Retention and Turnover.

Understanding Retention & Turnover is very important and should be grasped with diligent approaches. At Humba-HR-Consultants we realise that in these economic hardships there are approaches that are very vital and effective measures should be implemented to get the best outcome. Employers need to understand their rates of labour turnover and how they affect the organisation’s performance. An appreciation of the levels of turnover across occupations, locations and particular groups of employees can help to inform a comprehensive resourcing strategy. You’ll find here information on retaining talent, staff retention strategies, labour turnover and turnover costs.

Employee retention refers to the ability of an organisation to retain its employees. Employee retention can be represented by a simple statistic (for example, a retention rate of 80% usually indicates that an organisation kept 80% of its employees in a given period). However, many consider employee retention as relating to the efforts by which employers attempt to retain employees in their workforce. In this sense, retention becomes the strategies rather than the outcome.

In a business setting, the goal of employers is usually to decrease employee turnover, thereby decreasing training costs, recruitment costs and loss of talent and organisational knowledge. By implementing lessons learned from key organisational behaviour concepts employers can improve retention rates and decrease the associated costs of high turnover. However, this isn't always the case. Employers can seek "positive turnover" whereby they aim to maintain only those employees who they consider to be high performers.

Employee turnover can be disruptive, expensive and affect team morale. Employees leave for many reasons, and it is generally not because they want more money or better benefits. There are a range of other reasons that will result in the employee making that decision to stay or leave.

Within our business we screen and interview thousands of candidates and during this process we are able to ascertain the reasons why employees choose to leave their current jobs and seek additional opportunities.

Our observations are supported by a study of 12,000 employees1 where it was found that, in order of frequency, people will leave one company and go to another for the following reasons:

• exciting work and challenges
• career growth, learning and development
• working with great people
• fair pay
• supportive management/good boss
• being recognised, valued and respected
• benefits
• meaningful work and making a difference
• pride in the organisation, its mission and its products
• great work environment and culture
• autonomy, creativity and sense of control
• flexibility
• location
• job security and stability
• diverse, changing work assignments
• fun on the job
• being part of a team
• responsibility
• loyalty, commitment to the organisation or coworkers
• inspiring leadership

These results are backed up by a body of research that highlights that even if employees are paid well above the market rates and incentives with a range of monetary bonuses they will still leave if they feel that they are either not enhancing their skill set or they don’t have the social bonds to keep them in the workplace.

The reasons that staff leave vary between departments and companies. The best way of ascertaining the reasons why employees are leaving your company can be obtained from an ‘exit interview’. Surprisingly only 10% of managers will conduct a formal in-depth exit interview following a resignation. This is more than a quick ‘thanks for working with us and all the best in the new job’ chat, but a structured series of probing questions that are specific to both the job and the individual and designed to elicit the maximum amount of useful information. This knowledge can then be used to assess the workplace and make improvements to prevent additional resignations.

Exit interview questions include the following: 

Is the job that you were doing what you expected following the information we gave you during the interview?

What additional information should we be giving new employees regarding the scope of the job that they are being interviewed for?

What were the best aspects of the job?

What aspects would you like to see improved?

Were you supported with a good induction and initial training?

What advice would you be giving to the next person in your role?

What types of candidates do you think are best suited to our culture?

If we were to rethink this role what other suggestions could you make?

Staff turnover is expensive. You have spent time recruiting committed and talented employees and if these employees leave the entire business is affected.

A study2 found that the turnover cost for every employee who leaves ranges from 90% to 200% of their annual salary. Highly skilled professionals can cost up to 5 times their salary.

In assessing the cost of replacing an employee consideration needs to be given to:

• the business lost when the role is vacant
• the disruption to an existing smooth-functioning team when existing employees are required to take up the departed employees workload
• work put on hold until a replacement is found
• lost customers and business opportunities because relationships have been severed
• loss of shared knowledge
• lost supplier relationships
• lowered morale and productivity of existing employees
• the costs involved in hiring – advertising, agency fees, management time involved in interviewing and selection testing
• the direct employment costs of the new hire – salaries, sign-on bonuses, moving allowances, superannuation, workers compensation, payroll tax, office furniture, IT equipment.
• the time it takes to train a new person
• the cost associated with the socialisation of the new person into the group
• the gains made by competitors by employing your employees

It is a useful exercise to calculate these costs for your particular business. You will be aware of the significance of the role that is vacant, the business that you are losing and the disruption that the vacancy is causing. These costs can be considerable and can be many millions of dollars when significant accounts go to competitors.

