Employee Retention - Challenge or an Opportunity?

Retaining top talent remains very high on today’s executive agenda. In today’s globalized economy, if the opportunities for growth, advancement and work-life balance are not met for an employee, it is likely that the individual may seek employment elsewhere. The role of Human resources professionals in hiring and retaining the right employees is becoming increasingly crucial to an organization’s overall strategy.

The critical aspect is the need to minimize the crippling effects that key talent departures have on organizations, especially those that rest much of their success on these high-output, unique talents. 

Your expectations of people and their expectations of themselves are the key factors in how well people perform at work. Known as the Pygmalion Effect and the Galatea Effect, respectively, the power of expectations cannot be overestimated. These are the fundamental principles you can apply to performance expectations and performance improvement at work.

Why do employees leave?

There are five important areas that motivate people to leave their jobs. 

1. Poor match between the person and the job
2. Poor fit with the organizational climate and culture
3. Poor alignment between pay and performance
4. Poor connections between the individual, their co-workers, and the supervisor
5. Poor opportunities for growth and advancement 

These five P's can be addressed successfully. Employee retention begins by paying attention to what causes low job satisfaction as well as what attracts and retains your workforce.

U.S. management consultant Leigh Branham is the author of “The 7 Hidden Reasons Employees Leave: How to Read the Subtle Signs and Act Before it’s Too Late”. He's analyzed this data and has determined that there are seven fundamental reasons why employees disengage. 

1. The job or workplace was not what the employee expected: This is the No. 1 reason for turnover in the first six months and happens because employees have unrealistic expectations when they are hired, have misconceptions about the work, or are sometimes misled during the interview process.
2. The mismatch between job and person: Pressure to hire in a hurry, which leads to grabbing warm bodies just to fill slots, is the main culprit. Another contributing issue is that managers assign and promote workers to the wrong jobs, erroneously thinking that anyone can be trained to do anything or overlooking the fact that job satisfaction may be more important to an employee than getting a promotion.
3. Too little coaching or feedback: A survey of 1,149 people at 79 companies reported by Training magazine found that manager feedback and coaching skills were consistently rated as mediocre. To counter these problems, progressive organizations train all managers in effective, adult-to-adult coaching techniques to replace the ineffective parent-to-child model that frequently results in making employees defensive and even more disengaged. They allow employees to anonymously complete surveys rating their managers as coaches and people managers. Such upward evaluations help companies identify managers who need training or coaching in people management skills or need reassignment into altogether different positions and carefully assess the people management aptitudes of all managerial candidates.
4. Scarce growth opportunities: Amongst younger top performers, this aspect tops the list, when they rate today's managers on leadership competencies. While 85% of employees say career growth is a key reward, according to a Towers-Perrin study, only 49%s ay their organizations provide it. Employers of choice provide growth and advancement by providing self-assessment and take-charge-of-your-career workshops for employees, supported by career coaching for managers, by eliminating rigid time policies that restrict employees from advancing when ready, communicating clearly with all managers that the organization, not the manager, owns the talent, and that talent hoarding and blocking of internal employee movement will not be tolerated and requiring that all managers have developmental discussions with all employees at least yearly and conduct them separately from performance discussions.
5. Feeling devalued and unrecognized: The reasons include not being paid fairly, not receiving a simple thank you for a job well done, being treated with disrespect, being ignored, being put down instead of valued for being different, not getting the right tools and resources to do the job, and having to work in an unacceptable work environment.
6. Stress from overwork and work-life imbalance: A family and work survey conducted by True Careers reported that 70% of all workers don't think there is a healthy balance between their work lives and their professional lives
7. Loss of trust and confidence in senior leaders: Human resources consultancy Watson-Wyatt Worldwide, which evaluates a company's employment brand by its stock-growth performance, found that companies with high trust levels outperform companies with low trust levels by 186%. And yet, less than half of workers trust their senior leaders Why? Because employees in too many companies see their senior executives as self-interested, short-term focused, ego-driven, and greedy. It's a simple equation: When employees don't feel their leaders are interested in their welfare, they are generally not interested in giving their best effort. But when employees feel that senior leaders are committed to their well-being, they tend to return that commitment by staying and becoming more engaged and productive.

Other reasons

Most employees leave their work for reasons other than money - and your organization can correct these reasons. Most leaving employees seek opportunities that allow them to use and develop their skills. They often indicate that they want to use their qualities and skills in challenging teamwork led by capable leaders.

