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If You’ve Got ’em, Keep ’em

As many as three-quarters of U.S. employees claimed in a 2005 survey to be looking—actively or passively—for a new job. Almost half of those workers said they wanted better pay, and 16% told the Society for Human Resource Management and CareerJournal.com that they sought better benefits. Other oft-cited reasons for job-hopping included career growth and development, the quest for a better work/life balance and issues surrounding child care and eldercare. Seven percent of workers polled simply said that they felt unappreciated by their current employers (Miller 2005).

Indications are that employees are serious about those new-job aspirations. The latest figures for median monthly turnover rates showed an increase (to 1.1% for the final quarter of 2005) over the course of the past two years. Employee absences rose too, from 1.4% of scheduled monthly workdays in 2004 to 1.5% last year (“In Step,” 2006). And the unrest crosses organizational levels. The executive coaching firm ClearRock reported in January 2006 that a third of the 168 organizations it had recently polled had experienced greater middle management and executive turnover and that about one in four had lost senior leaders (“Companies Are Losing,” 2006).

Along with disquieted employees, factor in a shrinking workforce, aging Baby Boomers and what may be a growing tendency for employees to shift their loyalty from employers to work teams and projects (Levin and Sloan 2005). Little surprise, then, that executives name retention among their top concerns, priorities, challenges and/or critical success factors.

Perhaps it boils down to a two-sides-of-the-same-coin issue as characterized by Dr. Katherine Jones, author of the Aberdeen Group’s 2005 benchmark report on talent management: “Employers are torn between two primary sets of issues today: planning for the future workforce and hiring a better workforce today.” In light of that observation, what is surprising is Jones’s finding that half of the employers who participated in the study said they didn’t plan sufficiently—or at all—for future workforce needs, calling their talent management efforts “reactive and emergency-driven” (“Looking to Attract,” 2005).

Organizations can scarcely afford to ignore the importance of hiring and retaining the right talent. Latest estimates have nearly seven out of ten employers noting the cost (of recruitment, training, severance and productivity) of replacing a bad hire at two to three times an employee’s annual salary (Right Management, 2006). Although there is wide variation in estimates of replacement costs – anywhere from about a quarter of to as much as five times annual salary— there is agreement that companies pay for turnover not just financially, but also in reduced productivity, and in negative effects on the morale of employees who remain.

One troubling consideration was raised by the staffing firm Spherion when its research uncovered what it termed “a troubling gap between employers and employees” when it came to retention. Employers named the top drivers of retention as “management climate, supervisor relationship, culture and work environment, benefits and growth and earning potential.” Conversely, employees named “financial compensation, benefits, growing and earning potential, time and flexibility and management climate” (Spherion 2005).

While the elements that keep workers on the job and satisfied may vary, companies that focus on retention are beginning early. Some now start with their onboarding processes, going beyond orientation to immerse new employees in organizational culture in an effort to build loyalty, engagement and productivity from day one. Others say that retention begins with a formal commitment to find and keep a high-quality and highly qualified workforce. Workers’ satisfaction with a firm’s “people decisions,” managers who understand employee motivation, a good work/life balance and a company’s standing as a “good employer” also can inspire employee loyalty (O’Neal and Gebauer 2006).

Raises in salary continue to be a popular tactic to encourage retention, and some firms tout the effectiveness of career development opportunities and flexible work options. Some companies use retention bonuses and offerings of expanded benefits packages to attract and encourage long-term commitment by workers. On-site cafeterias, postal services, travel planning, workplace massages and provision of health insurance for domestic partners and even for employees’ pets are among the more inventive approaches organizations have tried.

While taking action to keep valuable employees is vital, it is also important to acknowledge that not all turnover is necessarily bad for an organization. Studies on engagement have found that workers who aren’t invested in their jobs can be negative influences in the workplace. In addition, eliminating turnover means that organizations limit their opportunities to add new employees who can introduce fresh skills and perspectives into businesses.

In the end, as it does with so many aspects of business, communication seems to be a key success factor in retention. Companies that clearly communicate to workers—their excitement about their visions for the future and the vital roles employees play in achieving those visions—are likely to find themselves with the talent they need to thrive.

For more information on retention issues, see HRI’s Retention Knowledge Center.

Documents used in the preparation of this TrendWatcher include the following:

BNA, Inc. Onboarding: New Methods for Integrating New Hires into Organizations. Washington, DC: BNA, January 2006.

Burke, Mary Elizabeth. 2005 Benefits Survey Report. Society for Human Resource Management, June 2005.

“Companies Are Losing Middle Managers.” T+D, January 2006, p. 18.

“In Step with the Strengthening Economy, Turnover Continues Upward Trend in 2005.” Human Resources Report, March 13, 2006, pp. 276–277.

Levin, Burgess, and Nathan Sloan. “Creating Commitment.” Workspan, July 2005, pp. 49–50.

“Looking to Attract & Retain Staff: Consider Talent Management Programs.” HRfocus. ProQuest. July 2005, p. 9.

Miller, Stephen. “As Workers Eye Greener Pastures, Retention Incentives Grow in Importance.” SHRM Compensation & Benefits News [www.shrm.org], November 2005.

O’Neal, Sandra, and Julie Gebauer. “Talent Management in the 21st Century: Attracting, Retaining and Engaging Employees of Choice.” WorldatWork Journal (First Quarter 2006):  6–17.

Rahman, Shoz. “Staff Turnover Brings Benefits.” People Management [www.peoplemanagement.co.uk], December 29, 2005.

Right Management. “Lower Employee Morale & Decreased Productivity Are Biggest Consequences of Bad Hires & Promotions.” Press release [www.corporate-ir.net], April 11, 2006.

Spherion. “Major Workforce Study Exposes Serious Disconnects Between Employers and Employees.” Press release [www.spherion.com], November 8, 2005.