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The Retention Puzzle

March 21, 2011

Recently, an HR colleague of mine was relating a story over lunch of the continuing trouble his organization experiences with new hires.  They show up for Day 1 (New Employee Orientation) and then don’t come back for Day 2.  And this, or so it sounded like, is a regular occurrence.  He indicated that the follow-up phone calls to find out “what happened?” are placed and the common answer is “oh, I don’t think that job is for me; I didn’t know you had so many rules.”

Unrealistic and unprepared workforce?  Possibly.

Inadequate recruitment process?  Absolutely.

Avoidable turnover?  Definitely.

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So often, we who are HR professionals or business leaders or managers of large departments, work to align the puzzle pieces together in order to play the Retention Game.  We try to measure it, often through some convoluted formulas, and we strive to reach some magic retention percentage.   Sometimes we differentiate between turnover and retention; as if there’s some sort of magic square that will TRULY give us a real sense of  what’s going on in our workplace.  We may have a portion of our bonus or incentive pay based on hitting that number – and some of us may even be in fear of losing our jobs if the retention percentage falls below a certain number.

So we measure and we calculate.  We put plans in place and we talk endlessly, while slicing and dicing the data.  Is our turnover voluntary or involuntary?  Are we retaining the right people?  Is the turnover a problem by position?  By department or job or function?  By manager? And who OWNS retention/turnover?  Many organizations seem to think it’s Human Resources.  Is it?

The bottom-line

Turnover has associated costs.  The dollars we spend on recruitment and training are a direct expense.  And savvy HR professionals are tracking productivity spend – what is the financial burden of an un-trained or new employee during a specified timeframe before they’re fully productive… 3 months? 6 months?  A year?

And if there’s a continual churn of employees, this can lead to a lack of sufficient staff to complete the basic and essential functions of a company – leading to dissatisfaction, burnout, frustration and just plain anger amongst the employees who remain.  The employees who remain may themselves become less productive and eventually, join their recently departed brethren by adding to the turnover number.

And what about the impact to customer satisfaction?  Dissatisfaction can be an unfortunate result whether one’s customers are high-paying corporate clients or the regular visitors to your local yogurt shop.  There are numerous studies that have linked high turnover in health care facilities to reduced patient outcomes.  And service-industry businesses, notorious for high-turnover, need to realize that their regular customers enjoy consistency in staff and don’t enjoy seeing a new face every-time they pull through the drive-up window.  Can that customer satisfaction be measured as a piece of the retention puzzle?  It sure can – and is a factor that needs to be considered.

What’s Causing the Turnover?

We realize that not all turnover is bad.  Sometimes, employees have a natural shelf-life and the turnover is expected and may be even good, or certainly acceptable.  Joe who’s retiring; Betty who’s reached the top of her pay grade, wants to earn more money but doesn’t understand that the company’s compensation structure is not based on merely providing automatic pay increases based on length-of service.  And Carl who complains, causes dissent and is just plain unhappy – boy, don’t we all rejoice when Carl leaves our organizations?

But for the most part, we dislike turnover and seek to understand and prevent it.  And while there are numerous ways that turnover can be tracked and analyzed, there are some fairly basic questions that one can start with:

  • When does the turnover occur?  If it’s occurring on day 1 (as in the example above), that speaks to an inefficient recruiting process.
  • What are the working conditions?  Are there basic working conditions, inherent in the job, that have been downplayed or minimized in order to placate new hires/existing employees?  Things such as scheduling or hours required to work or expectations for conduct/behavior that are specific to the organization?  Perhaps employees have become frustrated due to lack of clarity in some of these general areas.
  • Is the job what the employee was led to believe it would be?  Were things miscommunicated about the nature of the job?  Is there a mismatch between the work and the employee?  It’s possible this was a poor hire in the first place (not a poor candidate… a mismatch).  This could range from job tasks to salary/compensation structure.  Perhaps the employee was led to believe that pay could be $yy (i.e. down-the-road), yet their pay continues to be $xx.
  • And what about the culture of the organization/location? Ineffective managers, too many silos and lack of communication are just some of the reasons an employee may choose to leave.

Who OWNS Retention?

Some will argue that turnover and retention initiatives are solely the responsibility of the Human Resources staff.  HR Managers and corporate recruiters have turnover metrics tied to their yearly bonus plans (as frustrating as time-to-fill being tied to them when the Hiring Managers are involved… but that’s another subject).

And while HR has responsibility for items that lead to employee satisfaction (benefits, compensation, aspects of culture and related programs), sometimes there are other forces at work, outside the HR domain, that impede HR’s ability to effectively manage retention/turnover.

A number of years ago I interviewed for an HR position in the banking industry.  Needless to say, the bulk of their positions were service-oriented; tellers, personal bankers and others who worked on the front-lines, directly dealing with the customers.  This institution was known in the industry for paying starting wages, for these positions, that were the lowest of any in the market.  During the course of the interview process, I met with the President and I asked him about turnover (it was very high) and for information on primary causes of turnover.  He readily admitted that turnover was high and primarily due to the low wage – but he stated that it was OK and they built it into their model and welcomed high turnover because their belief was it cost less to replace/hire/train new employees than to pay high wages to retain experienced staff.  They welcomed turnover and WANTED it.

I guess that’s one way to tackle the Puzzle.

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One Comment leave one →
  1. March 21, 2011 4:09 pm

    Really interesting post Robin and lots to think about. As you say, not all turnover is bad, but as HR professionals and business people, we should be striving to understand why it’s occurring and what the reasons behind it are. Otherwise we are on one hell of a hamster wheel, always recruiting for the positions of the people who have just left.

    Great post – thanks for sharing.

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