Case: Untangling employee’s turnover.
Employee turnover costs companies more than it appears.
Directly, more than 33% of the annual cost of departing employees and indirectly in:
Replacement time
Internal and external credibility
Rework
Attrition
By applying action research, turnover rates and associated costs can be significantly reduced.
Look, think of it this way: employee turnover is very expensive. Every time an employee decides to leave the company, he takes with him hours of planning the vacancy, newsletter, per-filters, interviews, negotiations, on-boarding preparation, training.
We lose hours or client’s introductions, onboarding with the organization and the hope of the system that wants to be better, the new vacant generates opportunity costs and significant losses.
In fact, a study by EBN (Employee Benefits Network)* estimated that turnover costs companies 33% of the annual cost of the employee.
Let's crunch the numbers: if the average cost per employee was $35,000 USD per year, you have 300 employees and your turnover is high, say 48%: $35,000 x 300 employees x 48% turnover x 33% associated costs:
The turnover cost would be 1.7 million USD per year (!), that’s an amount to take in consideration.
This was the situation of a client I worked with. If you want to know a little more, keep reading below.
Situation:
In the last 12 months the company has had a very high turnover, close to 50% of its staff. Particularly in the sales department, the loss has reached almost 80%. This implies a lot of work for all the managers and HR because it takes longer to hire new people than they last in the company.
What did we do?
This is a common problem but not a simple one. I chose a first question to work on: why are people leaving? To find out, we talked to managers, current employees (both new and more senior) and analyzed exit interviews.
This pre-diagnosis let me see that there might be a problem with three topics:
The compensation and promotion model might not be reflecting employees' accomplishments or efforts.
Many of the managers may not have the basic skills to set objectives, evaluate and provide feedback to their teams, which has caused confusion, unfair situations and anger among the staff.
Profiles and methods of attracting and selecting staff may not reflect business objectives and priorities. In some cases, selection was done solely by store managers without training or guidance.
These working hypotheses needed to be tested, so I reviewed the documentary information available within the company's framework (strategic plan, organizational charts, performance evaluations, exit interviews, communication methods, training plans, among others), analyzed the Comp&Ben system and compared it to best practices in the market. I conducted interviews with key personnel of the organization, a vertical cut that led me to dialogue with talents from different areas.
With these analyses, we established a compensation model for the commercial areas that included sales incentives. We proposed a model of growth in small steps, micro-promotions as milestones were met. We piloted it with a few branches, learned from it and expanded it to all stores.
We ran a questionnaire with managers to self-assess their leadership skills and found five critical topics:
management by objectives
assertive communication
conflict management
active listening
recognition
We developed a training plan (face-to-face and virtual) that included two group coaching sessions and, for regional managers, individual coaching.
We reviewed the recruitment and selection system. Created a centralized pool for talent attraction at the national level where the initial selection was made. Business-critical positions were identified and the selection process was supported by the Human Resources team. Store managers were trained to conduct competency-based interviews.
Results
Managers felt more confident in their role and were able to fulfill their functions better.
Staff turnover started to decrease in the first months, once the first measures were implemented, and showed a great improvement one year later, reaching less than 30% in general, but in the commercial areas, where we had the worst numbers, it dropped more than 45 points.
The level of employee satisfaction grew thanks to the promotion model and the managers' communication style.
Using our same equation from the introduction, the company is managing to avoid a cost of 700K USD per year. Even after accounting for the investment in training and improvement the savings were significant as well as the improvement in productivity.
The door through which employees enter is the same door through which they will one day leave. Whether the time the individual shares with the organization is of mutual benefit, productivity and growth depends on multiple factors including: the clarity and congruence between goals, expectations and rewards, the leaders, their style and emotional capabilities, and the fit between the interests of the employee and the organization.
These elements, well linked, can be a factor of differentiation, satisfaction and development. Through Organizational Development techniques, researching, hypothesizing and taking action accordingly, organizational congruence and the ability to attract and keep the best talent can be increased.
*https://www.benefitnews.com/news/avoidable-turnover-costing-employers-big
I would really like to know what you think. Write me at fmonterrubio@icloud.com and let me know how you have dealt with this issue in your organization.
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