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Dylan Hook dth73

ILRHR 4620
Professor Livingston
20 March 2016
Staffing Organizations - Final Project
(The first memo will address the issue of retention at Goldman Sachs, based on the Quartz.com
article titled The downside of being Goldman Sachs.)1
________________________________________
To: Edith Cooper, Executive Vice President of Human Capital Management
From: Dylan Hook, Junior Human Resources Analyst
Date: March 20th, 2016
Re:
Retention at Goldman Sachs
Goldman Sachs is one of the most prestigious business organizations in the world.
However, with that prestige comes a price. While Goldmans prestige allows us to are hire great
external talent at a reduced cost, it also makes it difficult for us to retain these employees as they
work up the corporate ladder. Goldmans prestige acts as a signal to other corporations if
somebody works their way up from junior analyst to the executive-level of the Goldman, it
seems obvious to outsiders that this person must be a great worker. This creates the issue of
Goldman needing to pay more money to retain these employees, or they risk being poached from
outside companies. The research done on this topic has made similar conclusions. A recent study
has shown that employees capture a large portion of prestigious firms value as they move up the
ranks.2
The main issue at hand is one of voluntary turnover. Voluntary turnover occurs when a
mix of the desirability of leaving, the ease of leaving, and alternative job options combine to

1 Nisen,Max."TheDownsideofBeingGoldmanSachs."Quartz.
2 Bidwell, Matthew, et.al. "I USED TO WORK AT GOLDMAN SACHS! HOW FIRMS
BENEFIT FROM ORGANIZATIONAL STATUS IN THE MARKET FOR HUMAN
CAPITAL." Strategic Management Journal 36 (2014): 1164-173.

create the intention to quit within an employee.3 The issue for Goldman is that our high-quality
reputation acts as a signaling device, and our employees understand this. Fortunately, there are
ways to increase company loyalty among our workers that will not necessarily cause the
company to lose money. We can reduce the desirability of leaving and viable job alternatives by
increasing pay during the later years of ones career at Goldman.

RECOMMENDATIONS
Goldman should implement a quasi-probationary period lasting multiple years. In this
system, workers would earn greatly below the general market value of their productivity. While
this may discourage some from every applying, opting instead to take a larger up-front salary at a
different firm, we have no shortage of quality applicants (we reject roughly 96% of people who
apply4). This is where our companys perceived prestige comes into pay in a large way. High
quality applicants will still want to work at Goldman, even for a lower initial salary, because of
the reputation that comes with working here.
We can then afford to give promotions and generous raises to those who stay through the
entire probationary period. This will incentivize workers to stay throughout the probationary
period. Given the fact that we will be paying well below the workers productivity initially, we
can then give back some of the productivity that the firm has captured, so to speak, through
higher wages. If we can implement a system in which this works out so that the postprobationary wage is generally higher than most other comparable jobs at comparable firms, we
should be able to increase retention greatly. Figure 1 below shows a possible scheme for average
wages that illustrates this point.
3 Heneman, Herbert Gerhard, Tim Judge, and John Kammeyer-Mueller. Staffing Organizations.
677.
4 Blankfein, Lloyd, and Gary Cohn. "2013 Annual Report." Goldman Sachs. 2013.

Figure 1.
Avg. starting salary
Avg. salary after 5 years

Goldman Sachs
$50,000
$120,000

Others
$80,000
$95,000

It stands to reason that a larger post-probation salary will entice more people to stay at Goldman,
thus increasing prolonged retention. Additionally, lowering initial pay will allow the company to
save money and make this payment scheme possible, without drastically reducing the high
quality applicants (this is where our prestige helps!).
A report by WorldatWork identifies key methods for retaining employees and their effectiveness
on retention.5 One of the highest rated methods in terms of effectiveness is giving stock options
to employees that you want to retain. Research has concluded that stock options do effectively
reduce turnover, especially when the vesting process occurs over a long timeframe.6 It makes
sense employees will tend to stick around if they have to wait to gain the option to buy more
stock. Goldman could implement the usage of stock options as part of the compensation package
for employees who make it past the quasi-probationary period outlined above. This would
further increase the likelihood that employees will stay with the company, thus, increasing
retention.

