HR strategies to raise productivity and retention

Financial rewards

• Pay rises and competitive pay rates to attract and keep staff.
• Piece rate (pay per unit) and commission (pay per sale) link pay to output, raising productivity but possibly cutting quality.
• Bonuses for hitting targets and profit sharing.
• Performance-related pay after appraisal.

Taylor's scientific management saw money as the main motivator; Herzberg (Unit 1) argued pay is a hygiene factor: poor pay causes dissatisfaction, but more pay may not motivate in the long term. In the January 2025 WBS13 paper, Question 3 asked whether not paying a staff bonus would affect retention at a retail partnership; the mark scheme credited both the role of bonuses in retention and the view that job security, development and communication may matter more.

Employee share ownership

Staff are given or offered shares in the business, often at a discount, sometimes after a qualifying period. They then share in its success through dividends and the share price, which may increase commitment, align staff with owners' interests and reduce turnover (shares often vest only if the employee stays). Limitations: the link between one worker's effort and the share price is weak; share prices can fall; it dilutes existing owners.

Consultation

Managers ask employees for their views before making decisions, through works councils, team meetings, staff surveys and suggestion schemes. Staff feel valued (Mayo's human relations and Maslow's esteem needs), may contribute useful ideas and are more likely to accept change. But it slows decisions, and staff may become frustrated if their views are ignored.

Empowerment

Giving employees the authority and responsibility to make decisions about their own work, for example letting front-line staff resolve customer complaints. Linked to job enrichment, team working and delegation. It can raise motivation, speed up responses to customers and develop skills. It needs training and trust, may lead to mistakes, and not every worker wants extra responsibility.

Choosing a strategy: it depends on the cause of the problem (pay, boredom, poor management), the culture, the cost and the type of work.

Worked example

A hotel has labour turnover of 45% a year, well above the local average. Exit interviews show staff feel ignored and have no say in their work. Recommend a strategy.

1. The cause is not mainly pay, so a pay rise alone may not work (Herzberg: pay is a hygiene factor).
2. Consultation, such as regular team meetings and a staff forum, addresses the feeling of being ignored.
3. Empowerment, letting staff solve guest problems without asking a manager, gives responsibility and recognition.
4. Recommendation: consultation plus empowerment, with training; measure turnover over the next year to check the effect.

Answer: Consultation and empowerment, because the cause is non-financial.

Check yourself

1. Which financial reward links pay most directly to the quantity produced?
   • Salary
   • Profit sharing
   • Piece rate
   • Employee share ownership
   Show answer

   Piece rate. Paid per unit made.

2. How might employee share ownership reduce labour turnover?
   • Staff share in the firm's success and may lose shares if they leave early
   • It guarantees higher wages every year
   • It removes the need for managers
   • It makes staff responsible for all decisions
   Show answer

   Staff share in the firm's success and may lose shares if they leave early. Ownership aligns interests and schemes often reward staying.

3. Which is an example of consultation?
   • Paying staff a bonus for meeting targets
   • Allowing staff to decide how to handle customer complaints
   • Asking staff for their views through a works council before changing shift patterns
   • Giving staff free shares
   Show answer

   Asking staff for their views through a works council before changing shift patterns. Consultation means seeking views before deciding.

4. Empowerment means
   • paying employees more for higher output
   • giving employees authority to make decisions about their work
   • asking employees for opinions while managers decide
   • offering employees shares
   Show answer

   giving employees authority to make decisions about their work. Authority and responsibility are passed to staff.

5. According to Herzberg, why might a pay rise fail to motivate staff in the long term?
   • Pay is the only true motivator
   • Staff never notice pay rises
   • Pay rises always reduce productivity
   • Pay is a hygiene factor that removes dissatisfaction rather than motivating
   Show answer

   Pay is a hygiene factor that removes dissatisfaction rather than motivating. Motivators include recognition, responsibility and achievement.

6. Which is a drawback of empowerment?
   • Decisions always become slower
   • Staff may make costly mistakes without enough training
   • It always costs more than a pay rise
   • It is illegal in some industries
   Show answer

   Staff may make costly mistakes without enough training. Authority without skills can go wrong.

7. Explain why consultation might reduce labour turnover.
   Show answer

   Consulting staff makes them feel valued and listened to, which improves morale and job satisfaction, so they are less likely to leave.. Feeling valued, morale, staying.

Practise with instant feedback Print this lesson

Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Business specification (XBS11/YBS11, 2018), Unit 3 Business decisions and strategy and Appendices 6, 7 and 9
• Pearson Edexcel IAL Business WBS13/01 mark scheme, January 2025

Last updated 8 November 2026. Spotted a mistake? Tell us.