Heritage Place: Reducing Employee Turnover in a Small Business

Reducing Employee Turnover in a Small Business

Executive Summary
The resolution of this case analysis is to pinpoint the essential problems that are causing the high turnover rate at Heritage Place. The statistics have shown that within the past year, at least seventeen employees have left Heritage Place in search of other jobs. The high turnover rate has become very costly for this small business and has therefore brought about a need for change. Many reasons have been given for the need for change: low pay rates, no pay raises, lack of health, dental, and vision insurance, no vacation or sick pay, and the mistreatment/lack of respect and appreciation for the employees by management. It is the purpose of this analysis to present ways/ideas that will bring forth a reduction in the employee turnover rate and hence lower costs for the facility. By observing the need for these changes a plan has been put forth which includes the essential problems, recommendations, expected outcomes, dates, and timelines that are needed for the changes to be successful.
Introduction
Heritage Place is a small business that began in 1961 as an assisted living facility. It was first owned by Ruby Berry then in 1985 Nick Nikouyeh became the owner and he remains the current owner. Heritage Place remained an assisted living facility until 2010 when it became better known as a memory care facility for patients with Alzheimer’s. Today it is strictly an Alzheimer’s facility but there are a few patients that were “grandfathered in” from when it was just assisted living. Heritage Place is a small business with less than 30 employees and no benefits of any kind. Lack of benefits and treatment of employees causes this business to have high turnover rates. Many employees have found it difficult to remain at Heritage Place for any long period of time because the pay is so low, there are no medical, dental, or vision insurance/options, no 401k option, there is no holiday pay (and all employees are required to work at least half a day on all holidays), no sick days, no vacation days, no promotions, no pay raises, and the lack of respect management shows its employees. To reduce turnover rates, the organization should offer pay increases, earned sick days, earned vacation days, insurance options, holiday pay, and show some respect and appreciation for the employees.
Detection of a Problem In my short tenure at Heritage Place, I have noticed a large number of employees come and go. When many of them come in to pick up their last check, they are asked why they decided to quit. The main answer received is the low pay, lack of pay raises, lack of benefits, and the lack of respect shown to them by management. These major problems have triggered a much needed change in this organization in order to reduce the high turnover rate. Making changes to reduce the high turnover rate will benefit the employees and the facility.
External Forces
There are many external forces that are driving change at the Heritage Place organization. Changes to Medicare and Medicaid affect how much money the facility receives for those patients who have government insurance. Referrals from doctor’s offices and hospitals affect how many private patients decide to take up residence at the facility. It takes a lot of money to take care of each resident. If the residence is not private pay (meaning they are on government insurance) then the money from the government must be used to provide shelter (room and board), clothing, bed linens, towels, food and drink, toiletries, diapers and pull-ups, caregivers, etc. As for the private pay residents, their relatives pay monthly rent which includes room and board, food and drink, diapers and pull-ups, towels and bed linens. The relatives provide the toiletries such as shampoo and soap, as well as, their clothing. These external forces have a vital impact on the success of the organization’s future.

The Importance of External Forces The external forces affecting this organization are vital to its future success. These external factors are vital due to the impact they have on the organization. For instance, after reviewing the Medicare website, Heritage Place was not listed as a facility that is covered under the Medicare. Perhaps this was either a mistake or could possibly be the result of the new Affordable Care Act because as of now, Heritage Place is still receiving payments for Medicare patients. Likewise with Medicaid. As of right now, Heritage Place is receiving payments for Medicaid patients but those payments may be cut when the Affordable Care Act is fully in place. The reason these external forces are so important to the organization is because it affects the amount of money that is taken in by the facility, which in turn affects the employees.
Internal Forces There are many internal forces that are driving the need for change in the Heritage Place organization. Low pay rates, no pay increases/raises, lack of benefits such as health, dental, and vision insurance as well as no 401k options, no vacation or sick time, lack of respect from management, and the constant changing of rules just to name a few. Many employees also do not have a very good work ethic. These internal factors are the reason the employee turnover rate is so high and employee morale is so low. It’s rare to find an employee who has worked there for even a year. Most employees work for around four to five months with the belief that things will change eventually and they will get raises and so forth but end up leaving because they realize that will not happen. Heritage Place constantly has to hire and train new employees to replace the ones that quit. This is a waste of time and money for the facility and time consuming for the employees who have to do the training.
