Turning around turnover

Employers are facing a serious challenge: how do they hold onto their best and brightest employees when alluring external opportunities keep turning their heads? The trend is so worrisome that 9 out of 10 employers report that improving employee retention is a critical priority for their organization this year.

Ten million: That’s the number of alternatives available to your employees each month, which leads to month after month of record-breaking resignation rates. Two out of 3 employed Americans are looking to change jobs right now, and even more are considering switching careers altogether.

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The Society for Human Resources Management (SHRM) released data that indicates the cost for an organization to replace an employee is 50% to 60% of that employee’s annual salary. Another study by Gallup shows it’s more like 50% to 200%--an estimate they say is at the conservative end.

Either way, you’re probably doing the math in your head right now, adding up the annual pay of the number of folks who quit your organization this past year. At a 100-person company with an average salary of $50K, even a modest turnover rate could cost as much as $2.6 million per year.

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These costs spring from several areas. Turnover directly impacts customer satisfaction. It interrupts or reduces the speed of your operational processes.It slows the company’s ability to grow or scale. And it puts an additional level of strain on the colleagues who must then cover the responsibilities of their departed team members on top of fulfilling their own responsibilities. This human strain is often translated into additional work hours, which contribute to burnout--spurring more turnover--with stress spilling over into the employee’s personal life. That, in turn, morphs into another traditional cause of turnover: difficulties at home. The cycle is vicious. 

Is there any question why organizations are making stemming the tide of turnover a top priority?

 

Lessons in leaving

Reasons why employees leave jobs run the gamut from the deeply personal and unrelated to the employer, to changing individual professional needs, bad managers, and bad environments.

You need to know why your people are leaving.

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90% of Fortune 500 Companies conduct exit interviews. But, with typically just a 35% response rate, the findings are hardly representative. Not to mention that nearly every available employment resource encourages employees to be less than forthcoming or sugarcoat their feedback. So relying on exit interviews to understand why people iis dubious at best. Over half of those same Fortune 500s view their exit interview process as unsuccessful in driving any meaningful change. (That’s not to say we recommend abandoning them completely; there are litmus tests you can use to see if you’re doing them right.) So, how do you find out why your employees left, specifically?

Wages and benefits are consistently the top two reasons employees leave an organization. While Wayforward unquestionably supports strong, competitive compensation and best-in-class benefits that align with the needs of your people, there is more to the story here.

A study by PwC lists lack of flexibility, growth opportunities, and culture as 3 of the top 5 factors why people leave a company.

 

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Flexibility is simple. The majority of people in the workforce now are not interested in working full time at an office. Companies currently winning the battle for workers have the philosophy of “if the work is getting done, and employees are collaborating effectively, we don’t care where it gets done.” Remote and hybrid options are key to retaining employees. But some organizations, like those in manufacturing and hospitality, for instance, can’t separate the work to be done from the physical location. In these cases, they should examine other ways to attain flexibility. Examine your attendance policy, as we’ve previously described, or consider inviting more significant employee input when deciding how the work gets done.

Professional growth doesn’t mean you have to promote everyone in the company every year. Many employees consider professional growth and development much more holistically. Providing regular opportunities for growth across the organization is an oft-cited desire. Consider formalizing professional development by supporting employees with ongoing education or certifications. Make sure your workers are at the top of their field and are proficient on the equipment they use.Try instituting rotation programs so your employees are exposed to different departments, products, or divisions. This horizontal growth serves to challenge and stimulate people in ways they deeply appreciate--and is equally valuable to your company. Tying compensation growth to these practices becomes a no-brainer, because you can quantify the direct benefit the organization realizes.

Culture is a concept widely misunderstood by HR and organizations in general. The primary driver of your culture is simply the way that you do things. And the way you do things can either drive growth and improvement, or sow the stagnation and toxicity that kills retention.

To simplify our culture question: 

Does the way you do things engage and build loyalty from your employees? 

Or does it disengage and drive them away from you?

We know from decades of industrial/organizational psychology research that a company’s struggles with the quality of a product or service and high turnover almost always appear together. 

Organizations characterized by impeccable quality in their processes generally also see employees proactively troubleshooting problems, rather than at management’s behest; vibrant and forthright knowledge transfer; and strong succession planning. These phenomena are rarely found in high-turnover organizations.

 

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In our experience, the root cause of high turnover in organizations is dehumanizing stereotypes. Industrial psychologist and author Alan Weinstein confirms this in Human Energy, his book about the turnaround and subsequent meteoric rise of a failing General Motors plant. And, considering SHRM’s data finding that 75% of employees believe their manager sets the culture, we ought to be looking at how direct managers do things. Let’s repeat that important distinction: Culture is not what we do, it’s the way that we do things. So we’re examining the way that managers do things, not what they’re doing.

 

Shifting the manager mindset

This is a hefty accusation we’re making. How do we make the jump from “the way managers do things” to “dehumanizing stereotypes?”

Go through this mental exercise or, better yet, try this out at a meeting tomorrow. Think about your most common people-centric challenges: absenteeism, turnover, negative attitudes, people focused more on job protection than their work quality, poor performance, etc. Pick the one  your organization can relate most to.

Now, think about a time you asked (or do ask) a front-line manager or supervisor about how to fix this issue. Did their answer include a little character assassination of the employees in question? Rather than focusing on how to solve the problem, did they hint that the blame lies in the character of the employee population at large? If they did, then that manager is leading based on the assumption that their employees are somehow “less” than they are. This is the dehumanizing stereotype. 

In the same way that a conversation about that odd-looking MINI Cooper is going to have you noticing them all over the road - as soon as you notice a dehumanizing stereotype once, you’re going to start noticing it more. Just like the MINI Cooper, they were there all the time. They just weren’t on your mind.

Shifting the mindset of your front-line managers from thinking employees are flawed to believing employees are the secret sauce of success is the key to grabbing the reins of your company culture. When employees stop seeing dehumanizing stereotypes in the way their managers interact with and characterize them, and start seeing consistent examples of faith and trust from their manager, the organization becomes more than a paycheck. It becomes something personally important to them, and much more difficult to leave.

Feeling overwhelmed by this or want an expert opinion? Schedule a consult with Wayforward. 

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