The high cost of losing employees to Employers of Choice, the causes and how to eliminate it
Employees fire companies? You bet they do!
Just like companies fire employees that don't meet their needs, employees fire companies that don't meet theirs. Employees fire companies to pursue better opportunities, pay, culture or working conditions, whatever the case may be, many companies just don’t live up to their employees’ requirements.
But why should a business even care about level of turnover? A high level of turnover should not be ignored; it affects sales, customer service and even contributes to employee apathy. The bottom line is that it negatively affects the company’s bottom line in the following three areas:
#1 - Hiring Costs:
Recruitment and placement costs, management time, higher overtime costs and costs from temp agencies can be significant, and since most temp agencies require a minimum commitment or buyout of placed employees, these extra costs can go on for months.
#2 - Training costs:
Learning curves of new employees will cost your company through increased error rates, productivity losses, loss of infrastructure capacity and mentoring costs in the immediate and adjoining departments. In high turnover situations, the cost of inexperienced mentors can be overwhelming.
#3 - Cost of the negative effect on your corporate culture:
High employee turnover is a significant key indicator of the health of a company's culture. Employee turnover also exacerbates a poor culture, which directly affects the bottom line. Since companies with good corporate cultures achieve profit margins more than 3 times greater than other companies, it's just good business sense to be attentive to the health of your culture. The Russell Investment Group conducts an annual assessment of the financial performance of the publicly traded top 100 Employers of Choice against the S&P 500 and the Russell 3000, and over a 10 year period, the top 100 Employers of Choice achieved annualized stock returns of 6.8 percent, with the S&P 500 coming in at 1.04 percent and the Russell 3000 at 1.25 percent.
Know it’s coming
- Strong communication on survey results and the plan of action
- Frequent progress reviews
- Bottom up solutions being the imperative; a good employee engagement program is key.
Why it happens and how to fix it:
Lack of Opportunity: 50% of employees surveyed say career pathing and development is insufficient in their workplace. You can do it and it doesn’t even have to cost you!
- Career pathing; Groom from the start; an effective orientation program not only teaches a new hire what your company does, it shows them the career opportunities within your company. Having each department team leader use an orientation checklist to go through their department’s process flow for each new hire is a very effective way to plant a seed and leaves the career pathing up to them.
- Effective team leaders should always know where the team is as far as career pathing interests and their personal situations. This should be included in monthly sit downs with each employee.
Investing in your company infrastructure but not your employees; aren’t they your company? Walk the talk! With a thorough training program that includes written procedures you can create your own company university. Some of the best managers and salespeople I have seen have come from the warehouse; they know how the company works and they recognize the impact that a lack of interdepartmental synergy can have on your company over the employees who haven't moved through “the ranks”.
Poor pay and benefits: Remuneration and benefits aren’t the most important element of employee satisfaction but hey, would you be satisfied if your industry peers were making more than you are? Also, retirement savings plans are the most sought after employer-provided benefits, with 91% of employees citing them as a reason for accepting or keeping a job. You know what your competition is doing with marketing and merchandising but not with baseline salaries and benefits? Know your competition.
Micromanaging: No surprise here: over 40% surveyed say they want to be led by someone who is more like a coach or a mentor. Approximately 30% prefer a hands-on leader, and 10% of job seekers like a democratic leader. Having a strong knowledge management program and employee key indicators allows the team management autonomy and reverses the time that management spends on administration vs strategy. This allows more time for mentoring and reviewing performance through the systems.
Poor relationship between a team and a team leader: Relationship building is a key component of an effective team leader. A team leader that is surprised by a resignation usually is not effective in this regard. This is further supported by a recent report from Hudson, a global recruitment company where Hudson general manager Andrew Tomich adds: “Employees are looking for leaders to be able to understand and guide them through complexity and change, and this can only be achieved by having close relationships...” Having the team assess leadership performance through the employee opinion survey and holding management accountable with personal management objectives ensures your company's core values will be maintained.
Working Conditions: Would you rather work
- In a meadow or a jail cell? Pay attention to the work environment itself, ergonomics and perks like free coffee and comfortable rest areas for example.
- when you wanted to work or by a strict schedule or even worse a constantly changing shift schedule? Autonomous Work Forces, or, site, managed and schedule autonomous teams are something to strive for. Although some organizations are close to 100% autonomous and reaping significant benefits, this is not realistic for all. But almost all companies with an administrative element can achieve it on some level. Cloud solutions are the vehicle and written procedures and key indicators are the control to empowering employees and leaving the team leaders more time for mentoring and business strategy.
- being micromanaged or by personal management objectives? PMOs allow managers to be “hands off” and still maintain high visibility on individual’s performance
Empathy: A team leader should not only be approachable by team members he/she should be knowledgeable and supportive of outside influences that affect team member performance. (Good employee opinion survey component)
If you can’t be proactive be reactive:
- Don't you want to know why you got fired? Employees know why and have the opportunity to improve, shouldn’t you know so you can? Exit interviews should be followed up through a third party survey and should be centered around questions like “what could the company have changed to make you stay?”
- Turnover has to be tracked; if you don’t measure it how do you know you’ve improved? Track turnover by department and how a separation was initiated, this information will steer you to the area that needs attention, whether it’s hiring right, corporate culture, or leadership.
Moving Ahead:
Like every part of your corporate structure, strengthening these will create a stronger organization and improve your bottom line. A company with high turnover will have low profit margins. Period. Not only does turnover add extra operating costs, customer experience takes a hit, and turnover decreases the chance of the company to benefit from being an employer of choice. It’s pretty simple: treat your team members like you want to be treated and they will look forward to work, not dread it.
#corporateculture #triadmlc
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