How to keep your best employees (and get the best out of everyone in your organization)
“It doesn’t make sense to hire smart people and then tell them what to do; we hire smart people so they can tell us what to do.”
In today’s business climate, many organizations feel that they have to recruit constantly in order to ensure that they have a steady supply of employees to handle an increasing volume of work. While bringing in new faces can help to re-energize teams, the perpetual search for new talent often leads to a revolving door effect. New hires aren’t fully utilized, and existing employees don’t feel truly valued. If this dynamic takes hold, it can lead to one of the most insidious problems faced by enterprises today – rampant employee turnover.
Most businesses have felt the pain of employee turnover at some point. It often surfaces when a superstar leaves unexpectedly to go to a competitor, or maybe just decides that they’d prefer to pursue another career path with little to no explanation. If the root causes of those isolated incidents are not explored and addressed, those departures can turn into a slow leak of talent coupled with a nagging sense that the remaining team is no longer as vital as it once was. And from there, the problem can quickly become much more pervasive. If the remaining employees start to feel that the culture is no longer attractive, you can bet the ones remaining are probably not fully engaged in doing their best work – and a significant percentage of them may actually be actively disengaged.
The Hidden Costs of Employee Turnover
Josh Bersin of Bersin by Deloitte, believes that employees can be viewed as “appreciating assets” that produce increasing value to the organization over time. This explains why losing them is so expensive. According to Bersin, the cost of losing an employee can range from tens of thousands of dollars to 1.5–2.0x the employee’s annual salary, when you consider the following expenses:
- Cost of hiring a new person (advertising, interviewing, screening, hiring)
- Cost of onboarding a new person (training, management time)
- Lost productivity (a new person may take 1-2 years to reach the productivity of an existing person)
- Lost engagement (other employees who see high turnover disengage and lose productivity)
- Customer service and errors (new employees take longer and can be less adept at solving problems). In healthcare, this may result in much higher error rates, illness, and other very expensive costs (which are not seen by HR)
- Training cost (over 2-3 years you likely invest 10-20% of an employee’s salary or more in training)
Cultural impact (whenever someone leaves others take time to ask “why?”)
Most enterprises fail to fully realize the cost of employee turnover because they lack a way to quantify it. Tweet This!
Jack Altman, CEO of Lattice, has created a simple formula: The cost of employee turnover is equal to the number of regrettable departures multiplied by the average cost of those departures. As an example, he offers, “If you are a 150 person company with 11% annual turnover, and you spend $25k per person on hiring, $10k on each for turnover and development, and lose $50k of productivity opportunity cost on average when refilling a role, then your annual cost of turnover would be about $1.57 million. Reducing this by 20%, for example, would immediately yield over $300k in value. And that says nothing of the emotional headache and cultural drain felt from losing great people.”
Why the brain drain?
A 2017 Qualtrics survey of 800 recently promoted American workers found that, on average, top performers receive 4.3 new job offers a year, and that 88% of them will reply. This presents a frustrating conundrum for managers. Why are the best performing team members so eager to explore greener pastures when they are having the highest degree of success within the organization?
Talent management thought leader, Liz Pellet, cites two primary reasons for top performers to explore new opportunities: compensation and leadership. With regard to compensation, Pellet is quick to point out that money won’t necessarily buy loyal employees, but it can become a factor when other challenges are present. “Pay and benefits are a driver to many individuals and to some people the extrinsic benefits of the organization can outweigh the intrinsic benefits,” she explains. “Employees can withstand and overlook things when they feel highly compensated, but when they feel they are underpaid, (read underappreciated), there is a lot less toleration.”
Thus, leadership may be an even bigger concern for talented workers. A 2015 Gallup study of 7,272 U.S. adults revealed that one in two employees had left their jobs to get away from their managers to improve their overall lives at some point in their careers. According to Gallup, “Organizations need to understand what managers are doing in the workplace to create or destroy engagement.”
In another study of 7,712 U.S. adults, Gallup asked respondents to rate their managers on specific behaviors. These behaviors — related to communication, performance management and strengths — strongly link to employee engagement. They give organizations better insights into developing their managers and raising the overall level of performance of the business. “Communication is often the basis of any healthy relationship, including the one between an employee and his or her manager. Gallup has found that consistent communication is connected to higher engagement.” Gallup also found that managers who use a combination of face-to-face, phone and electronic communications are the most successful in engaging employees.”
Career and workplace expert, Heather Huhman, echoes this sentiment, pointing out that compensation can be balanced with transparent leadership. “Make sure executives and managers understand the importance of transparency. Model the correct behavior by actively sharing the information they want and need. This is especially important when you’re providing employees with feedback. They need to understand where they stand and how they fit into the team. Employees feel valued and respected when leaders give them concrete examples of what they’re doing well and how to improve.”
Cultivating a Great Employee Experience
When it comes to retaining top performers and optimizing the engagement and performance for all employees, training and development is another important factor.
According to a survey of more than 1,200 executives and managers by American Management Association (AMA), only one-third of companies focus on developing and retaining current employees rather than recruiting from the outside. “With only 34% of organizations committed to developing and retaining employees it’s easy to see why employee loyalty has declined,” said Sam Davis, Vice President for AMA’s customized consulting solutions. “The same survey found that 52% of companies report their employees are less loyal than five years ago. So many companies seem to discount internal candidates and just call a recruiter to fill an opening. But this sends an unfortunate signal to employees, who are usually eager for promotion and advancement.”
City Electric Supply, a family-owned, global wholesale business, reduced new-hire employee turnover by 50% by implementing more training, based on the input they received from their workforce using Waggl’s crowdsourced employee voice platform.
The ability to retain top performers is of critical importance to CES’ business. As explained by CEO Thomas Hartland-Mackie, “Ultimately, if you look at our successful businesses, it’s where there’s a consistent face that that customer is seeing day-to-day coming in. People like that. It’s just something as simple as going into Starbucks, and you’ve got that same barista every day who knows you, knows your order. You feel more welcomed when you come in. You feel like you’re building that relationship.”
Mackie asserts that the desire for more training is something that CES management would have never known about had it not been for Waggl. “What Waggl has allowed us to do is get that direct unfiltered feedback and really analyze it on a really big scale. When you’re getting a few thousand people responding to a pulse, you can pretty quickly figure out what your problem items are. If you’ve got a thousand of those talking about training, you know that’s an issue. You know you need to look at that more, invest more there. Waggl really has allowed us to cut through a little bit of the noise and really focus in on what’s important.”
The City Electric Supply success story is a great reminder that the best ideas can and should come from anywhere within the organization. They already exist within your workforce – the tricky part is surfacing them in a way that makes them actionable across teams, departments, and roles. This is particularly true in large enterprises, in which the workforce is dispersed across multiple offices and diverse geographies.
When staff members don’t feel that they’ve been heard, the result is a general lack of commitment, engagement, and productivity – all of which contribute to employee turnover. But active listening is one of the most effective agents for organizational change and group development. Developing a listening culture within an organization leads to more inclusive and transparent communication, more authentic feedback, greater retention of top talent, and higher levels of engagement across the entire organization.
Do you want to surface actionable insights that will help you to retain your top performers? Waggl can help by providing an easy and efficient way for leaders to show employees that their opinions matter in the workplace. If you are interested in learning more, please get in touch today.