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THE BOTTOM
LINE
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Losing
Key Employees Adds Up to Big Bucks
By Liese Hutchison
Eight years of economic growth have made the economy a job-seeker’s
paradise. The cost to companies that lose employees can be staggering.
The U.S. Labor Department estimates the cost to replace an employee
in a management position is 30 percent of that person’s salary.
The time it takes to recruit, hire and train a new employee means
downtime and lost intellectual capital to an organization.
“Though employee turnover has plagued companies for years, many
still don’t understand the real costs and problems,” says Richard
S. Wellins, senior vice president of marketing for DDI, a global
human resource consulting firm. “Some companies have taken steps
to stem the loss of key employees, but few companies have done all
they could, mainly because they don’t yet fully understand how bad
the situation is, and they don’t really understand what employees
want.”
Susan Meisinger, senior vice president of the Society of Human Resource
Management (SHRM) notes, “Retention issues are vital, especially
at a time when unemployment rates are so low. Companies spend tremendous
resources attracting good people, but companies must be equally
diligent about keeping good people once they’re members of the team.”
DDI recently conducted two surveys. For its “Retention Survey of
HR Professionals,” DDI interviewed human resources managers and
executives from major corporations. For its “Retention Survey of
Employees,” DDI surveyed employees of major corporations. SHRM’s
survey results highlighting retention threats and retention initiatives
are outlined in the sidebar.
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Retention
Practices Mini-Survey conducted by the Society for Human
Resource Management
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| Employee
Retention Threats (percent of respondents) |
- Higher
salaries offered by other organizations (89 percent)
- Dissatisfaction
with potential for career development (85 percent)
- Employee
perception of not being appreciated (79 percent)
- Job
burnout (74 percent)
- Difficulty
balancing work and life issues (71 percent)
- Conflicts
with supervisors or coworkers (62 percent)
- Better
benefits offered by other organizations (56 percent)
- Perceived
lack of job security (44 percent)
- Viability
of the organization (32 percent)
- Conflict
with organization’s values or mission (31 percent)
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| Top 10
Retention Initiatives (percent offering) |
- Health
care benefits (94 percent)
- New
hire orientation (90 percent)
- Open
communications policy (89 percent)
- Salary
increases (87 percent)
- 401(k)
or 403(b) plan (85 percent)
- Salaried
position (85 percent)
- On-site
parking (84 percent)
- Training
costs reimbursement (83 percent)
- Casual
dress policy (76 percent)
- Relocation
costs reimbursement (65 percent)
Note:
Respondents could make multiple choices
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“The root of the problem is that too many businesses still believe
in myths about employee turnover,” Wellins says. “Many organizations
have taken some effective steps to retaining key employees, but
far too many employers are ignoring valuable tools for keeping their
best employees. More important, many employers are still far away
from truly understanding what makes employees stay and what lures
them—or drives them—into the arms of another company.”
From DDI’s two survey’s, several myths emerged that do the most
to hamper employee retention efforts:
Myth: Companies are doing everything they can to keep employees.
Fact: In the DDI survey, 98 percent of HR professionals admitted
their organizations needed to do better with respect to employee
retention. In fact, only 44 percent of those HR professionals in
the survey said their organizations plan to overhaul the retention
strategy in the upcoming year.
Myth: Employee satisfaction equals employee retention.
Fact: The DDI survey showed that less than 10 percent of
the employees said they were dissatisfied with their jobs. But more
than a quarter of employees, regardless of satisfaction level, plan
to look for a new job within the year.
Myth: It’s all about money.
Fact: When employees ranked what was most important, money
finished out of the money—it was only the fifth most important value.
The most important values were, in order, the ability to balance
work and outside life, the meaningfulness of work, trust among employees
and the employees’ relationships with their supervisors or managers.
Myth: Employees have stopped caring about organizational
trust and loyalty.
Fact: Ninety-nine percent of employees surveyed consider
trust in the workplace to be important, but only 29 percent of those
employees report a high level of trust within their current organizations.
Only six percent of HR professionals selected lack of trust as one
of the top five reasons why employees leave.
Myth: Companies have embraced new retention tactics.
Fact: The DDI survey showed that companies have adopted some
new tactics, but not all. Companies have found that exit interviews,
internal surveys, salary hikes or rewards and more open communications
have helped fight job turnover. But more than half the organizations
in the survey haven’t even tried tactics such as offering stock
options, assigning coaches or mentors for employees, educating managers
in retaining employees, increasing managers’ responsibility for
retention or offering job sharing, rotational assignments and telecommuting.
Myth: It doesn’t cost much to hire a replacement.
Fact: HR professionals estimated the average cost of replacing
a manager at $30,000. This finding is similar to U.S. Department
of Labor estimates that the base cost of replacing a worker is 30
percent of that person’s annual earnings. Looking more broadly at
all the costs, DDI’s research estimates the cost of a poor hiring
decision for a highly skilled professional or leadership position
to be $107,970.
Another survey on this issue conducted by Hewitt Associates shows
that retention strategies such as flexible scheduling arrangements,
child care assistance, elder care programs, adoption benefits, on-site
personal services, casual dress, financial security programs, personal
and professional growth opportunities, and family and medical leave
are being offered by more companies than ever before.
“Employers must offer these benefits to remain competitive in today’s
war for talent,” says Carol Sladek, a work/life consultant with
Hewitt. “With the lowest unemployment rate in 30 years, organizations
recognize they need to offer attractive benefits that enable employees
to better balance their work and personal lives.”
Liese L. Hutchison is an assistant professor in the department
of communication at Saint Louis University and a free-lance writer.
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