Managing Retention and Reducing Employee Turnover

By Tom Kelley, SPHR, senior vice president, AmeriBen

Positive signs of economic improvement have been encouraging as companies continue their efforts for growth and profitability. However, an improved economy has historically increased the challenge of managing retention and reducing turnover. Both of these areas significantly impact your bottom line.

Many employees in your organization may be looking for another job or planning to look within the next 12 months. We have moved out of an employer’s market, where the mindset of some managers has been, “Employees are lucky to have a job.” Meanwhile, employees who have felt over-extended and under-appreciated will look for another opportunity as the economy continues to improve and more job opportunities become available. Now is the time to review and address retention strategies and turnover in your organization.

Review your culture to improve retention
Marcus Buckingham and Curt Coffman, authors of the book, “First Break All the Rules,” listed five major questions that organizations need to answer for employees in order to address retention:

• Do I know what is expected of me at work? (Clearly define my performance expectations.)
• Do I have the materials and equipment I need to do my job? (Resources.)
• At work, do I have the opportunity to do what I do best every day? (Use my skills and competencies.)
• Does my supervisor or someone at work seem to care about me as a person? (Individual interest and support.)
• At work, do my opinions seem to count? (Meaningful participation and input.)

How long an employee stays is determined by the relationship an individual has with an immediate supervisor. Employees may leave managers, not the organization.

Another survey conducted by the Society for Human Resource Management (SHRM) listed survey data for 3,400 employees on why they took their current jobs. Three major areas will impact retention:

• Open communication
• Opportunities for work/life balance
• Meaningful work

Review the culture and work environment that exists in your organization. Are you coaching and developing managers? Do you conduct employee opinion surveys every 12-18 months to identify and address employee issues and concerns? Other areas you may wish to review and evaluate when considering retention issues include:

You cannot buy commitment and loyalty with money. A recent poll by Maritz Research surveyed 1,000 randomly selected adults who had voluntarily left their jobs. The four areas that had the most significant impact on their decision to leave:

• Lack of opportunity within the organization
• Lack of incentives
• Dissatisfaction with corporate culture
• Lack of recognition and praise

Developing recognition programs that foster a positive work environment will impact your ability to attract and retain employees at all levels. Now is the time to demonstrate to your best performers that you feel they are an important part of the organization’s success. Tell employees they are doing a good job and then tell them again.

Reducing expensive employee turnover
Turnover is costly to your organization. Estimates for the cost of turnover run from $2500 - $7500 per employee. One figure estimates 2 ½ times the employee’s annual salary; J.C. Penney estimates one third of the employee’s annual salary. The cost of one year’s turnover in that organization was $400 million. In addition to profitability, turnover also impacts productivity, morale and customer service.

A formal turnover analysis is important. However, you should look at both perspectives. Although there is a tendency to focus on “why people leave” you should also identify “why people stay” with your organization.

To analyze turnover, implement a tracking system to determine the reasons for termination and separate them into voluntary and involuntary sorted by specific position. List the different reasons/categories on why people leave. Some examples will be better opportunities, better pay/benefits, to stay at home, return to school, disliked job, unhappy with supervisor, etc. Then list voluntary terminations by category and by length of service. Patterns or trends will be apparent. You should also use a formal exit interview process. You can then formally address and develop strategies for each area. Reducing turnover will reduce operating expenses, improve profitability and will certainly impact morale and productivity.

In summary, having the right staff in the right place at the right time, with the knowledge, skills and competencies to help you succeed, will make or break your organization. Be proactive in analyzing turnover and managing retention. The continued success and future growth and profitability of your organization are dependent upon your ability to manage and respond to these key areas.

About the author
Tom Kelley is a senior vice president with AmeriBen/IEC Group, an industry leader in human resource, management consulting and benefits administration services. AmeriBen is an endorsed provider of human resource services for SAO members. (SAO members receive a 15% discount) Kelley was the national chairman of the Society of Human Resource Management in 1989. AmeriBen/IEC Group is located at 13535 NW Science Park Drive, Portland, Oregon 97229. Tom can be reached at 800-536-1444 or tkelley@iecgroup.com.