Turning the Turnover Tide

Aug. 1, 2001

Turning the Turnover Tide

Hanging on to the employees you have

By Joe Escobar

August 2001

Keeping the employees you have — many companies are realizing that is the key to increased profitability and positive work environments. In searching for ways to improve the bottom line, holding on to employees is a central part of any successful operation

What does turnover cost?
Employee turnover has many costs. One of these is the direct monetary impact on the business. Leigh Branham of Kansas City-based Right Management Consultants notes in an article titled "Six Truths about Employee Turnover," that most managers know turnover is expensive, but two-thirds are unable to quantify the actual cost. He states that turnover can cost a company from 25 to 200 percent of annual compensation. Using the low end figure, if the average pay for a mechanic is $40,000 per year, then it would incur costs of approximately $10,000 to replace him should he leave. These costs are related to decreased productivity, administrative costs, resources spent on searching for applicants, relocation expenses, and increased training time.

Brutal Bosses
Dehumanizers – Transform subordinates into faceless victims.Blamers – Treat workers like wayward children. Rationalizers – Justify abuse by focusing on some greater corporate good.Conquerors – Are obsessed with demonstrating their personal power.Performers – Try to make their own work seem more important by denigrating that of others.Manipulators – Tend to "waffle," dancing to and fro on the periphery of an idea, until the matter’s success or failure becomes clear. – Harvey Hornstein, Brutal Bosses and Their Prey

Other hidden costs
Other costs of high turnover rates that adversely affect companies include disruption in the smoothness and continuity of the operation, lowered morale, burnout/absenteeism among remaining employees, and loss of experience and knowledge. Although it is not easy to place a specific dollar amount on these issues, they definitely affect the profitability of the company. Lowered morale of remaining employees can be the most harmful effect of high turnover rates; once the seeds of low morale are planted, it can be hard to uproot the negative attitudes even with the best intentions.

Lowering the turnover rate
So what are the keys to keeping the employees you have? It may only require a few changes within the organization. But, in cases of very high turnover rates, there may be many factors influencing the defections that will require significant introspection on management’s part.

Open up the lines of communication
Talk with the employees to find out what issues are important to them and where they see room for improvement. Showing a sincere desire to have open lines of communication can start the ball rolling towards higher morale. A questionnaire might be used to obtain information that otherwise might not be shared openly in person due to fear of retaliation.
Another good tool is an exit survey. It should be thorough enough to obtain important information like reasons for leaving, opinions on pay, benefits, supervision, and opportunity for advancement. Although some disgruntled employees may give exceedingly low remarks, many will be truthful in this type of survey. Consistent low marks in a particular area should send up a red flag. The feedback obtained from these exit surveys and communication with the employees can help focus on areas that need improvement.
In his book, Keeping the People Who Keep You in Business — 24 Ways to Hang on to Your Most Valuable Talent, Leigh Branham states that companies fostering a culture of commitment versus a culture of abuse will more easily hold on to their employees. Companies that have cultures of commitment become "employers of choice" because they create environments where three key retention management practices are established:
1. Adopting a "give-and-get-back" philosophy
2. Measuring what counts and paying for it
3. Inspiring commitment to a clear vision and definite objectives

One essential management philosophy is putting people first. It centers around treating employees as number one. The company ’gives’ in terms of fostering a positive work environment, and it ’gets back’ employees who are happy and work hard towards customer satisfaction and meeting company goals.
Investment in employee training goes a long way towards increasing company loyalty. By investing in training, the company reaps the benefits of having a more knowledgeable workforce — resulting in lower troubleshooting time and increased productivity. It shows the company’s commitment towards helping employees advance in their careers through increased job skill knowledge. It sends the message to employees that they are valuable enough to invest in.
However, the most basic way that a company can foster high morale is to treat employees with respect. Care about the people as people. Branham states that the most important thing a company can give to an employee is good management. Managers and supervisors who abuse and belittle their people account for thousands of turnovers each day.

