Managing Employee Retention and Turnover

Managing Employee Retention and Turnover

Employee retention has always been an important focus for human resource managers. Once a company has invested time and money to recruit and train a good employee, it is in their own best interest to retain that employee, to further develop and motivate him so that he continues to provide value to the organization. But, employers must also recognize and tend to what is in the best interest of their employees, if they intend to keep them. When a company overlooks the needs of its employees and focuses only on the needs of the organization, turnover often results. Excessive turnover in an organization is a prime indicator that something is not right in the employee environment. We will look at the differences between retention and turnover, why employees stay, reasons why they leave, and what can be done to save them. We will also examine some external factors that will make employee retention and turnover reduction highest priorities for human resource professionals in the twenty-first century.

Basically, employee retention is measured by an employee's longevity with a company, and is the desired outcome of a company hiring workers it wants and needs. Many organizations find it more productive and profitable to redirect resources formerly allocated to recruiting, hiring, orienting, and training of new employees and use them instead toward employee retention programs. Such programs identify good performers who are likely to leave the company and work proactively to retain them. Although there is no tried-and-true prescription for retaining good employees, there are five factors that have a proven positive impact on retention and they should be taken into consideration when developing an employee retention program:

* Supervisor/Employee relationship - "Immediate supervisors who are also leaders of people will be the most important people in the workplace of the future..." (Jamrog, 2004) Today's supervisor is expected to be a coach, a trainer, and a mentor. Foremost, he must be able to communicate well up and down the organization. Employees who have honest, open relationships with their supervisors feel a sense of commitment to them.

* Employee engagement - The best employees are motivated by tasks that are intellectually stimulating and provide variety and challenge while contributing value. Studies from the Gallup organization show that employees who have an above-average attitude toward their work will generate 38 percent higher customer satisfaction scores, 22 percent higher productivity, and 27 percent higher profits for their companies.

* Training - Employees want to increase their skills, knowledge, and abilities to remain marketable. It gives them a sense of job security. In today's workplace, the more training employees get, the more likely the employer will retain them. "According to a 1999 Emerging Workforce Study conducted by Interim Services and Louis Harris and Associates: Among employees who say their company offers poor training, 41 percent plan to leave within a year, versus only 12 percent of those who rate training opportunities as excellent. (Business Week, March 1, 1999)"

* Recognition - According to Roger Herman, chief executive officer of The Herman Group, a management-consulting firm in Greensboro, N.C., "you need to show [your employees] that you appreciate them, that you value their opinions--and show them in a lot of ways." Care and concern for employees on a personal level means more to many employees than compensation.

* Balance - "Management's recognition of the importance of personal and family life remains the top driver of employee loyalty. Employees who spend a moderate amount of time each week attending to personal matters while at work have a higher level of commitment to their employer than those who spend no time." (America @ Work 1999," Aon Consulting, Chicago, Illinois; 312.701.4844) Employers who provide a work/life/family balance are more successful in retaining employees.

Traditionally, executives have used compensation strategies to solve retention problems, but in today's workplace high pay by itself is not enough to keep employees around. A recent survey by The Society for Human Resource Management ranked tuition reimbursement programs and vacation/holiday time as the top two retention initiatives being offered by employers. In addition, instant recognition programs, such as spot bonuses, are being used to reward excellence in performance as it occurs. Such programs give employees immediate gratification for their efforts rather than delaying it until annual reviews. Also, flexible work hours and telecommuting programs that allow employees to better balance their work commitments with their family duties are becoming more common. According to Ceridian Employer Services (2004), "90 percent of companies with more than 5,000 employees allow telecommuting.... And ... 52 percent of large companies use virtual teams." Organizations must continually search for innovative ways to retain their best employees. Fortunately, the costs of these efforts are low in comparison to the high costs of turnover.

Turnover of employees can be involuntary or voluntary. When a company "lets go" of an employee who has been a bad performer, has violated company policy, or broken a law it is usually considered involuntary turnover. So are layoffs. More often we speak of turnover in the context of being voluntary, or the unplanned loss of employees who leave on their own accord, but that the company would prefer to keep. This type of turnover is undesirable. Regardless of type, turnover costs are staggering. The quantitative costs include: hiring a temporary to fill the position or paying overtime to an existing employee, lost productivity, loss on training dollars invested in the employee who left, severance pay and benefits, as well as, advertising, recruiting, hiring, orienting, and training costs to fill the open position. Carl Kutsmode, Principal and founder of the Tiburon Group, an Internet recruiting solutions consulting firm makes this observation, " In many cases, reducing your turnover rate can significantly reduce your total staffing costs by as much as one half. " The Journal of Business Strategy, 2003 estimates turnover costs in the United States at $5 trillion annually. There are also intangible costs associated with turnover, such as a drop in employee morale, poor service delivery, and lost customers. Though difficult to quantify, they impact both productivity and profitability.

Because employees are inclined to state politically correct reasons for resignation, companies often conduct exit interviews to obtain value feedback. Using human resource