(This second memo will address high turnover rates and large numbers of job vacancies in the
Nebraska state prison system, based on the article on Omaha.com titled Problems with staffing
persist in prison system, Corrections report says.7
5 Scott, Dow, Tom McMullen, and Mark Royal. Retention of Key Talent and the Role of
Rewards. WorldatWork. June, 2012.
6 Aldatmez, Serdar, Paige Ouimet, and Edward Van Wesep. The Option to Quit: The Effect of
Employee Stock Options on Turnover. Center for Economic Studies. January, 2014.
7 Hammel, Paul. "Problems with Staffing Persist in Prison System, Corrections Report Says."
Omaha.com. January 12, 2016.

To: Scott Frakes, Director, Nebraska Department of Correctional Services


From: Dylan Hook, Human Resources, Nebraska Department of Correctional Services
Date: March 20th, 2016
Re: Staffing issues in the state prison system
A recent Nebraska Department of Corrections report shows that the turnover rate for
prison security and housing unit staff is near 29%. This is more than double what the agency
considers to be normal. This has led to an increase in the amount of overtime pay that the
department has had to pay out over the past few years. This is an issue that clearly needs to be
remedied.

REASONS FOR HIGH TURNOVER IN THE PRISON INDUSTRY


In a study by Minor et. al., current prison staff were asked to explain why they thought that
turnover was so high in the prison industry.8 Not surprisingly low pay was cited as the most
contributing factor. The other top factors cited in the study were:

Concerns over personal safety


Concerns over institutional security
Officers not knowing what their supervisors expect
Officers not believing that senior management understands problems faced on the job

So, if we are to apply the results of this study to the problem facing the Nebraska
Departments of Corrections, we should focus on three main areas of improvement: (1) pay, (2)
safety and motivation, and (3) management involvement. Below follows a brief overview of the
implications of each area, and recommendations for addressing each.

PAY
It goes without saying that pay is a clear motivator for employees indeed, the primary
purpose of most jobs is to pay the bills. Coupled with the fact that low pay is the most cited
8 Minor, Kevin, et. al. "Understanding Staff Perceptions of Turnover in Corrections."
Pennsylvania State University.

reason current prison staff give to explain high turnover9, it is clear that we should make greater
efforts to increase pay for our prison staff. However, given the fact that our budget is set by the
state, there is little that can be done in terms of prison management deciding to give out large
raises across the board. So, we must examine other areas in an attempt to reduce turnover.

SAFETY & MOTIVATION


It goes without saying that working in a prison is a potentially dangerous job. As such, we
do not want people who are not open to the possibility of danger to be working in the prison
system. Given this, we should be searching for people who are intrinsically attracted to, and
comfortable working in, dangerous environments.
The use of personality questionnaires can be useful for employers who wish to test for
certain traits.10 An example from an article in the Journal of Business Law sums up just why
employers test for certain personality traits: it is useful when hiring a firefighter to know that
the prospective applicant is not likely to freeze in an emergency.11 Likewise, for our prisons, we
need to know that prospective applicants will be open to the possibility of safety issues when
dealing with prisoners. We can also test for traits that will indicate that applicants are not just
looking for extrinsic rewards.
In order to attract applicants who will find it easy to be intrinsically motivated on the job,
we should develop a test for all applicants that will examine eachs probable motivation and their
potential reaction to safety situations. We should then extend offers to those who will be
intrinsically motivated. An example of a potential exam is as follows:

9 Ibid.
10 Stabile, Susan, et. al. "THE USE OF PERSONALITY TESTS AS A HIRING TOOL: IS THE
BENEFIT WORTH THE COST?" Journal of Business Law 4, no. 2, 272-313.
11 Ibid.

Answer each question by circling a number. 1 indicates the lowest


possible level, 5 indicates the highest.
1. How at ease are you in dangerous situations?

