Reduce Employee Turnover By Simple Everyday Practices

Finders keepers, losers weepers. Here's an interesting statistic: every time you replace an employee, you have a 50% chance of getting someone worse than the one you just lost! And in a small-to-medium business, who can afford that risk?

Rather than focusing on improving recruitment processes or increasing salaries to attract candidates, more organisations are focusing on retaining the employees they already have.

Often SMEs do not have a dedicated human resources manager with access to skills or information to address retention. And senior managers are already swamped with work without trying to take on more responsibility. What can small and medium-sized businesses do to increase employee retention?

Fortunately, there are a few effective tools that every organisation, even the smallest ones, will benefit from.

Count the cost

Losing staff costs time and money. Plus, there's the cost of lost opportunity: what advances could the business be making instead of using resources just to replace a lost employee?

Use this mini cost calculator to identify the direct and indirect cost of losing staff.

Direct costs	$	Indirect costs	$
Advertising costs		Lost productivity prior to resignation
Recruiter fees		Lost productivity until retrained
Back fill costs (overtime, casuals, contractors)		Lost productivity during vacancy
Assessment fees		Manager time
Higher salary for replacement		Peer time
Training costs		HR time
Other		Quality problems
		Project delays
		Overworked staff
		Adverse customer relationships
Total direct costs	$	Total indirect costs	$

Then think about weighting those costs for a real high performer. We can all identify in our business those employees who make a stronger or more immediate difference to company success.

Many organisations can easily identify their recruitment budget but few organisations have a retention budget. Collect all the costs associated with the loss of employees and you will see that prevention is an attractive commercial alternative.

Identify all costs of employee turnover to determine the organisation's appetite for improving retention.

Retain valuable employees first

Firstly, think about employees in terms of their relative value to the business. Some roles or some employees will have a greater impact on your business than others. Perhaps that impact changes over time - for example, a project manager is more valuable as a project nears conclusion than after implementation.

In other cases, it might be an employee's own attributes - social leadership or forward-thinking ability, relationship skills or computer skills - that make that person very valuable. In thinking about employees in this way it will become obvious that to lose some employees is more damaging than losing others.

So rather than worrying about employee turnover generically, think about specific employees first.

Identify who is most valuable to your business. Which roles or employees make the strongest or most immediate contribution to your business success?

Measure flight risk

Secondly, conduct a risk analysis on your HR assets.

Every employee is nearing the end of their employment cycle with their current employer - for some, their last day will be many years away. For others, they've already accepted another role and will be resigning any day now.

Who's planning on leaving? What events are coming up that might encourage an employee to resign?

It's impossible to know for sure but through our 6 years of research, we know there are tell-tale signs and events to look for:

• Look at an employee's previous employment history - lots of short-lived jobs might indicate a higher flight risk.
  
  
• Look at recent behaviour - unusual signs such as coming in later, leaving earlier and pulling back from work social occasions also suggest an upcoming resignation.
  
  

We've also identified 'disconnection events'. These events are what encourages a slightly disengaged employee to finally think ‘That's it! I don't want to work here anymore!'.

Typical events include:

• performance review or salary review results (even good ones!)
  
  
• working for a new manager
  
  
• having difficulty with a colleague or customer, or
  
  
• graduating from university
  
  

These events can trigger a decision to leave, especially if an employee has not had other key expectations met.

Profile each employee to assess their degree of connection and which disconnection events might be coming up that you can intervene in before the flight risk escalates.

Your valuable employees who register high on the flight risk scale must be the first priority to retain. Focus on high risk/high value employees first.

Find out what's important for employees at work

The key to retaining employees is not so much ‘how can I make them stay?', but ‘how can I make them want to stay?'. And the employee is the one who holds the answer to that question.

Engage in regular one-on-one discussions with employees about their expectations from work.

The most fundamental questions to ask employees include:

• ‘What do you want more of at work?'
  
  
• ‘What do you want less of?'
  
  
• ‘Being realistic, what one thing will make working here so much better for you?'
  
  

Be frank about what you can and cannot deliver. Employees just want to know the truth and will appreciate honesty. Even if you can't provide that promotion, or that extra challenge or variety, employees will value just knowing where they stand. You may uncover expectations that you can meet such as being more flexible with shifts or subsidising study or providing a mentor.

The real key is to open up regular and honest discussions with employees about their future.

Show interest and uncover unmet needs in one-on-one discussions with staff, especially high risk/high value employees.

Make managers aware of their retention responsibility

In six years of research amongst every type of organisation - from government to private, from global to family owned, from large to small - the same central theme emerges: managers have the most pervasive influence over whether an employee stays or resigns.

Every day, what a manager says and does (or fails to say and do) affects their teams. Most conversations around the evening dinner table include reference to ‘What my manager did today'. Employees join a company but they leave a manager. In order to increase retention, every organisation must increase its managers' capability to retain employees.

A retention-capable manager will be one who provides feedback, gives guidance, promotes an employee's career interests, takes a personal interest in their lives and helps them with their problems.

Organisations need to focus less on salaries as a retention tool and turn more to building effective managers. The result will be not only increased retention but higher performance as employees' expectations are met.

Managers influence performance and retention, so make them aware of their impact and develop their retention capabilities.

For organisations who struggle to attract candidates - let alone great candidates - to their vacancies, the emphasis must now turn to protecting existing employees and encouraging them to stay. Interacting with employees and working with them to create a place they want to stay employed will only add to positive word of mouth and encourage new candidates to apply for future roles.

And when organisations consider the substantial costs of losing a key employee and retraining the replacement to full productivity levels, time spent in encouraging existing staff to stay starts to look increasingly like an effective use of time. Better to be great at retaining staff than being great at conducting interviews with possible replacements!

Utilising these effective tips and tools to a small-to-medium business is an effective start to building a retention-capable organisation.

Lisa Halloran is the Director of Retention Partners. Lisa’s background includes 4 years in political market research and 14 years experience in HR management and consulting roles in television, maritime, retail, manufacturing and insurance. Lisa has a Bachelor of Commerce degree and an MBA from AGSM. Retention Partners was established in 2000 as Australia’s employee retention specialist and serves clients in FMCG, law, government, telecommunications, education, sport, health and engineering. Retention services include retention and attrition surveys, exit interview outsourcing and manager retention skills programs. Phone Retention Partners on 1300 93 83 71 or visit the web site: www.retentionpartners.com.au
First published: 19 April 2007.
Last updated: 19 April 2007.