Employee Turnover is Detrimental
by Freda Turner
A telecommunications company recently calculated the cost in replacing an
operator. After considering the exit interview, administrative activities,
replacement and training costs of education, and coaching, the cost exceeded
$6K. In addition, there were indirect costs associated with employee turnover
including increased workloads and strains as coworkers pick up the slack until
new employees are hired and trained. Additionally, an organization’s reputation
becomes somewhat tarnished as others hear and observe revolving-door turnovers.
The January 24, 2001 issue of the Wall Street Journal reported "…labor turnover
is one of the most significant causes of declining productivity and sagging
morale.” Understanding the cause of employee turnover is the first step in
being able to control and manage the most costly problem to organizations.
New Hiring/Training Strategies
Successful football coaches have long extolled the virtues of selecting the
right players (employees), inspiring them to win, and showing them you (as
manager) care about them. Many business organizations are now realizing this.
New retention strategies include offering new hires retention bonuses payable
after 6, 12, and 24 months instead of signing bonuses. Additionally, a strong
orientation/training program has proven to positively impact retention. One
local hospital discusses with new employees how they fit into the treatment
program providing employees an opportunity to see the significance of their
contributions. Aventis Pharmaceuticals show new hires a video that reinforces
the role of employees in making people’s lives better. The video features
patients who have benefited from the company’s allergy medications discussing
how much those medications helped them. In a radically different industry,
Harley Davidson puts up large, full-color posters of Harley owners standing
beside their motorcycles, to remind employees of the important role they play
in customer satisfaction. Taco, Inc. (a heating and cooling equipment manufacturer
in Cranston, R.I.) knows the benefits of providing employees training opportunities.
They have an annual turnover rate of less than one percent, while revenues
have increased at a steady 15-20 percent annually since opening their employee-
learning center. IBM set up internal career center where employees can attend
lunch-and-learn seminars and other subjects relating to career opportunity
and growth. Microsoft created an electronic campus for employees providing
professional development resources. Ernst and Young, Price Waterhouse and
Hewlett Packard provide a highly structured online mentoring program that
has resulted in significant reduction of employee turnover.
Larger companies are finding they are losing top-notch talent to start-ups,
because the latter tend to offer more autonomy and flexibility in day-to-day
work. Flexibility in work arrangements is also an important factor in retaining
employees. In a survey conducted by Wirthlin Worldwide, 75% of the respondents
stated that they must take some company time at least once a month to tend
to personal needs. Of the group surveyed, 40% responded that they take work
home or work overtime at least once a week. Understanding work-life balance
is important even in places such as fast-food restaurants. One example relates
to Steve Bigari who owns nine McDonald's restaurants in Colorado Springs.
He implemented "McFamily Benefits" to reduce turnover in a 300% turnover industry.
His benefit plan offers access to transportation, education, health care,
housing, childcare, and even stock options. He's able to offer these programs
because of collaboration with state, nonprofit and private agencies. All employees
qualify after 90 days. The idea behind Bigari's plan is to build a trusting
relationship between employee and employer and to get them the benefits they
need. His retention statistics reflect his efforts are working.
Poor Managerial Coaching
A good manager can make even the worst of working conditions tolerable, and
a bad manager can make the best company one of the worst. The manager’s style
creates a certain type of relationship with employees. If that relationship
is a poor one, it can drive employees away from the workplace. The January
24, 2001 issue of the Wall Street Journal cites an example of an engineer
who was a poor manager. The engineer was a micromanager, and did not provide
employees the opportunity to grow and flourish. His team finally ground to
a halt in productivity. The CEO recognized this and reassigned the engineer
to a project that utilized his individualism. The employees were given a new
manager and of course, production improved.
If your employee turnover is high, find out why. Retention should be an
evaluated competency at every level of the organization. Until there is accountability
or negative consequences from high turnover, don’t expect it to stop.
Freda Turner, Ph.D., researches workplace trends and best business practices.
She is affiliated with the Graduate and Doctoral Programs at University of
Phoenix and may be reached at firstname.lastname@example.org
Also by Freda Turner | Additional articles
on turnover and retention in The HR Refresher
in The CEO Refresher Archives