How to Retain Staff
The cost to your business to replace staff is around 2½ times their salary. By example, if you need to replace an administration officer on $40k per year salary, the cost to you could be around $100K.
That’s ridiculous I hear you say … well consider the following which contribute to the costs:
- direct costs to recruit (eg, recruitment agency fees, advertising fees etc)
- salary costs to undertake the recruitment process (ie, salary of the person/people who will take calls from potential applicants, read applications and shortlist, undertake interviews and referee checks etc).
- productivity cost having staff focused on the recruitment activities rather than regular duties.
- productivity cost of other staff who have to pick up the work of the vacant position whilst recruitment process is being undertaken (this could include overtime costs as well).
- costs associated with inducting/training the new staff member in their job and associated processes.
- IT costs of setting the new staff member up in the system etc.
- productivity cost whilst the new staff member is coming up to speed on their job until they are at peak productivity (research suggests this could be anywhere between 4-12 months).
When you look at the costs in this light, I suggest it highlights the need to look at ways to foster an environment where employees want to stay.
Employee retention refers to the ability of an organization to retain its employees. Employee retention is a business management term referring to efforts by employers to retain current employees in their workforce.
Retention does not mean keeping an employee by obliging them to stay so it should not be costly for the company. Retention means encouraging the employee’s free choice to maintain his/her relationship with the company. Conversely, retention is not about keeping everyone all the time at any cost. This would require too much money and energy. Certain criteria must be introduced, such as measuring competency, performance and engagement in order to know which employees to keep. Your methods must depend on the level of the commitment of the employee.
The most commonly used method of retaining employees is without doubt remuneration, with different systems of financial or non-financial bonuses that become part of a “global remuneration package”. The list is long but it includes bonuses, super and non-super benefits, and stock options. Policies that are solely based on the accumulation of financial bonuses don’t differentiate between employees.
Businesses can also utilise reward and recognition systems to re-enforce value of employees. For these systems to be effective, they must be transparent, equitable and fair otherwise you can experience the opposite effect resulting in disgruntled employees and a toxic culture.
The following Retention Questionnaire published humanresourcesmagazine.com.au (2006) is a great start to understanding where you, as a business owner, are at in your approach to staff retention. Take some time to answer the following questionnaire in order to get an indicative feel for the capacity of your business to keep its employees engaged. The following questions are simply an indicator of commitment to retention.
- My company is well regarded by people looking for work and employees say flattering things about their job.
- I have an employee-centric culture that values internal customers as much as external ones.
- My employees have ample opportunity to understand how their work contributes to the bottom line of the company.
- I provide my employees with opportunities for growth and development.
- I provide a comfortable, safe work environment and I have a good reputation in the community.
- My leadership is accessible and provides vision and direction.
- I care for the wellbeing of my people by making employees’ lives easier and less stressed.
- I know how much it costs me to replace every employee who resigns/needs to be replaced.
- I know the reasons for these departures and the difference between an avoidable and an unavoidable departure.
- I know why employees stay or leave my company and what keeps them engaged.
- The rate of turnover in my company is lower than the average in the industry.
- I spend more time and money on my retention program than on recruitment.
- Salaries and bonuses are linked to performance or the development of competences.
- Our managers are trained to select, identify, guide, coach, reward and retain their people.
- I know my job forecast and professional development plan for the next two years.
- My employees are aware that they are an ‘asset’ in which one needs to invest and not a ‘cost’ to reduce.
- I use a job satisfaction or engagement survey in order to understand the requirements of my employees.
- I know who the talented employees in my company are.
- I think that my company does what is needed in order to retain its valuable employees.
- I regularly measure the effect of my retention strategy.
How many did you tick?
Under 5: You are regularly in the job market and finding it increasingly difficult to attract staff. Either you are challenging established thinking that a salary and a job are enough to motivate your employees or perhaps you have turnover rate of zero, so retention is not a priority for your company?
But let’s take a moment to think about the following: For your birthday, which present from your partner or spouse would give you the most pleasure? A cheque or a gift appropriate to your hobbies? The cheque would be easy and practical, but is not what one would expect to receive from a close family member. In this case, why do you as a company systematically use this method? It is time to research the individual satisfaction and personalised retention?
Between 5 and 10: The retention practices of your company are largely inspired by the concept of ‘the carrot and the stick’ and are centered on financial reward and Friday drinks. But you recognise that this mass motivation, used to obtain better productivity has reached its limits. Retention is not about “one size fits all”.
Between 10 and 15: You are conscious that your employees are as important as your clients and that you need to concentrate on the former to assure satisfaction of the latter. You know what is at stake with retention and you are committed to answer your employees’ demands in a culture of engagement. Excellence is on its way!
Between 15 and 20: You are an employer of choice and everybody should know it.
If you are finding your staff turnover is too high and would like some help to improve the situation, call me today (3264 4783) … I can help!