Managerial staffs cite "career growth" and "leadership" as the major factors that influence attrition and retention, together with "opportunities for management" "ability of top management" "use of skills and abilities" and "work/family balance". 

Ineffective Managers

High employee turnover can be recognized and properly attributed to poor managerial performance, emotional intelligence, and ineffective leadership. Poorly selected or improperly trained managers can be very expensive. 

Do organizational factors influence job tenure?

We consider whether job tenure is arbitrary, or if organizational factors impact on the length of job tenure. Average job tenure differs across industry sectors. It has been widely reported that some industries have greater difficulty retaining employees than others.

War for Talent

The finance, IT, and professional services have the next lowest average job tenure. These industries employ large numbers of workers with specialist skills, knowledge, and expertise. With skills shortages prevalent, these individuals tend to be highly sought after. With their skills, so much in demand, it may be easier for these individuals to shop around prospective employers, looking for their ideal role.

The larger the Organization, Longer the Employees Stay

Job tenure within smaller organizations is lower than in large organizations. Job tenure in organizations with more than 5,000 employees averages 3 years. This is fully 11 months longer than in the smallest organizations (less than 50 employees).

Possible reasons for this could be a lack of development and promotion opportunities or the greater impact of personality clashes within smaller organizations. Variation in the job tenure in different locations is, perhaps, due to the types of industry prevalent within particular regions.

Average job tenure- Changes over time

There has been much recent debate centered on how average job tenure has (or hasn’t) changed in recent times. Many commentators claim that the increased prominence of redundancy programs over the last 20 years has broken the psychological contract between employers and their employees.

Effective Attrition Management

Identifying your employee turnover rates and benchmarking this figure against similar organizations is one way to assess significance, however, the key determinant of whether retention is a cause for concern is how difficult and/or costly it is to replace leavers.

Why is attrition important to consider?

Employee attrition costs 12 to 18 months’ salary for each leaving manager or professional and 4 to 6 months’ pay for each leaving clerical or hourly employee. If managers know the real causes of attrition, managers can control attrition and retain employees. Each retained employee can save money and lead to better opportunities.

Though employee turnover can help organizations evolve and change, an American Management Association survey showed that four out of five CEOs view employee retention as a serious issue for organizational success.

Costs Incurred due to attrition 

The true cost of attrition to the organization is often substantially higher, as this figure does not include:

• Cost of lost productivity (during notice period, time to recruit and induction)
• Cost of lost knowledge, expertise and business relationships (perhaps picked up by a competitor)
• Comparing employee turnover costs with costs of implementing an employee retention strategy will prioritize the action required.
• Calculate their employee attrition rate and its associated costs
• Benchmark their attrition against similar organizations Identify potential causes of their staff turnover
• Highlight possible solutions to try to improve their staff retention.

New Hire Costs

The cost of getting a new person on board+ cost to put them on the payroll + providing system/security passwords/ID cards+ telephone hookups +email accounts+ leasing of automobiles/equipment + Cost of a manager's time spent developing trust and building confidence in the new employee's work.

Training Costs

When an employee leaves, the costs incurred for training include:

Cost of orientation - new person's salary + the cost of the orientation trainer + cost of orientation materials

Cost of departmental training - the actual development and delivery cost + salary of the new employee.

Lost Productivity Costs

A new employee’s on-the-job learning causes low productivity. Use the following guidelines to calculate the cost of this lost productivity. After the completion of the training provided:

Also, calculate the cost of mistakes the new employee makes during this elongated indoctrination period.

 When do employees leave?

As the graph shows, the peak shows employees who have worked for the organizations for only two years. In the survey, 76% of respondents had left their last organization within 3 years.

While concurring that most job tenures last less than 3 years, their results identified a second group. Having ‘shopped around’ in their early careers, they suggest people then find a role and organization in which they feel comfortable and then settle down long term. 

Reasons for Leaving: Implications for Retention Strategies

Many employers were unaware of the real causes of employee attrition. This highlights the importance of employers ensuring they understand and proactively manage the most influential HR practices to reduce employee attrition. 

COO, Large Bank says, “Who is responsible for making retention happen? Is it HR? No. HR builds framework. Is it the senior management? Senior management provides the resources and the direction. Who is responsible? We all are! We all have to make retention come to life. Your own people frame their company by your behavior. To them, you are the company. They came here because of you. They stay here because of you, and 75 % of those who quit don’t quit the company – they quit their managers.

How can organizations "crack the code" on talent retention? – is the crux of my next blog, which lays out steps for designing and implementing Talent Retention strategies and provides useful tools for developing the same.