March | 2012 | CEO People Management

Staff retention is one of the single biggest factors affecting future business success in today’s environment. In particular, the success of an organisation is very much dependent on their “critical employees” – those employees in whom the intellectual capital and corporate memory resides.

Not withstanding, not all turnover is necessarily bad. Paradoxically, a low turnover (i.e., high retention) rate in some organisations may pose just as serious a problem. A high retention rate may indicate a workforce which is “stuck” (i.e. the “walking wounded”) and who are too afraid to leave. These people consider their employment prospects elsewhere, under the equivalent terms and conditions of their current employment, to be bleak.

Such a workforce is hardly the foundation for an organisation to move forward and respond to today’s dynamic business environment and challenges. What is therefore important is selective staff retention or retaining the “right” people. However, retention is a complex issue – there is no “magic wand” solution.

Ultimately, staff retention is about how an organisation manages its workforce, or more specifically, its relationship with its workforce. Apart from the obvious cost savings in retaining the right people, there are other significant, lasting benefits to an organisation which are often unappreciated. These include:

Higher levels of job satisfaction and performance
Reduced workplace stress
Enhanced employee well being, and
More satisfied customers

However if retention is relegated to the status of an HR issue, it often falls to the bottom of a manager’s priority list. When retention becomes one of the business goals, it takes on a new perspective. Holding managers accountable in this fashion ensures the motivation to examine and enhance their personal retention practices is ever present.

The solution lies in tying retention to critical business activities, so managers do not think about retention after the fact when it is too late, but rather see it as an ongoing priority integral to business success and survival.

An organisation’s ability to put in place philosophies, systems, strategies and action plans to meet these challenges will determine their future success.

Recent influences on employee retention

The unprecedented workplace changes that have occurred in the past 10 to 15 years have contributed to turnover. These changes include:

Increased competition as a result of globalisation and technology
An emphasis on economic rationalism
Changing employment practices (e.g. fixed term contracts, casuals, contractors etc.)
Changing needs and values of employees (e.g. career advancement as opposed to job security etc.)

The costs of turnover

Estimates of turnover cost range between 1 to 2 times an employee’s annual salary. Cost fall in to the direct and indirect categories:

Direct Costs

Cost of termination (including payout arrangements)
Cost of hiring (advertising, recruitment fees)
Cost of new hire (only 60% as effective in first three months)

Indirect Costs

Lost or damaged customers
Additional marketing and sales expenditure to win replacement customers
Loss of intellectual capital
Lost opportunities
Decrease in “bench strength” for succession planning
Transfer of knowledge to competition
Decreased morale and increased stress
Negative effect on reputation

So what do employees want?

The kudos of working for a respected and successful organisation
Opportunities for personal development and growth
Enjoyment and meaning in their work – feeling they can count for something
Commitment to quality
To know they make a difference – not just to the corporate bottom line but to the community in general
The knowledge that their opinion counts for something
A shared sense of purpose and belief in company values

The importance of values to retention

Organisational performance is largely dependent on the quality of the people – attracting and retaining the right people for the right job. Top performance is distinguished not by knowledge or skills but by behaviour and values.

Values are not an intellectual issue, they are a cultural issue. It is about building a positive dynamic within your organisation. Identifying your core values is critical to underpinning the future success of your organisation.

If you have your values established you can use them as a basis for all strategic planning and decision-making. This will then help you and your employees align personal values with company values. If these two do not relate you will then run into problems.

Without values, it is difficult for a common direction to be established within your organisation. Values driven from above create organisational practice. Values, supported by training and reward systems, emphasise the importance of people management.

Values lead to long-term growth. By letting employees explore their own values and where they fit into the organisation fosters retention of staff.

If you establish your own organisational values, you can use them to guide your strategy and business direction and create a compelling place to work which in turn helps you select and retain the right people in your business. Then, when you identify the ‘right people,’ they can bring their raw physical energy, values, thoughts, ideas, talents and competencies to your organisation and you can all enjoy the benefits of a highly motivated and productive workplace.

