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Money, Not the Answer to Employee Retention

by: Adele B. Lynn                     PDF Format

Even the most modest forecasters predict that the United States is at the beginning of a labor shortage predicted to reign for several years to come. In some industries, that shortage is at critical levels with no relief in sight. Since 1992, the unemployment rate has steadily declined from approximately 7.8% to a current rate hovering around 4%. In some industries, you don't have to use your imagination to picture turnover rates as high as 300%. That number is already a reality.

The same employers who in the past welcomed turnover as a way to infuse new blood and thinking into the organization, are now scrambling to develop retention strategies to hang on to top talent. Also, turnover is now contributing to lower profits because of increased costs of recruitment, training, and lost productivity. The US Department of Labor estimates that an employee who earns just $6 per hour will cost the company a minimum of $3600 to replace. Banking and insurance industry statistics from 1998 estimate that the average cost per hire ranged from $6000 to $35,000. Mercer, Inc, estimates the cost of turnover to be between $10,000 and $40,000 per employee. High tech companies have placed the cost of turnover as high as $100,000.

Before deciding on appropriate retention strategies, companies must gain a clear understanding of why people are leaving. The Bridgegate Company polled 660 working Americans who had left their previous employer for another job. Of the 660 workers polled, 43.2% DID NOT name compensation as the reason for leaving. In addition, Robert Half International's latest study places work environment and praise and recognition as the top two reasons that people are satisfied in their present positions. Sixty one percent of employees rated these factors above compensation. Also, in our own study, 51% of employees interviewed said that they would work for slightly less money if other conditions were present. The top four reasons sited for leaving an organization included organizational practices that weaken morale, poor fit between skills and culture, no concern for growth and development and inadequate training.

For retention strategies to have impact, root cause must be considered. Exit interviews, employee opinion surveys, let's chat sessions, employee focus groups, and an aggressive combination of communication strategies will help companies discover specific retention strategies, however, the following five strategies are based on current broad based research:

•  Create a High Trust Work Environment – Strong employee morale is an important prevention technique for employee turnover. When employees feel respected, trusted, and honored in their daily work relationships with management, employees are less likely to leave. In interviews with over 1000 workers, a high trust environment was defined as consisting of the following factors:

•  Importance – Giving employees a sense of importance and significance related to the tasks they perform is vital. When you can make all employees' work seem equally important to the organization, people feel valued.

•  Touch – No, not physical touch, but the notion of connecting with employees and showing concern and interest in who they are. Something as simple as saying “Good Morning,” may not seem important, but more than once, it showed up in the exit interview as an example of inconsiderate bosses who appear not to care about employees.

•  Gratitude – When leaders can express heartfelt gratitude for the gifts, talents, skills, abilities and attitudes that people bring to work, then this appreciative culture contributes to high retention.

•  Fair and Equal Contributions – When employees feel that all people are expected to perform, this contributes to feelings of fairness. One common gripe that can quickly cause resentment is “Why should I bust my butt, if Susie doesn't have to?”

•  Offer Strong Training Programs for New Hires – The most frequently cited reason for leaving in employees with tenure of less than one year, is inadequate training. Employees want to feel a sense of mastery and accomplishment, not failure. Inadequate training contributes to all the wrong feelings and sets up at best a culture of confusion and at worst, a culture of failure. Training programs for new hires should clearly spell out the expectations of the trainee, expected success competencies or proficiencies, and timeframes for success. These training programs should provide lots of feedback and reinforcement early in the process. The key is to help new employees feel a sense of mastery.

•  Offer Mentoring and Other Development Programs for Employees – Stagnation breeds discontent in many employees. Therefore, aggressive mentoring and development programs for employees are essential for keeping employees engaged. Development strategies should be very broad in scope. Not only development for the present job, but also development for future or potential jobs should be a part of your strategy. More and more companies are offering development on ANY topic, even topics that are non-job related.

•  Autonomy, Flexibility and Involvement - Greater and greater numbers of employees have expectations of the workplace that include autonomy, flexibility and involvement. People are no longer content to be sheep, they want input into their jobs, greater variety and challenge, and flexible work rules and environments. People increasingly see themselves as free agents who are shopping for the right conditions to employ their talents. When these conditions are present, star performers will often remain loyal, highly productive and creative.

•  Strong Leadership Skills Among Supervisors and Managers – The front line leader and manager are the points of contact that most employees experience on a daily basis. These people must have strong leadership skills or they will be unable to provide the kind of environment necessary to sustain good employees. Leaders must be trained to develop an employee culture that is filled with respect and dignity and helps people to succeed. In addition, it is the front line managers and supervisors that must listen to employees' concerns and work to create the culture that will inspire workers to be their best.

Creative sourcing techniques, job fit, and fair compensation will always remain part of the equation of low employee turnover. However, as the job market continues to tighten in the years to come, additional strategies as suggested must also be included. Besides retention, employers have a great deal to gain by creating environments of high trust. Higher productivity and greater creativity within the workforce are certain benefits. But more importantly, employees who are actually happy to come to work on Monday morning would suggest that the effort is worthwhile. And all this without spending money.

© 2001. Adele B. Lynn. All rights reserved.

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