Employee Retention Strategy Can Save Companies Millions

With unemployment at its highest point in decades, many organizations have let their focus on employee retention slip. Why worry if an employee leaves when a tsunami of resumes lie on your recruiting coastline, right?

That attitude is costly, according to Dick Finnegan, founder of Retention Institute and author of Rethinking Retention in Good Times and Bad. A number of management studies conducted in the past few years all point to one trend: The majority of your current employees will look for work elsewhere when the economy improves, if they are not already looking. In fact in July of 2009, one survey found that more than 90 percent of executives would talk to a recruiter if contacted and more than half of the nation's executives were currently looking. Yet the attitude in many organizations is that employees are easily replaced.

If the employment picture is so critical, why don't senior managers seem to "get it," I asked Finnegan this week by phone. "Many don't know what to do," he said. "It's like rush hour traffic, you just manage around it," Finnegan said.

How does improved retention tie into risk management? "One study showed that 50 percent of all truck accidents in one company were caused by first-year truck drivers," Finnegan said. "The more experienced the worker, the fewer mistakes," Finnegan contends.
 
Human resources alone should not drive retention processes, Finnegan maintains. They should be driven from the top down by a company's executive team. Finnegan has a unique model, which he calls The Rethinking Retention Model. The base of this process, he believes, is that retention should be managed like any other process: sales, service, quality or safety. Here are some of his recommended steps:

• Calculate the cost of turnover to determine how much it hurts your company's bottom line.
• Hold supervisors accountable for retention.
• Teach supervisors the important of and how to build trust.
• "Narrow the front door to close the back door," according to Finnegan.
• Carefully script the employee's first 90 days on the job.

Studies repeatedly show the number one reason employees stay or leave their current employment is not due to pay or benefit packages, it results from the employee's relationship with his or her supervisor or manager. Employees only stay with employers, Finnegan says, because of the "things they get uniquely from you. Supervisors build unique relationships" that either increase retention or turnover, according to Finnegan. "If supervisors aren't effective, all of the programs you create will be ineffective." Pay disputes, reduced benefits or career advancements, one study reported, are all "mediated" by employees' relationships with supervisors. "Poor supervisors will trump good employee programs," according to Finnegan.

Finnegan's Stay Interview is a practical approach to retention designed to reduce turnover and is a favored tool among members of the member of the Society for Human Resource Managers (SHRM). A Stay Interview is a "one-on-one meeting each manager and supervisor has with each direct report in order to learn why that employee stays with your company." Once the employee offers feedback, the manager acts on the stay reasons to increase the chance that employee will "stay longer and be more productive." according to Finnegan.

Supervisors then document and share the results of the interview with the management team and with senior managers. The Stay Interview is not just for line employees; it is for each member of the organization. Managers and supervisors also have Stay Interviews with their bosses.
 
To be effective, a "stay plan" must be tailored to the employee's opinions of the work environment. For example, suppose an employee reports he or she likes the flexibility of a one-day a week telecommute arrangement. Can you build on this benefit to include two telecommute days, for example?

Orienting new hires is critical to your company's retention model. "Most think of onboarding as filling out paperwork. However, the tipping point is 90-to-180 days into the employee's job stay." Finnegan recommends a company build tools to connect with employees "during their tipping point." Managers should keep talking with the employee during that time, he said.
 
How your employee enters the organization is critical to retention. Consider this testimony from a Chartis Insurance employee about her new-hire experience. "Each person I met at Chartis was warm, genuine, excited to meet me and learn about my background and interests. The day I accepted my full-time offer I got 17 emails from people at the firm welcoming me, most of which came from people I hadn't worked with during my internship. I knew I was joining a truly unique kind of firm." Does your company do this?

To reduce turnover, Finnegan also recommends candidates preview the job to see if they like it. In conjunction with risk management, Finnegan sent fast-food candidates behind the counter to watch and see if they liked the job. Finnegan anticipated that up to 20 percent would opt out before they are hired rather than after. "This will immediately cut employee turnover,” he said.

Change your approach from "We want to sell you on the job" to allowing candidates to screen themselves out, Finnegan said. Many found they weren't cut out for the work and withdrew their applications, Finnegan said. One cable company, for example, shows employees crawling through attics to install cable and a voiceover narrates the heat, bugs and other downsides to the job.

How do you keep good employees? Here are a few more of Finnegan's recommendations.

Hold employment vendors to retention standards, as well, Finnegan recommends. Hire older workers. The US Dept of Labor confirmed, "The older employees are when they start a job the longer they stay," Finnegan reports. Finally, use a referral system so that current employees refer candidates for three reasons:

1. Candidates start with a friend at work.
2. Employees usually won't embarass themselves by referring 'bad' employees.
3. Candidates better understand the job and the organization's culture before they come on board.

Retention has always been "the red-haired stepchild," according to Finnegan. But retention is critical to a company's bottom line. "In one hospital, we cut nurse turnover by 34 percent and saved that company millions," Finnegan said.

In today's economic climate, organizations can no longer ignore retention strategies if they want to retain their top talent.

For more information on Dick Finnegan’s work, visit www.TheRetentionFirm.com or www.RetentionInstitute.com.