Employee Retention

May 22, 2008

Employee Retention: Five Easy Strategies for Keeping Great People
From the PHCC Educational Foundation via third-party

“The ultimate throttle on growth for any company is the ability to get and keep enough of the right people.” This quote from Jim Collins’ book Good to Great, is a perfect introduction to the topic of retention. Basically, what Mr. Collins is saying is that the key to running a “great” company is having “great” people. Taking the concept one step further, having a satisfied and engaged workforce (great people) leads to operational excellence, which produces customer loyalty and that leads to increased profits (a great company).

Why Focus on Retention?
There are many reasons to focus on employee retention, but the number one reason is because turnover is very expensive. While it may appear difficult to put a real number on the cost of turnover, most studies indicate that – when you consider lost productivity plus management time to fill vacancies plus time to train new staff – the hard dollar cost of turnover is approximately 50% of the annual pay of each person you have to replace. So it is nothing but common business sense to focus on retention to reduce turnover. In fact, it could be said that having high retention numbers actually cuts operating costs.

But, unfortunately, the reality is that every week thousands of well-performing and hard-working employees leave their companies. The average annual turnover range for most companies is 18-34%. So why do good employees leave? Many believe that most employees leave for more money or better benefits. But, again, studies indicate that most employees don’t actually leave companies, they leave their supervisors! Employees want to work in an environment where managers care about them personally and professionally and where their managers have the supervisory skills to help them grow and learn. When employees don’t have this connection at work, they “quit their boss.”

Efforts to enhance employee satisfaction and retention actually start with recruiting. Before you can keep good people, you have to hire good people. Hiring good people starts with creating an employment brand. Determine what your company’s culture and philosophies are and hire people who will be a good match. Ways to accomplish communicating your brand include enhancing your Web site to reflect your company’s culture. For example, if you have a fun and entrepreneurial workplace, be sure your Web site reflects that. In addition, ensure that effective interviewing practices are in place that will help you identify the right candidates.

Once you are able to bring in good talent, the real challenge begins. Keeping good employees is all about creating employee satisfaction. And, simply said, when employee satisfaction goes up, customer satisfaction goes up and profits go up, too! In a typical organization only 20% to 30% of employees are engaged and satisfied and willing to give their best efforts. If you take a few moments to focus on engaging and retaining your employees it will pay off in real profits. Below you will find some suggestions of cost effective retention strategies. Some business owners may find that it is not practical or possible to implement all of these strategies, but it is important to consider which strategies can help you retain your best employees.

Do the HR Basics Well!
While employees aren’t typically going to leave an organization over money, benefits, or other core Human Resources programs, they aren’t going to come to your organization if your company doesn’t do these things right in the first place. Important HR basics to focus on include offering competitive pay and benefits, having an effective new employee orientation to the organization and the job, and ensuring employees have the tools and resources necessary to do their jobs.

Compensation and Benefits programs should be properly designed and implemented to meet the needs of your current and future workforce. Your company’s compensation and benefits programs should be communicated in a meaningful way so that employees understand their value. Here are some questions you should ask yourself to ensure that your company is competitive in this area:

• Does the company understand what the market pays employees who hold the same positions that you employ?
• Does your benefits package achieve company goals such as providing a safety net for employees or encouraging them to maintain their own health?
• Does the benefits package match the company’s employee demographics, not wasting money on benefits that don’t meet the needs of the workforce?
• Does the benefits package attract desired applicants?
• Does the benefits package recognize an employee’s time in a position?

It is important to ensure that employees have the Tools and Resources necessary to do their job. This could be as simple as providing a cell phone, uniform or even a GPS for drivers. Not only will these types of tools make the employees feel more supported in their work, it will probably make them even more productive!

Finally, make sure that your company has a comprehensive Orientation Program that ensures that new employees are welcomed, processed seamlessly into company systems such as pay and benefits, trained as needed, and integrated effectively into their work. Employees need to understand their work assignments and to feel like they have a doable job. They also need to understand how their job ultimately impacts the results of the company. Here are a few questions to ask yourself to ensure you have a well-designed orientation program.

• Do new hires receive a welcome letter?
• Before their first day, do employees know what to expect when they arrive?
• Do you have a package of materials organized for the new employee to put them onto payroll, benefits, etc.?
• Are supervisors prepared for the new employee and have they set time aside to spend with them during the early days of their employment?
• Who assumes responsibility to ensure that the new employee understands the organization, its goals, and basic policies and procedures?