First-Order Change
First-order change, or incremental change, is recommended because it “may involve adjustments in systems, processes, or structures, but it does not involve fundamental change in strategy, core values, or corporate identity”. These changes are necessary because so much depends on the culture of the organization. These changes seem large but they are actually small-scale because Heritage Place could just keep hiring people then hire more when those employees quit and keep the process going. The facility has been using this method for years. Fine-tuning, or implementing changes that may anticipate changes to the outside environment, may help Heritage Place receive more residents by improving the referral rates. Making adaptive changes by researching what other organizations are doing to keep their turnover rates low can give Heritage Place an idea of how to begin their changes and figure out if it would benefit the organization.
Analysis Model
The Six-Box Organizational Model by Marvin Weisbord should be used to analyze this case because it focuses on the six variables of purpose, structure, rewards, helpful mechanisms, relationships, and leadership. This model asserts that “while one variable might be identified as the site requiring the greatest attention, the systemic effect of any change must be noted”. In this case, the rewards system requires the greatest attention. Helpful mechanisms are also an important variable in this situation. Budgeting will play a vital role concerning pay increases, health, dental, and vision benefits, vacation, and sick pay.
Emphasis on adjusting the pay rates/allowing raises, earned vacation and sick days, and providing health, dental, and vision insurance options, would help to reduce the turnover greatly. Heritage Place is a small facility with little to no room for promotions but pay raises are a possibility. Attempting to improve this organization’s culture will be difficult and is not a change that can happen immediately.
The Importance of Personality
Employee’s work morale and attitude are very important to improving the turnover rate in this organization. When the employees come to work with a good attitude and work ethic, the residents are also happier. The residents can sense when the employees are not happy. Many employees are not happy with Heritage Place at the moment. Many have said that they feel as if there is no goal to work for and there no point in trying to focus on doing a great job because they will never get a raise, a promotion, or benefits of any kind. Heritage Place can benefit by the employees having more positive attitudes when coming to work. Honestly, there have been several employees who only work at Heritage Place until they can find a different job to replace the income. In other words, they view their jobs as temporary. Employee personalities likely will not change until the organization makes the necessary changes that will benefit the employees and the facility.
Recommended Changes Heritage Place should implement changes that benefit the employees and the facility by reducing the turnover rates. The changes would entail earned pay raises, earned vacation and sick days, health, dental, and vision insurance options, and holiday pay. The owner and administrator of the facility should brainstorm ideas on how these changes may be implemented and what other measures the organization can make in order to further reduce the turnover rate. For example, an employee who knows that by working hard they can earn a pay raise will have a more positive attitude as well as a goal to work towards. There is also a constant changing of rules and they go back and forth. For instance, at one point the employees were told to help out the other shifts (there are three shifts: first, second, and third) if possible. A few weeks later, the employees were told not to do any of the other shifts’ work no matter what. Then a few weeks after that, the employees were told to help do the other shifts’ work. It goes back and forth. In addition, Heritage Place should rethink their treatment of the employees. Employees do not want to be treated “like dogs” so to speak, especially when their pay is low and other opportunities are available elsewhere. Everyone wants to be treated with decency and respect by their managers and coworkers.
Why these Changes are Recommended These changes were recommended because Heritage Place greatly needs to focus on reducing their employee turnover rate. These internal changes would lessen the amount of time spent on constantly having to advertise for open positions and train new employees. The facility would save money by retaining the current employees. These changes would not only improve employee attitudes but it would also help the facility in the future. These recommended changes could also work as advertisement by word of mouth. When employees leave a job for another one, their past jobs are usually mentioned. These changes are not only recommended to benefit the employees and the facility, but it can also improve the residents’ attitudes. As stated earlier, the residents can sense when employees are not happy and it can reflect in their behavior.
Expected Outcomes
By changing the way Heritage Place treats their employees, the company’s turnover rates are likely to reduce, employee morale and attitudes will improve, the residents’ attitudes will be better, and the organization’s reputation is likely to improve by way of word of mouth. There is also a greater possibility of improving the relationships not only between the employees and managers, but with the outside environments such as hospitals and doctor’s offices. Many employees strive to receive pay raises and benefits, especially when the pay is low to begin with. Knowing that pay raises and benefits are a possibility would motivate the employees to work harder and remain at the company, thus, reducing the turnover rate. Career goals and personal goals allow employees to focus on what needs to be done in order to achieve those goals.
