Employee turnover can cost companies up to 40% of their annual profit. The financial impact of losing a significant number of high performing and high potential employees can be exponentially higher.
Furthermore, these top notch employees are the ones who are being contacted daily by executive recruiters. Are they ready to bolt? Consider these recent survey findings from Salary.com:
Over 66% of employees surveyed said they plan to look for a new job in the next three months; nearly double the 36% that employers believe are looking.
More importantly, employers are at risk of losing their most productive talent – people who have been in their positions for 3-10 years. Nearly 66% of tenured employees plan to find new jobs over the next 3 months.
This could have tremendous hard and soft cost implications for employers. HR professionals estimate that the hard costs to replace an employee ranges between 33% and 50% of their base salary, in addition to soft costs such as the loss of productivity and institutional knowledge, as well as new hire recruiting and training expenses.
How do you stem the flow of your top talent from leaving the organisation? While one can never reduce the flow completely, there are five clear steps that can be taken to ensure that people aren’t attracted to what appear to be greener pastures elsewhere, and you are prepared to address the eventuality that everyone will not stay forever. These five steps are:
- Know who your top talent is and where they are located – Too many organisations only begin to recognise how valuable their talent was when those employees have decided to leave the organisation. Work is not getting done as quickly, effectively, or creatively. How can this be prevented? An effective performance management system should identify and differentiate top, acceptable, and marginal performers. This requires that:
- Clear, challenging performance standards demonstrate how each employee adds value and contributes to the overall business objectives.
- Clear, challenging performance standards demonstrate how each employee adds value and contributes to the overall business objectives.
- A meaningful performance rating scale differentiates talent. Often, a 3-point scale to assess the extent to which goals/results were met coupled with a 3-point scale to assess the extent to which competencies were applied will suffice.
- Managers calibrate their ratings to ensure they are using the rating scales consistently.
- Communication and education are provided to enable managers to have performance-based conversations.
- Communicate with your top talent – do they know they are valued? – Special attention should be given to those identified as top performers by the performance management system. In order to continue to reap the value that these employees provide, managers should take time to have sincere dialogue with them throughout the year, ensuring that managers do the following:
- Recognise their efforts and accomplishments
- Explain how their contributions add value to the business, and to other leaders
- Ask what additional help and resources they may need
- Pay attention to any indicators that may suggest that their interest is waning, and address it promptly
- What is the Employee Value Proposition for high performers/potentials? – Several organisations conduct periodic employee engagement surveys. This data is often analysed in terms of various demographic criteria (e.g., geographic location, functional area, etc.). In order to keep the data anonymous, it is rarely analysed in terms of high performers/potentials. However, we need to measure the attitudinal pulse of this group. It is important not to fall into a “one size fits all” trap; instead, get a good handle on the needs and desires of this employee population as well as regularly monitor their levels of engagement. Some suggestions on identifying the Employee Value Proposition for this community include:
- Convene focus groups with this targeted group of employees and determine their key drivers (what does the organisation offer to them that they value) as well as what organisational barriers get in the way of them feeling completely engaged.
- Consider establishing task forces to explore these barriers in greater detail and determine how they can be minimised or eliminated. Involvement of high potentials in these task forces can be a great way to help them have additional organisational impact and be a part of the solution.
- Use the outputs from this process to develop and communicate a unique “employee brand” that can be used in recruiting other top performers to your organisation.
- Ensure they are receiving rewards that are meaningful to them – None of us would likely turn away more money. However, a total rewards program considers not just monetary rewards, but also non-monetary rewards that are valuable to many. Consider the following list as you explore how to build engagement with all top performers, and ensure you are effectively communicating the rewards that people have at their disposal. Employees often do not realise the true market value of the benefits they receive – distributing a customised Employee Benefit Sheet providing the market value of salary, benefits (e.g, employer retirement contributions, employer contributions to health care, sick time, vacation time, etc.) to show the “total rewards package” is very meaningful and can make someone think twice before they jump ship.
- Monetary rewards:
- Base pay
- Benefits (retirement, healthcare, paid time off, etc.)
- Annual incentives/variable compensation and cash recognition
- Long-term incentives (pension, stock options, increased paid time off, etc.)
- Non-monetary rewards:
- Growth and career development
- Non-monetary recognition and visibility
- Training
- Work environment (e.g., telecommuting options, flextime, collaboration with others, etc.)
- Develop a Workforce Plan – Realistically, we cannot hold on to our best performers forever. Some attrition is expected, especially as employees near retirement age. It is important to analyse your demographic data for your most critical roles in order to identify and prepare talent for future roles, as well as ensure that a great deal of your institutional knowledge does not leave the organisation as people retire. Consider the following as you develop a workforce plan and determine your future recruitment and development needs:
- Current numbers of employees
- Projected growth rate for the organisation
- Expected turnover rate
- New entrant turnover rate
- Retirement rate (based on age distribution of workforce)
If you are able to hold on to your better performers longer, and ensure that a plan is in place to replace them when they do leave, the bottom-line savings are dramatic.
Consider an organisation that loses 20 high performers/high potentials per year, with an average salary of $50,000 per hire. Assuming the organisation stays the same size over five years (no growth), and the recruitment and lost productivity cost of replacing this talent is at least 50% of their salary, this turnover costs the organisation $2.5 million over that five year period.
Reducing this turnover by 20% per year (four top performers decide to stay each year) produces a very conservative savings of at least $500,000, and undoubtedly more when one considers the impact that high performers leaving an organisation has on the morale of those who are left behind. If your projected growth rate is greater than 0% or your high performers earn more than $50,000 per year, the savings are even more dramatic.
Author Credits
Scott Cohen, Capital H Group. Capital H Group is a consulting firm that takes a value-based approach to helping companies manage, and invest in, their human capital. Partnering with our clients, we focus on creating value through their people. For further information, visit web site: http://www.capitalHgroup.com
CEO People Management 