Manage Performance and Recognize and Reward Good Performers
Every company must pay attention to measuring employee performance and providing regular recognition and rewards. While providing quality feedback is something that doesn’t always come naturally, it is a skill that every manager must learn. Eighty-nine percent of workers say that getting candid feedback is important, but only 39% say that they receive it!

In order for employees to perform well, they need to know what is expected of them. Managers need to define the standards of performance and have a system for Measuring Performance. Equally importantly, managers can’t ignore poor performers or bad behavior. Ask yourself the following questions to determine if your performance management techniques can help enhance retention:

• Do employees get both positive and constructive feedback in a timely manner?
• Are performance issues documented and followed up on appropriately?
• Does the company have a way for employees to raise issues or express concerns?
• When performance improves, is it acknowledged and recorded?

Once performance is measured, you need to recognize those employees who are good performers and reward them appropriately. This is a small investment to make in order to retain your top performers. Determining the best Recognition and Reward Strategies is all about understanding what you want to reward and what motivates people. Reward systems need to truly motivate people to change their behaviors to produce strong performance and to sustain that performance over time. Employees often don’t understand what it takes to make a company successful or profitable. For example, cost of goods may not seem important to the average worker, but if they were to receive a bonus for minimizing waste on the job, there would be more motivation for everyone to work toward the bottom line of the company. Money can be used as a reward but it is a short-term motivator. There are many other non-monetary rewards that companies can provide. Amongst the strongest of these is recognition. Sixty-five percent of employees have not been given as much as a “thank you” by their immediate supervisor in the last year.

Provide Quality Work Life
It seems that today everybody talks about employees wanting work life balance and companies that provide work life quality. But what does Work Life Quality really mean? In fact it means different things for different companies. In the broadest sense it means that a company provides a positive work environment and consciously works to keep employees satisfied with their employment. Obviously making this work in one company will be different from making it work in another.

Let’s face it – everybody wants Work Life Balance. We all want to be able to balance work with our personal lives. But how realistic is this when you’re trying to run a small business? It’s very realistic. And it’s very beneficial. Companies need to recognize the benefits of providing work life balance for their employees and establishing an atmosphere that promotes respect for the demands of modern life. There are many things you can do to help provide good work-life balance. These include flexible work schedules, part-time work schedules, job sharing, compressed workweek, etc.

One of the benefits of focusing on work life quality and balance in your company is that you can make it uniquely your own plan – there is no cookie cutter approach. A thoughtful and unique approach will attract employees who want to work in your type of environment. And if the environment you create has a sense of community, shows employees that you value and care about them, and provides for open and honest communication, you will have gone a long way in not only attracting, but also retaining a strongly contributory workforce.

Ensure Management Effectiveness
This topic has been saved for the end because it truly is the most critical. Remember, employees leave supervisors, not companies. An employee’s relationship with his or her boss is the top factor in determining whether there is a successful partnership between the person and the company. Therefore, ensuring strong and effective management is critical. Making an investment in the quality and effectiveness of your management team will pay off. Employees need two things from their managers. First they need managers with good Managerial Skills. If your management team is lacking great management skills, invest in management training and development right away. The critical things that employees are looking for in a good manager are:

• managers who create opportunities for staff development at all levels,
• managers who provide leadership, direction and support,
• managers who care about their employees,
• managers who treat their employees well and fairly, and
• managers who provide face time with their employees.

Mark Schweber, owner of Water Works Plumbing in Rockville, Md., says he has very little turnover. When asked why he thinks people stay at his company, he said “the most important thing I do in my company is I pay attention to my people. I try to understand each employee individually well enough to know what might make a difference to them. I do small things that show that I care. In the end, what might seem small to me is very important to that employee. When you run a small business, you need to be willing to help people with their problems.”

The second thing employees need from their managers is the Ability to Learn and to be given new opportunities. Almost all employees want to learn and grow. They want to make meaningful contributions and feel a sense of accomplishment. Again, Schweber agrees, “Giving employee the opportunity to learn new skills keeps them satisfied at work. And, when employees are happy, they do the job right the first time, which ultimately make the customers happy and leads to more business.”

In summary, there are so many things a company can do to focus on and improve staff retention. These strategies can be fun and affordable to implement. And, in the end, organizations that build a committed, interested and engaged workforce can gain a true competitive advantage. If you make retention a priority, you will be able to attract and keep the people who will make your business a success.

This content was provided by a third party via the PHCC Educational Foundation. Please consult your HR professional or attorney for further advice, as laws differ in each state.

The PHCC Educational Foundation, a partnership of contractors, manufacturers and wholesalers was founded in 1987 to serve the plumbing-heating-cooling industry by preparing contractors and their employees to meet the challenges of a constantly changing marketplace.

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