Imagine that you enter your office one morning to find your CFO informing you that the company safe was depleted overnight by more than $100,000 cash without any explanation. Most leaders would be auditing their books immediately as well as collaborating with their security team or the local police to determine how the money was stolen as well as how to recover it. Sadly, when a valued employee ends her/his tenure at a company, there is not a similar level of investigation, but simply an internet posting to replace the position
The Society of Human Resource Management (SHRM) cites employee turnover typically costs an organization about 150% of the departing employee’s base salary to effectively replace the position. Why so much for turnover as compared to the cost ($10K - $20K) for hiring an employee for a new position? The costs of departing employees includes temporary labor, replacement training, management staff time coping with the changes, lost revenue and lost customers whose connection to your organization was tied to their relationship with the departing employee. The company will be adversely affected briefly while re-assigning duties for the departing employee during the recruitment process and followed by three to six months for the new hire to assimilate to the functions of the job.
So why do employees leave? Many persons incorrectly assume it was a matter of pay. A famous scene from Mad Men occurs when Don Draper’s protégé Peggy Olsen is seeking recognition, mentoring and autonomy, but he incorrectly presumes financial reasons and attempts to resolve the dilemma by stating, “That’s what the money is for.” Compensation is often listed near the bottom of the top ten reasons that an employee remains with her/his organization.
Kim Ruyle, Inventive Talent Consulting, emphasizes that employee engagement is a mindset in which employees take personal stakeholder responsibility for the success of the organization and apply discretionary effort aligned with its goals. If you want to retain employees, engage them!
Numerous studies cite the key to employee retention is the relationship between the employee and the employee’s manager. Employees who perceive loyalty FROM their immediate supervisor are usually aligned with company mission, dutifully complete assigned tasks, and inform managers of problems to mutually solve.
Marcus Buckingham and Curt Coffman, the authors of First Break the Rules, challenge great managers to spend more time with their best employees. Too many managers focus their time on their least productive people rationalizing that mindset with the belief that struggling employees need instruction and control. The underlying message becomes “the better your performance becomes, the less time and attention you will receive from me, your manager.”
Great managers learn from their most proficient employees, gather their feedback to customize team policies and procedures, and showcase their employee’s talents to other senior leadership. Occasionally, a long-term valued employee will encounter a personal or professional challenge which is adversely affecting the employee’s performance. A guiding principle of an Employee Assistance Program (EAP) is to provide short-term consultation from an expert clinician or Organizational Development specialist to address the reasons for the work challenges and then identify specific objectives to overcome the work challenges and resume expected performance outcomes. For small business owners who have not included an EAP within their benefit structure, Management Consultations often cost a few hundred dollars, which is a great Return on Investment, compared to the replacement costs cited above.
Sharon Armstrong, author of The Essential Performance Review Handbook, notes that happy employees are ones who stay with a company for an extended period, and that saves time and money. Are you ensuring that your employees are likely to be retained by emphasizing quality managerial skills to increase your financial bottom line?