find satisfactory employment in recent years. Under these circumstances, surely only a few people would not consider changing jobs, regardless of whether they are dissatisfied with their current organizations. The same applies to high performers. In other words, even though the importance of retention is growing, factors obstructing it are increasing.
3. What is retention?
 I would like to define retention, the subject of this series. Generally, retention means things like “keeping,” “holding,” “continuing,” “anchoring.” In marketing, it means keeping customers, but in organization management, it means securing employees within the organization and is measured using things like employee retention rates. In other words, improving retention means prolonging the length of employment for employees. Furthermore, with regard to retention, an emphasis is often placed on management that an organization conducts in order to improve retention, while the organization hiring employees plays a principal role. Therefore, for this series, retention of employees is defined as “securing (anchoring) employees in organizations.” When emphasizing the management of companies, retention management is defined as “all the management policies of human resources for employees, in particular high performers, to stay within their company for a long time, and for them to demonstrate their abilities.”