Stop the Madness: Reduce Employee Turnover
Employee turnover costs are largely hidden. They don't hit the profit and loss statement; they aren't line items in the budget. However, they can have a very real impact on your company's bottom line. In fact, there are studies that estimate it costs upwards of twice an employee's salary to find and train a replacement. The reasons why employees leave – not just the fact that they leave – have crucial implications for future retention rates among staff, job satisfaction, employee engagement as well as an organization's ability to attract talented people for job vacancies. Organizations track turnover to determine the following (among others): lost productivity during the time when positions are vacant, a loss of institutional knowledge, diminished productivity and efficiency from those who remain at the organization and must compensate for job losses by taking on additional work and subsequently training the new hire, hiring and onboarding costs for new employees, and potentially, decreased customer satisfaction, which is a result of having fewer personnel around to handle requests, (PricewaterhouseCoopers, 2006. Driving the bottom line: Improving retention). In other words, employee turnover can be very expensive and presents new management challenges.
So, how do we stop the madness and reduce employee turnover?
It Starts with the Hiring Process
Most executives and HR professionals agree that hiring the right people from the start is the single best way to reduce employee turnover. A good place to begin is to clearly define the role – both to yourself and to the candidate. Think about the position and what kind of person would be best to fill that role. Is it a business development position where the employee needs to be out-going, personable, and have the willingness and flexibility to travel and work after-hours? Do you need someone who is steady, consistent and reliable for a traditional 9-5 in-the-office position?
It is important to interview and thoroughly vet potential hires – not just for the right skills and qualifications – but for how they will fit in with the department and company culture. Do the values of your potential hire match those of your company?
People work best when they believe in the vision and mission of an organization; when they can make decisions on their own in pursuit of that vision; when they have the skills, knowledge and training necessary to be successful in their new roles; and when they understand the purpose of their jobs and what their contributions mean to the company.
Engagement levels rise when employees feel empowered to apply what matters to them to their work and with an employer whose mission aligns to their personal values. When you give employees the opportunity to understand that they are working for something larger – not just the person above them – it creates a sense of purpose and loyalty. And now, hopefully, you've created the blueprint for a long-term relationship.
And Continues Throughout Employment
A majority of organizations (77%) reported that they currently have an employee recognition program in place. 50% of those organizations also indicated that the program is tied to the organization's values. Companies with employee recognition programs reported an average employee turnover rate of 14% compared with organizations without an employee recognition program in place (17%). This translates to an average turnover rate that is 22% lower among organizations with an employee recognition program in place (Society for Human Resource Management, 2012). An employee recognition program does not necessarily need to be a formalized process (unless that's what works for your company).
What this really means is to invest in your staff. The reason that most people quit is out of frustration with the status quo and lack of future development. Create a work environment where new ideas are encouraged, good work is rewarded, and people are allowed to stretch themselves to take on new roles and responsibilities. Employees need respect and recognition from their managers and a challenging position with room to learn and move up. Executives often overlook how a positive work environment is for their employees and how far meaningful recognition and praise from managers can go to achieve that. Awards, recognition and praise might just be the single most cost-effective way to maintain a happy, productive workforce and reduce turnover.
Also, pay attention to your employee's needs – ask them what they want. Not every suggestion will be viable, but it is important that they feel valued as individuals and are more than just another cog in the wheel. Employee "happiness" is a key indicator of job satisfaction, absenteeism, and alignment with values. Investing in the happiness of your employees will pay dividends in engagement, productivity and retention. After all, happy employees don't necessarily want to leave.
Compensation and benefits are important but they are not always the deciding factor to stay or go. Why not ask successful employees to chair new committees or offer them an increased budget? Consider offering telecommuting or compressed work schedules when you can. The Boston College Center of Work and Family Study found that 76% of managers and 80% of employees indicated that flexible work arrangements had positive effects on retention.
The reality in today's workplace is that employees are more inclined than ever to pursue new opportunities and new careers. However, if you take a step back and really think about the position in terms of human capital and what kind of Return on Investment you expect – before you start the hiring process – the picture of employee retention and turnover becomes clearer. How much are you willing in invest in your workforce to get the results you are looking for?