Importance of Change
Change is important for the future success of this organization. Change is also necessary in order for this organization to receive future referrals from hospitals and doctor’s offices as well as obtaining private pay residents. Heritage Place will never be able to retaining employees and will continue to waste time and money training new employees. Heritage Place has been losing money and residents over the past few years. Heritage Place lacks the competitive edge to compete with other similar facilities. Many other facilities are better funded, have more staff, treat their staff better, allow the staff to earn raises, offer vacation and sick days, and offer insurance and retirement options. In turn many of them also have more residents staying at their facilities and with better funding, other facilities are able to house more residents since many are larger. Organizational change is important for companies to be able to optimize performance and achieve their goals.
Implications of Refusing to Change
Refusing to change can cause many problems for an organization. For many small businesses, employees are not always comfortable with change which may cause employees to resist change. There are many reasons for resistance to change: dislike of change, discomfort with uncertainty, perceived negative effects on interests, attachment to established culture/ways of doing things, perceived breach of psychological contract, lack of conviction that change is needed, lack of clarity as to what is expected, belief that the specific change being proposed is inappropriate, belief that timing is wrong, excessive change, cumulative effect of other changes in one’s life, perceived clash with ethics, reaction to the experience of previous changes, and disagreement with the way the change is being managed. Some costs of resistance include:
Productivity declines
Absenteeism
Loss of valued employees
In this case, employees are wanting change as long as it is in their favor. When employees realize that change (at least not the change they were expecting) is not occurring productivity declines, there are more absences, and eventually many employees ultimately quit.
Addressing Resistance to Change
Addressing resistance to change can be critical to the success of a small business. Addressing resistance to change is important to successfully implement the necessary changes in order for the organization to have future success. Managers can address resistance to change by speaking directly to the employees and explaining to them why these changes are necessary and how the changes will affect each one of them. Listening to the employees concerns and trying to answer their questions can make the employees feel more comfortable about the changes. Managers and supervisors need to address the employees’ needs. Communication is critical in dealing with resistance to change. In the case with Heritage Place, resistance to change occurs when the owner and administrator make changes that are not fair to all employees. For example, the CNAs take care of their residents, but there are many other tasks involved as well. One of those tasks is laundry. Recently, the administrator wanted first shift to do not only third shift’s laundry but also second shift’s laundry because they were not doing it. This is a change that is not fair to first shift employees which in turn caused resistance. Basically, first shift does third shift’s laundry, second shift does first shift’s laundry, and third shift does second shift’s laundry. The changes are fickle at Heritage Place. As of two days ago, the owner stepped in and that new rule was changed back to the original.
Ethical Implications of Change
When trying to implement changes in an organization, managers and supervisors are expected to act professionally and ethically. It is possible for managers to coerce or manipulate employees to go along with changes but it is not ethical or professional. Heritage Place has a pretty standard code of ethics. Employees should be honest and act in an ethical manner by complying with all of the laws and regulations. It is important for the employees, the administrator, and the owner to keep up and follow all of the laws, including any new laws. If there is any wrong doing it should be reported to the state for possible inspection. The most important task is to care for the residents. It is important to respect the dignity of all the residents and to make the right choices when providing their care. It is also important for the employees to conduct themselves honestly and ethically towards family members. In a small business, it is also important for managers to act ethically and professionally and respect how employees feel towards the changes and do their best to explain why the changes are necessary. When management explains why the changes are necessary and how they fit in with the new changes, managers are expected to truthful/honest.

Lessons to be Learned
One of the lessons that I would like to be learned from this situation is that it is never a good idea or good business to treat your employees poorly and give them no goals to work towards. Offering benefits, raises, vacation and sick time, will draw employees to want to work for the organization. Poor treatment and the constant back and forth changing of rules will push away employees. Effective communication between management and employees can help to reduce these problems and give management a better understanding of how the employees feel. Another lesson is that change takes time and is not something that happens overnight. Everyone has to have patience because change is a process.
Image of Change Management
The Interpreter approach will guide the change management at Heritage Place. According to table 3.1 in the text, the Interpreter image states that “pressures for change emerge from internal and external forces; the key demand on managers is from staff to help provide them with meaning and understanding about “what is going on””. The staff can clearly inform management of what needs to happen and why. An interpreter image reminds us that a change will depend on the perspective of the person considering the change and managers should form these perspectives of provide “sense-making” for the employees of the organization about “what is going on here”. As a manager using the interpreter approach, the manager should help the employees make sense of and understand the actions and changes that are taking place. The purpose of the ‘interpreter” is to explain to the employees directly, how the changes will impact them, and to allow them to hear this information from someone they work with on a daily basis.

