The lowest unemployment rate since 1976 is a headache for many business owners. The shortage of skilled workers has become the single biggest HR risk. It is a complex problem, however there are a few guidelines we suggest every business follow.
Quantify your problem
It is a common belief that turnover costs an organisation three times the salary of each person that leaves. But what are the sources of those costs? Generally there are three categories of costs associated with turnover:
- Direct costs:
these costs are typically those that spring to mind when you think about losing staff. They include costs associated with recruitment, training and socialisation of the new employee.
- Indirect costs:
include costs associated with any temporary or contract staff that are brought in to fill the position whilst a replacement is sought, lost production costs and costs associated with lowered morale when a popular employee leaves.
- Intangible costs:
as implied by the definition, intangible costs cannot be measured, but include things such as knowledge loss.
It is important that businesses understand the magnitude and sources of their costs. This allows businesses to pinpoint their major sources of expenditure and concentrate their efforts on reducing costs.
It also helps businesses to track the success of various strategies in place. Some organisations may have little success in reducing the number of people who leave their organisation, but are still able to reduce the costs associated with their turnover, by making induction better and faster, thereby reducing productivity costs.
Diagnose your problem
Attraction and retention of staff remains a popular media issue. There is a lot of research in the field and not all of it will apply equally to every organisation. If a business addresses its retention problem from the wrong angle, or implements a popular solution without exploring its validity for their particular context, it could be an expensive exercise.
We have developed an attraction and retention audit tool to help businesses analyse their business and set key measures and priorities to address it. This assists businesses by:
- understanding the important problems,
- benchmarking practices against best practice and industry leaders,
- providing clear priorities for the business, and
- ensuring that any resources spent on the issue are well directed.
Key tips
Despite the above, there are some strategies that generally apply across the board. If a business does nothing else to minimise attraction and retention issues, they should implement the following:
- Core HR practices
The factors that cause an employee to quit are not the same as those that cause you to stay. An employee's motivation to stay is most strongly influenced by core HR practices such as planning, measurable Key Performance Indicators, performance management and recognition and reward. SMEs have a big opportunity to be creative in this regard - golden handcuff your star performers!
- Line management
People don't leave an employer, they leave their manager. Your managers need to understand their role in retaining staff and be provided with the skills to do so. Set some key performance indicators around this.
- Critical events
A fifth of employees who leave an organisation do so after a critical event. Critical events can occur within the organisation, such as bullying, or they can be outside of the organisation, such as marriage, birth of a child, death of a loved one, or a call from a head hunter. Managers need to be aware of the potential impact of critical events and provide extra support to employees who may have experienced one.
There is no one size fits all approach to attracting and retaining staff. Businesses need to carefully diagnose their problem, choose creative strategies to address it and monitor the strategies to ensure they are working.