In today’s business climate, many organizations feel they have to recruit constantly in order to ensure they have steady supplies of employees to handle increasing volumes of work. While bringing in new faces can help to re-energize teams, the perpetual search for new talent often leads to a revolving door effect. New hires aren’t fully utilized, and existing employees don’t feel truly valued. If this dynamic takes hold, it can lead to one of the most insidious problems faced by enterprises today – rampant employee turnover.
Most businesses have felt the pain of employee turnover at some point. It often surfaces when a superstar employee leaves unexpectedly for one reason or another. If the root causes of those isolated incidents are not explored and addressed, those departures can turn into a long, slow leak of talent. This leak can leave employees with the nagging sense that the remaining team is no longer as vital as it once was. From there, the problem can quickly become much more pervasive. If remaining employees start to feel that the culture is no longer attractive, you can bet their engagement levels will drop. Many of them may become actively disengaged.
The Hidden Costs of Employee Turnover
Josh Bersin, principal and founder of Bersin by Deloitte, believes that employees can be viewed as “appreciating asset[s]” that produce increasing value to the organization over time. This explains why losing them is so expensive. According to Bersin, the cost of losing an employee can range from tens of thousands of dollars to double the employee’s annual salary when you consider expenses such as the cost of hiring and onboarding a replacement, the loss of productivity, training costs, and so on.
Jack Altman, CEO of Lattice, has created a simple formula. The cost of employee turnover “is equal to the number of regrettable departures multiplied by the average cost of those departures,” Altman writes in The Huffington Post. As an example, Altman offers the following:
“If you are a 150 person company with 11 [percent] annual turnover, and you spend $25,000 per person on hiring, $10,000 on each for turnover and development, and lose $50,000 of productivity opportunity cost on average when refilling a role, then your annual cost of turnover would be about $1.57 million. Reducing this by 20 [percent], for example, would immediately yield over $300,000 in value. And that says nothing of the emotional headache and cultural drain felt from losing great people.”
Why the Brain Drain
A 2017 Qualtrics survey of 800 recently promoted American workers found that on average top performers receives messages about 4.3 new job opportunities per year, and that 88 percent of these top performers will reply to these messages. This presents a frustrating conundrum for managers. Why are the best-performing team members so eager to explore greener pastures when they are having such high degrees of success within the organization?
Talent management thought leader Lizz Pellet cites two primary reasons driving top performers to explore new opportunities: compensation and leadership. With regard to compensation, Pellet is quick to point out that money won’t necessarily buy loyal employees, but it can become a factor when other challenges are present.
“Pay and benefits are a driver to many individuals, and to some people the extrinsic benefits of the organization can outweigh the intrinsic benefits,” Pellet writes on the Saba blog. “Employees can withstand and overlook things when they feel highly compensated, but when they feel they are underpaid … there is a lot less toleration.”
Leadership may be an even bigger concern for talented workers. A 2015 Gallup study found that one in two employees had previously left a job to get away from their manager at some point in their career.
In another study, Gallup asked respondents to rate their managers on specific behaviors related to employee engagement. According to the results, employees whose managers are more open and communicative are more engaged.
“Communication is often the basis of any healthy relationship, including the one between an employee and his or her manager,” Gallup notes. Gallup also found that “managers who use a combination of face-to-face, phone, and electronic communications are the most successful in engaging employees.”
Career and workplace expert Heather Huhman echoes this sentiment, pointing out the importance of transparent leadership in convincing employees to stay.
“Make sure executives and managers understand the importance of transparency,” Huhman writes in Entrepreneur. “Model the correct behavior by actively sharing the information [employees] want and need. This is especially important when you’re providing employees with feedback. … Employees feel valued and respected when leaders give them concrete examples of what they’re doing well and how to improve.”
Cultivating a Great Employee Experience
When it comes to retaining top performers and optimizing engagement and performance for all employees, training and development is another important factor.
According to a survey of more than 1,200 executives and managers by the American Management Association (AMA), “only one-third of companies focus on developing and retaining current employees rather than recruiting from the outside.”
“With only 34 percent of organizations committed to developing and retaining employees, it’s easy to see why employee loyalty has declined,” Sam Davis, vice president, AMA enterprise government solutions and mid-market sales, said in a press release. “The same survey found that 52 percent of companies report their employees are less loyal than five years ago. So many companies seem to discount internal candidates and just call a recruiter to fill an opening. But this sends an unfortunate signal to employees, who are usually eager for promotion and advancement.”
City Electric Supply (CES), a family-owned global wholesale business, reduced new-hire employee turnover by 50 percent by implementing more training, an idea that leadership got by listening to employee feedback.
The ability to retain top performers is of critical importance to CES’s business. As explained by CEO Thomas Hartland-Mackie, “Ultimately, if you look at our successful businesses, it’s where there’s a consistent face that that customer is seeing day to day [when] coming in. People like that. It’s just something as simple as going into Starbucks, and you’ve got that same barista every day who knows you, knows your order. You feel more welcomed when you come in. You feel like you’re building that relationship.”
Mackie asserts that the desire for more training is something that CES management would have never known about had it not been for the company’s use of an employee feedback platform. This success story is a great reminder that the best ideas can and should come from anywhere within the organization. They already exist within your workforce. The tricky part is surfacing them in a way that makes them actionable across teams, departments, and roles. This is particularly true in large enterprises, in which the workforce is dispersed across multiple offices and diverse geographies.
When staff members don’t feel that they’ve been heard, the result is a general lack of commitment, engagement, and productivity – all of which contribute to employee turnover. Active listening is one of the most effective agents for organizational change and group development. Developing a listening culture within an organization leads to more inclusive and transparent communication, more authentic feedback, greater retention of top talent, and higher levels of engagement across the entire organization
A version of this article originally appeared on the Waggl blog.
Waggl is the most human way for organizations to crowdsource feedback.