Implementation Plan
One of the plans needed to effect change at Heritage Place is to have a meeting with the accountant and calculate numbers on a possible benefits package for the employees. This benefits package should include some type of health benefits (health, dental, and vision). The accountant needs to draw up a budget that shows the costs of allowing employees to build up vacation and sick time, as well as pay raises and holiday pay. Nick Nikouyeh, the owner needs to take into account the suggestions and ideas of the employees since they are the most affected. The employees must be involved in implementing these changes. Communication between the employees and management (and the owner) has to improve. It is important for communication to occur with the employees in order to gather ideas and implement these changes to make the change successful and permanent. Communication must be on-going and two-way process with employees and management.
Dates, Timelines, and Accountable Parties
Heritage Place is a small business with fifty or fewer employees. Implementing a healthcare plan would take no time at all. According to HealthCare.gov, obtaining healthcare coverage through SHOP (Small Business Health Options Program) may begin as soon as January 1, 2014. “Businesses with 50 or fewer full-time equivalent (FTE) employees can use the Small Business Health Options Program (SHOP) to offer coverage to their employees. This applies to non-profit organizations as well. You control the coverage you offer and how much you pay toward premium costs.”
Not only do the employees benefit from these changes but the organization can too. Heritage Place could qualify for tax credits by offering health coverage through SHOP. Heritage Place is an organization that actually has less than twenty five full-time employees that make less than $50,000 a year, which can allow the organization to qualify for a small business health care tax credit. Beginning in the year of 2014, the cost of offering health coverage will lower because the tax credit is worth up to 50% of the organization’s contribution toward employee premium costs. In order for the tax credit to be available, the coverage has to be offered through SHOP.
The responsible parties in this case are the owner, administrator, and employees. Everyone will need to participate in order for these changes to become and remain successful. Whatever decisions the owner and administrator decide to make, their actions will ultimately have to be justified. These changes can only take effect if the owner takes the initiative. All parties involved need to be aware of any changes that take place in order to ensure the changes are being implemented correctly. The champions in this organization will undoubtedly be the employees. The employees will finally have benefits, raises, holiday pay, vacation and sick time, and be treated better/more respected and appreciated. Happier employees will cause the turnover rate to become reduced, ultimately reducing costs for the facility.
Communication Plan After all the information and research is in from the accountant, including budgets, financial layouts-including costs and profits (loss or gain), the decision will be made to implement the necessary changes. The owner, Mr. Nikouyeh, must sit down with the administrator and explain how and when these changes will occur as well as why. Then the administrator must call a meeting with the employees (there should be three meetings: one for every shift) to explain what the changes are, when the changes will be implemented, and why these changes are necessary for the employees as well as the facility.
Plan Evaluation In order to evaluate my plan to observe if it has been successful, I will compare the statistics of the turnover rate at Heritage Place to those after one year’s time. For instance, within the past year, Heritage Place has lost around seventeen employees due to low rates of pay, lack of benefits (health, dental, and vision), no vacation or sick pay, lack of pay raises, and lack of respect/mistreatment from management. These changes will take affect at the beginning of 2014. At the beginning of 2015, the changes will be evaluated for their effectiveness and the numbers will be compared to the previous year’s statistics.
Conclusion
As the research in this case shows, Heritage Place is a small business in desperate need of change. The turnover rate is very high for this small business and is in turn very costly. The essential problems in this organization require an immediate implementation of change that will benefit the employees as well as the facility. Pay raises, vacation and sick time, health, dental, and vision insurance benefit options, holiday pay, and better treatment are just a few of the changes that need to take place in order to reduce the turnover rate. Communication between management and the employees is critical for the success of these changes. After a clear understanding between management and the employees as to when, how, and why these changes must occur, the changes may begin to take place. These changes may begin at the start of the year 2014 and after one year's time (at the beginning of the year 2015) these changes must be evaluated in order to determine their success. The success of these changes may be determined by comparing the turnover rate of the previous year to that of the year 2014. Upon reviewing the success of the recommended changes, if needed they may be revised in order to make the changes more successful.

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