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In some situations, employee turnover can be delightful. The new employee provides freshness and, in time, perhaps can be more effective than the departing staffer. But, over all, turnover has to be seen as a problem for an organization – a serious, if often unacknowledged problem – when too frequent. It has been variously estimated that it costs from 50 per cent to two times the new employee’s remuneration for the process of replacement.
Usually turnover is seen as an issue the human resources team must handle. Attention is paid to salary levels and benefits. Perhaps offering insurance for employees’ pets will help you hang on to more of them. Or perhaps tweaking recognition and onboarding programs will do the trick. But consultant Richard Finnegan argues that’s wrong-headed. It’s a well-established fact that employees leave an organization primarily out of frustration and even anger with their immediate, first-line supervisor.
“Whenever employees are asked over dinner, ‘How was your day, dear?’ no one ever answers, ‘My day was okay, but I just wish we had pet insurance.’ If that same employee is feeling a lack of recognition at work, they don’t say, ‘Just hopin’ we have Employee Appreciation Day this year,’” he writes in Targeting Turnover.
At dinner, they talk about bosses, colleagues and duties. But in the end, complaints collapse back down to their immediate supervisor, who should be making things better or is clearly making everything worse. That doesn’t mean every time an employee quits it’s because he or she doesn’t trust the boss. But it does mean each individual supervisor becomes your best employee retention solution. “It means those solutions that do not involve your first-line leaders take a back seat – a far back seat – in your efforts to cut turnover,” he says.
He first learned this while working in HR during the 1990s for a multistate regional banking company, dealing with 70 branches in Florida. The CEO announced their greatest weakness was employee turnover and Mr. Finnegan was informed by his immediate supervisor that he was accountable for changing the situation in their area. He figured he was doomed and even updated his resume that night.
After studying retention figures for different bank branches with a more senior manager, he realized turnover correlated with the people-management reputation of the supervisors – high turnover where managers were considered poor, low where those managers were praise-worthy. They decided to assign each manager an annual retention goal of improving turnover by 10 per cent.
To their surprise, turnover fell by 19 per cent over the next 90 days. “We found that more employees were staying because their managers were, well, just being nicer. They opened their previously closed doors, asked how little Johnny’s little league game was and told employees they were doing their jobs well. And they probably hired much more carefully because new hires had proven to be the most vulnerable to leaving,” he writes.
It should be stressed that those returns came without any additional training for those supervisors or implementing any typical HR initiatives for making employees happier and more satisfied. He took away crucial lessons that have since been affirmed as he works with companies across the globe and follows the research on retention:
- Everything HR taught him about reducing turnover was wrong, or at least incomplete. You can certainly continue with one-size-fits-all employee programs – even pet insurance – but reduce your expectations that it will have a significant impact.
- The best and easiest-to-implement solution is to hold first-line leaders accountable to retention goals.
- Unfortunately, it is a formidable challenge to convince company executives that a retention solution might involve operational managers rather than leaving it to the HR department.
- Manager retention accountability improves turnover across many cultures and languages, so this solution is universal.
Each organization, he notes, has a series of metrics it watches, be it sales, customer satisfaction, products produced per hour or worker safety. He urges you to include employee turnover in the top three metrics because you can’t execute those other objectives without retaining your best workers. Then put a cost to turnover for various jobs in your organization for recruiting, onboarding, training and lost productivity while the job is vacant and the new employee ramps up. That underlines it is an extremely costly business issue – not just an HR matter.
Then set two goals: Reduce overall employee turnover by 20 per cent and improve retention by 20 per cent during the new-hire period when turnover is highest. Studying turnover by length of service will help you to identify the new-hire period you should focus on.
He also recommends stay interviews by the frontline managers with employees so they can build trust with their direct reports, cut turnover and improve employee engagement. He notes that Gallup found 42 per cent of employee exits could have been prevented if managers scheduled enough individual meetings to learn what their employees need.
He also asks supervisors to forecast after the first stay interview how long an employee will stay using this colour code: Green for staying at least one year; yellow for leaving in six to 12 months, voluntarily or otherwise; and red for the employee exiting within six months. Supervisors are told to not lose a green, and the overall process builds a greater commitment to managing turnover as they ponder the yellows and greens.
As well as making first-line managers accountable for retention, he asks organizations to name a retention champion from senior management. Together, that moves the responsibility for turnover from HR to operations, where he insists it belongs.
Cannonballs
- During a recent quarterly earnings call, Gary Burnison, chief executive officer of Korn Ferry, was asked how the consulting firm can still win business in a weaker environment. His reply: “This is the best environment ... It’s where I’m most motivated.” In his newsletter, he notes this is a time when great companies become even greater companies, taking advantage of the fact the weaker business climate indicates change is necessary and people need to change their mindset.
- Executive coach and longtime HR executive Tammy Perkins warns that when fewer employees are leaving an organization you have to make sure it’s not a mirage, with engagement levels not improving and employees mentally checked out. True organizational health isn’t about people staying but people thriving.
- Ottawa thought leader Shane Parrish observes that most arguments are ego competitions disguised as truth-seeking. That means you can save a lot of time and energy by saying, “you’re probably right,” and moving on.
Harvey Schachter is a Kingston-based writer specializing in management issues. He, along with Sheelagh Whittaker, former CEO of both EDS Canada and Cancom, are the authors of When Harvey Didn’t Meet Sheelagh: Emails on Leadership.