The Importance of  

   Employee Re

 

tention
by Ed Schmitt       


   ASK ANY BUSINESS OWNER OR HUMAN RESOURCES MANAGER what they consider to be their primary staffing objective and they'll most likely say that they are focused on hiring only the best employees into their organization. While this is an important objective indeed, there is a key element of personnel management that is every bit as important, but often overlooked - retention of current employees. This article will give you a brief insight on why employees leave, what companies can do to keep them from going and how to plan for the long run.

Changes in the World of Work

   As times change, workers change. Companies must evolve along with their employees to avoid getting caught up in the "revolving door" syndrome with their staff. Today's workers have different expectations from the companies they work for and are much less hesitant to leave one job for another if they don't feel those expectations are being met. Job security is less important to today's worker. In fact, many see job hopping as an opportunity for advancement. What they can't get at one company, they can probably find at another. In order to reduce turnover, you must think to yourself, what is my competitive advantage? What is it about your company that will make employees want to stay? To answer that question, you first have to understand why employees leave.

Why Employees Leave

   Surprisingly, most people do not leave their jobs for money. While money usually plays some role in a person's decision to leave a company, it is not normally the deciding factor. Research indicates that bad management practices are the real reasons employees leave. Management controls the majority of the reasons people leave. Overwhelmingly, it is the day-to-day interaction between management and their employees that create what are often called "dissatisfiers." Among the most common dissatisfiers cited by employees in exit interviews are:

  • Lack of recognition and rewards
  • Lack of advancement opportunities
  • Family obligations
  • Lack of feedback/communication from management
  • Not being made to feel like a valued part of the company
  • Lack of training/education
  • Non-competitive compensation packages
  • Lack of responsibility/challenging work

What You Can Do to Address These Concerns?

   You must have a planned approach in order to provide successful solutions to your employees' concerns. Approach your retention plan as a long-term objective rather than a quick fix. It needs to become part of your company culture, embraced by all levels of management and kept on the front burner at all times.
   The next step is to address the specific concerns of your employees. That is the tricky part. There is not one simple solution, however, if you can demonstrate to your employees that you are willing to make an investment in them, positive results are sure to follow.
   Some issues can be addressed immediately and without a lot of expense. For instance, establish an employee recognition program. Reward those employees that go above and beyond with a day off, flowers, a gift certificate to a chic restaurant or another gesture. Simply acknowledging all the hard work your employees do goes a long way in raising their level of job satisfaction. To help ease the burden of employees with family obligations allow flex-time so parents can drop off or pick up their kids from school. Other quick and inexpensive programs include mentoring programs, employee communication forums and frequent performance evaluations.
   Many larger companies, with the financial means to do so, also offer their employees daycare services, concierge services, tuition reimbursement, stock options, profit sharing and performance based bonuses.

Hidden Costs of Turnover

   It is expensive to lose good people. It may not always be possible to put an exact price tag on the loss of an employee, but there are four internal sources to consider. They include the costs of termination, the cost of hiring and training a replacement, the vacancy cost until the job is filled and the loss of productivity with a new hire.
   All of these elements can be lumped into the following cost calculation formula: Number of Employees Lost x Average Salary x 30% = Annual Turnover Cost. The 30% figure is a combination of a conservative cost estimate of the departed employee's salary and the time associated with the elements mentioned above. For example, assume a company has 5,000 employees with the average salary of $35,000. Now assume the annual turnover rate is 25%. The costs would break out this way:

5,000 x 25% = 1,250 (employees lost in one year)
1,250 x $35,000 x 30% = $13,125,000
(total turnover cost in one year)

   If the company were able to reduce the turnover rate by 10%, the annual savings would be $5,250,000.
   These staggering figures should be motivation enough for owners and managers to begin to focus on retaining their best employees.

Begin Today!

   Employee retention is more than a buzz word, it is a very real and powerful part of doing business in today's marketplace. It is becoming more and more difficult to find and retain top talent. The company that recognizes and embraces the need to be competitive in meeting the expectations of its employees is the one that will hold on to its most valuable asset - its employees.


Ed Schmitt is an Account Executive with MRI Retail a Florida-based executive recruiting firm focusing on placing individuals in the following industries: Credit, Debit, Smart Cards, Acquirers, EFT related software and Internet EFT Systems. Ed can be reached at 561.871.1100, ext. 203 or .



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