Effective retention starts with effective selection

Things to consider:

Translate your strategy into action by knowing the core functions you need to recruit in and train for
Plan a structured selection process
Assess the applicants objectively and fairly
Develop a privacy policy and practices
Evaluate your selection processes regularly
Speak to your people regularly to check their alignment with you and your organisation

Selection for a changing workplace

Leading American Quantitative Psychologist J.F. Kehoe defines the worker attributes needed for a changing workplace: Of nine worker attribute groupings, seven are related to behaviour:

Learning, knowledge and skill acquisition
Problem solving
Effective team performance and collaboration with people of heterogeneous cultural, educational & experience backgrounds (diversity)
Effective contextual performance
Ability to handle uncertainty, ambiguity and stress
Ability and willingness to work outside traditional boundaries
Employee retention
Ability to act quickly and capitalise on opportunities for business growth or process improvements
The prediction for counterproductive behaviour

Discipline, motivation and success

The most successful companies globally are all staffed by disciplined and motivated people. They are disciplined in thought and action, understand why they are there and are motivated to succeed. Leading edge organisations understand that the right people are important and they know what they want. Motivational strategies for retention There are broadly six strategies for motivation:

Establish performance goals
Remove obstacles
Recognise and correct appropriately
Individualise the recognition
Reward equitably
Provide effective feedback

These are the basic staff retention strategies, though the final mix will vary from workplace to workplace. Essentially, there is a gap between an individual’s actual state and some desired state of which the manager tries to reduce this gap.

So what does a leading edge organisation look like?

Offering a workplace that supports the organisation’s business goals
A shift in value creation – revolving around knowledge, reputation and brand
A coherent system of human performance practices
More commitment to achieving business success than others
High performance work practices (i.e. self directed teams, access to business information, full/part time, etc.)
Innovative compensation practices (i.e. profit sharing, group based pay, paid maternity leave, child care, etc.)
Innovative training practices (i.e. mentoring or coaching programs, training information systems, etc.)
Support structures to help people learn

How to become a leading edge employer

Excel in people leadership
Create compelling employment offers
Accelerate development of your people
Culture and values are critically important
Communication
Respect – work / life balance, differences, etc.
Responsibility for employees
Diverse work culture
Flexible work practices
Comprehensive and holistic work environment
Implementation of meaningful strategy / goals

Guest Author:

Sue Barrett is Managing Director of Barrett Pty Ltd. Barrett is a performance consulting firm specialising in challenging paradigms to unlock elite sales performance.

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Here is a six-step plan to retain employees that have the best talent for longer.

Every organisation faces the same question with despair. At even greater risk are those organisations facing uncertainty or significant change. Talent will flee from uncertainty – and why not? It’s a sellers’ market.

Outline their future – Ensure your best people know that they’re your best people and that their future with you looks strong.

If you are going through a period of change, have the most senior (respected) leader personally take them aside to sketch out the organisation’s future and their role in it. These messages of security must be repeated three or more times in different ways so that employees really understand they have a future and what it looks like.
Ask them what they want – If there are sufficient high value employees (at least 20), undertake a stay survey with them to identify what encourages them to stay, what would make them think about resigning, what would keep them there longer, and what messages they need to hear about their future.

This will give you practical recommendations straight from the ‘horse’s mouth’ so to speak, which you can immediately implement. If budgets are tight – don’t forget that even a very detailed stay survey costs a fraction of replacing just one high value employee.
Give it to them – After step 2, you’ll be able to make the right organisational changes. Separate from those big picture items the littler things managers need to do every week. They need to have a plan about how to manage each unique individual on their team. An engagement plan, if you will.

The quickest and best way of doing this is where the manager has a view of their team on one chart in terms of risk and value. They can then create an employee engagement plan for each person, customise it and start using the plan. It takes only minutes to create a plan but it gives managers a truly unfair advantage compared to those headhunters sitting on hold.
Something to brag about – If there are insufficient numbers of high value employees to conduct an aggregated survey, or you want to go a step even further, provide each high value employee with a Personal Employee Engagement Plan, where each employee is interviewed and a plan created for their learning, their preferred manager practices, knowledge transfer, the changes they’d like to see to increase their performance and how to retain their knowledge in low cost/no cost ways.

You can do this internally or, for a bigger ‘brag factor’ and more frank and open responses, engage an external party. High potentials are the people who warrant being given external coaches, internal mentors and other signals of value.
Get creative – With high value employees, the key is not to rely on financial rewards alone – every employer has the same colour money, and real talent can easily choose to walk. At this point, you’ll know who your high value employees are and you should have an inkling of what motivates them.
Show them – We all respond to a belief that what we’re doing is important and valued. If these really are your best people, make sure they know it, show how much you appreciate their contribution, and make it harder for them to decide to leave.

Guest Author:

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.