Measure what counts and pay for it
Money seems to be a key factor in why employees leave for other jobs. Great disparities in pay will send people looking for employment elsewhere.
Sam Lee, Training Coordinator at Goodrich Aerospace’s Fairhope, Alabama facility says "We felt the effects of pay differences in the early 1990’s. Our employee turnover rate jumped to around 25 percent when another aerospace company opened up nearby offering higher pay than what we were paying."
With a high percentage of employees already gone, and more looking to leave, management realized right away that something had to be done. They did an in-depth survey finding out what competing aerospace companies were paying in the area. Their company had always offered good pay for the area they were located in. However, when they compared their pay to aerospace companies within 100 miles, they found out they were falling short. A more competitive pay scale was implemented and the turnover rate went down to a much lower level.
Offering competitive pay works in two ways — it helps keep the employees you have and it also helps attract qualified employees when the time comes to fill a vacancy. Although not the cure-all for turnover problems, pay rates play a significant part in employee retention.

Money is not always the ’silver bullet’
Some companies offer great pay but still suffer high rates of employee turnover. What can be done to turn the tide at these places? According to Branham, more money is not the "silver bullet" for solving high turnover rates. Workers want to feel they are being paid comparable to others in the industry. But more than this, they desire interesting and meaningful work, acceptable working conditions, and good management practices. With these factors in place, the prospect of making a little more money elsewhere where these "softer" factors are unknown is usually not enough to pull the employee away.

A Culture Change
A good example of turning a company culture around is the that of Goodrich Aerospace in Fairhope, AL. As mentioned earlier, the company changed pay scales after researching pay rates throughout the area. But it didn’t stop there. Goodrich Aerospace realized that in order to attract and keep the best employees, it would have to change more than just pay: it would have to foster a culture of commitment within the workforce. Sam Lee shares "In almost every organization you have around 10 percent of the employees that are ’bad apples.’ Some companies concentrate on these employees through disciplinary tactics, taking for granted those who are working hard. We choose instead to concentrate on the 90 percent that are doing a good job. We reward hard work and creative thinking in these workers. We value their ideas and commitment, and provide a work environment where they can excel. The other 10 percent either jump on board or take care of themselves. Doing this has increased morale 100 percent." Some of the changes the company initiated: • Making all employees salaried with monetary bonuses based upon production output • Making work hours flexible — allowing each individual team to set their work hours • Stressing the importance of mutual trust and respect between management and employees and showing it through action • Making a commitment to the employees future through training and development programs • Initiating a program to constantly strive to remove waste and improve job processes The company has realized numerous benefits from this culture change including lower turnover rates, improved morale, improved production rates, and plenty of highly trained, motivated employees.

Inspire commitment
The third retention practice of successful companies is that they inspire commitment in their workforce.
Workers want more than just monetary incentives. They want to believe that they are essential to the company’s success. As Robert Reich, an economics professor and former U.S. Secretary of Labor once said, "Talented people want to be part of something they can believe in."
Having a clear company mission or goal is important and helps to show employees where the company wants to go and what it’s core values are. But just stating these is not enough. Employees must be made aware of how their work contributes to these goals and the well-being of the company.

Selecting the right people, right away
Poor hiring practices set the stage for future turnovers. Job applicant screenings should be more than just sticking a mirror under the applicant’s nose to see if he is breathing. Those in charge of interviewing potential employees should be trained on interviewing techniques that give them the ability to hire the best people for the jobs.
Give applicants a realistic description of the job. Keeping information from them, fearing they’ll leave if they learn the truth, is never a good practice.

Coach and reward to sustain
Employees should be given the tools such as necessary initial training and assigned challenging work that utilizes their knowledge and skills. Their achievements should be recognized and appreciated. Make sure they are aware of how their work is important to the company’s success.
Managers need to be trained in career coaching and be expected to use that training with employees.
It is evident that high turnover can be the downfall of an organization. By taking a good look at all the factors involved, a company can work at turning the turnover tide, resulting in a positive work environment and improved profitability.