Consider how much money your organisation would save by reducing turnover and how more effectively your organisation could use the dollars associated with recruiting and training new employees e.g. employee development and enrichment programmes.

There are many implications when someone leaves an organisation, but consider the following scenarios:

When a sales rep leaves territories are vacant and the doctors are receiving the competitor’s messages, therefore losing market share.

When a product manager leaves supplier relationships are lost, the new product manager does not have the personal chemistry to work effectively with the advertising people; is unfamiliar with the marketing mix and overall brand strategy so therefore competitive opportunities are lost.

When a senior manager leaves there is a loss of high level networks with key decision makers therefore business takes longer and can be more costly (the best deals cannot be negotiated because the personal relationships are not there).

When a CRA leaves, clinical trial project management milestones are not met, local investigators lose confidence, regulatory timelines are lengthened, local health economics data is not being collected and the entire pre-marketing strategy is affected.

When regulatory or health economics staff leave relationships with both the TGA and head office are lost, resulting in delayed submissions.

When the receptionist leaves the phone does not get answered resulting in lost business; or an inexperienced receptionist cannot identify key callers or visitors resulting in a decrease in customer service and lost business.

THE IMPORTANCE OF THE INTERVIEW PROCESS IN MAXIMISING STAFF RETENTION

Maximising staff retention saves the company money. There are a range of initiatives to minimise turnover and it starts with the interview process. Candidates become attracted to the vacancy because they have seen the advertising and have heard positive reports about the company in the marketplace. Creating and nurturing these positive thoughts within the candidate marketplace, and thus increasing the pool of candidates available for interview, are central to a company’s Recruitment Brand Management strategy.

When devising a Recruitment Brand campaign the following questions should be asked:

What impressions do the candidates have of our company?

What types of people suit our organisational culture?

What is the personality of our department?

What are the key benefits of working for the company?

How will these benefits be communicated?

Answers to these questions then drive the advertising strategy from the text of the ad through to the entire feel of the campaign. Effective advertising is aligned to the overall branding strategy and communicates the right messages to the right audiences in order to bring candidates in for interview.

The initial interview is an important aspect of the candidate’s introduction to the company, however many managers treat this interview too casually.

Behaviourally based interviewing is the strongest technique to assess a candidate’s suitability for a particular role. The premise here is that past behaviour and performance is the best predictor of future performance. This can be achieved by asking candidates prepared questions, probing for fuller answers, understanding what the candidate is capable of doing and understanding what the candidate wants to do.

During the structured interview interviewers want to find out how the candidates have handled various situations, what they did and the results of those actions. They want to uncover the true nature of the candidate’s knowledge, motivations and values. With this insight an assessment can be made in terms of the candidate’s organisational fit. If the candidate is the wrong person to add to your existing group they won’t form the necessary informal networks to share knowledge and enhance group productivity and turnover will be an issue.

To augment the interview process a number of employment tests can be used including:

IT and Office skills

Role plays

Writing tests

Presentations

Analysis of papers

Psychological tests

Sales aptitude tests

Management and leadership assessments.

These tests can be invaluable in reducing turnover because the employer can gain an accurate understanding of the candidate’s skill set so there is no misunderstanding once they have joined the company. If they are relaxed in a particular area then training can be given during the initial induction period, thus facilitating the candidate’s smooth introduction into the company.

Further, to decrease turnover it is necessary to ensure that the candidates have a good experience throughout the entire interview process. How they see the company in the future will depend on how they remember their first experiences.

With successful candidates it is advised to move them quickly through the interview process (good candidates have high expectations of quality and service and don’t favourably view delays); to take time to clarify expectations so there is no misunderstanding of what the role involves; to excite the candidates but not to oversell the job; and to stay close to the candidates after the second interview and during the offer process continuing to probe for attitude, motivation and organisational fit.

Once employed, new recruits should have a good induction and socialisation experience. This involves meeting with other employees, understanding the structure of the company, what the different employees are responsible for, how they are expected to interact with employees in other departments, who to go to for help, how to use the office IT and telephone systems, and training in SOPs. During this period employees will also learn how to socially adapt to their new workplace. They will need to understand the social norms of acceptable behaviour and the unwritten rules for interaction. Without this knowledge they may make social mistakes that will affect their smooth introduction.

Following an effective induction employees then form a psychological contract with the company to deliver what is required. The new employees then identify with the new company and build productive relationships with their management, peer group and subordinates. If this is followed structurally then the best bespoke strategy will be effectively put in place.