1 2 3 4 5

2. Will performing the job duties make you happy?

1 2 3 4 5

3. How important is pay when selecting a job?

1 2 3 4 5

Question 1 would be used to gauge the applicants likelihood of quitting because of safety issues.
We will want to hire those who answer highly, as they are more open to dangerous situations.
Question 2 would be used to gauge the applicants potential for being intrinsically motivated by
the job. Again, we will want to hire those who answer highly, as the prison system can not
currently deliver much in terms of external rewards (e.g., high salary) at this time. Finally,
question 3 would be used to determine how important extrinsic rewards are to the applicant. We
want to hire those who are more heavily intrinsically motivated, so we should not extend job
offers to those who put great value on pay. This is simply a sample of the hundreds of different
questions that could be used to determine an applicants preferences.
In addition, we could try to heavily recruit people with a military background, as it is safe
to say that people in the military would be at ease in dangerous prison scenarios, at least in
comparison to the general public overall.

MANAGEMENT INVOLVEMENT
Working on the assumptions generated by the study12 mentioned earlier that many prison
workers are dissatisfied with managements expectations and lack of understanding of the issues

12 Minor, Kevin, et. al. "Understanding Staff Perceptions of Turnover in Corrections."


Pennsylvania State University.

faced by the front line workers, it seems as though management needs to be more involved in
the day-to-day operations of the prison.
In order to foster a culture where management and employees more properly work
together, management should have to spend time with security and housing personnel in order to
get a better understanding of what goes on during day-to-day operations. This may allow
management to give more clear expectations to the employees, thus reducing dissatisfaction from
the employees because of the stress that often accompanies unclear expectations on the job. A
reduction in dissatisfaction should correspond to a reduction in turnover.

References
Aldatmez, Serdar, Paige Ouimet, and Edward Van Wesep. The Option to Quit: The Effect of
Employee Stock Options on Turnover. Center for Economic Studies. January, 2014.
Accessed March 11, 2016. http://www2.census.gov/ces/wp/2014/CES-WP-14-06.pdf
Bidwell, Matthew, et. al. "I USED TO WORK AT GOLDMAN SACHS! HOW FIRMS
BENEFIT FROM ORGANIZATIONAL STATUS IN THE MARKET FOR HUMAN
CAPITAL." Strategic Management Journal 36 (2014): 1164-173. Accessed March 11,
2016. http://onlinelibrary.wiley.com/doi/10.1002/smj.2272/epdf.
Blankfein, Lloyd, and Gary Cohn. "2013 Annual Report." Goldman Sachs. 2013. Accessed
March 10, 2016. http://www.goldmansachs.com/s/2013annualreport/shareholder-letter/.
Hammel, Paul. "Problems with Staffing Persist in Prison System, Corrections Report Says."
Omaha.com. January 12, 2016. Accessed March 12, 2016.
http://www.omaha.com/news/nebraska/problems-with-staffing-persist-in-prison-systemcorrections-report-says/article_1f0f737c-9b5f-5420-922c-622cde04d697.html.
Heneman, Herbert Gerhard, Tim Judge, and John Kammeyer-Mueller. Staffing Organizations.
677. Print.
Minor, Kevin, et.al. "Understanding Staff Perceptions of Turnover in Corrections." Pennsylvania
State University. Accessed March 12, 2016.
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.505.1842&rep=rep1&type=pdf
Nisen, Max. "The Downside of Being Goldman Sachs." Quartz. April 14, 2014. Accessed March
10, 2016. http://qz.com/198980/the-downside-of-being-goldman-sachs/.

Scott, Dow, Tom McMullen, and Mark Royal. Retention of Key Talent and the Role of
Rewards. WorldatWork. June, 2012. Accessed March 13, 2016.
https://www.worldatwork.org/adimLink?id=62016
Stabile, Susan, et. al. "THE USE OF PERSONALITY TESTS AS A HIRING TOOL: IS THE
BENEFIT WORTH THE COST?" Journal of Business Law 4, no. 2, 272-313. Accessed
March 14, 2016.
https://www.law.upenn.edu/journals/jbl/articles/volume4/issue2/Stabile4U.Pa.J.Lab.&Em
p.L.279(2002).pdf.