10 important takeaways from this lecture:
00:00:28 It’s important you attract, hire, and develop the right people, but it’s equally important that you know how to keep them. This is employee retention. In every department the boss knows that there are at least 1, 2,or 3 people that the boss knows that were this key person to leave, their department would be in deep trouble.
00:01:39 Companies have departments who deal solely with recruting, departments who deal solely with training and development, and departments dealing solely with compensation and benefits, yet you almost never find a company with a department whose sole responsibility is dealing with employee retention.
To say Human Resources is only about the people management is soft; you can, and you must, calculate certain things about the cost of employment:
00:15:47 In companies, studies have shown that it is the high-performing, and the low-performing employees who voluntarily contribute most to your turnover rate.
Low-performers tend to leave companies because they can’t adapt and fit in with the company culture, which results in a limited loyalty to the company, and low-performs usually have conflicts with their peers, as it is their peers who must constantly do that person’s work. Once that person has been branded as a loser, they prefer to change companies than try to overcome their ‘reputation,’ etc.
High-performers tend to leave companies because they have more options available to them, are likely to be more mobile and flexible, well-networked,etc.
An important thing to note is that when a company claims that their turnover rate is 1%, this average really tells us nothing about the company.
The two important turnover rates you want to understand are:
- ‘What is turnover with your high-performers?’ It’s very likely that the turnover rate for your high-performers is much higher than your company average turnover rate.
- ‘What is your turnover rate in your most important, critical functions?’
00:21:10 What are the visible and hidden costs of employee turnover?
- The price of this person taking his or her knowledge away from your company and bringing it to one of your competitors
- All the training and development invested in the employee
- The cost of recruting a new person to fill that person’s shoes
- Paying for headhunters and consultants to assist in the hiring (approximately 1/3 of the person’s annual salary)
- The cost of training and developing that employee
- Decreased productivity during onboarding
The total turnover cost of employee retention can range from 100%-400% of that position’s salary, depending on how specialized the job is, and whether or not it is a key position.
00:26:48 There is a rule of thumb which states that employes who are leaving have a lower motivation (perhaps as much as 50% less performance) to getting things done during their last 1 to 3 months of employment. Likewise, new employees will perform perhaps as much as 50% during the first six months of employment as they learn to do the new job.
00:27:55 Another major assumption is that the value added by an employee is at least equal to his or her pay. If you are paying the employee more than that employee is bringing back into your company, then you are losing money. If you are paying your employee much, much less than the employee is bringing back into your company, then you risk:
- Demotivating the employee – which reduces productivity
- Losing the employee to a competitor who offers more money for the same work
- Employee strikes and/or organized unions stepping in
…so what can we do about retention?
00:33:39 Turnover risk is evaluating the likelihood of each employee’s leaving the company and how much of an impact upon the company this person’s leaving would cause – what are the consequences?
00:35:50 Ambitious, high-performing and high-potential employees either currently in a key positition, or striving to be in a key position are always likely to leave; especially if this person is not receiving the recognition or training he or she wants.
People who constantly complain – through meetings with upper-management or amongst peers – are likely to leave.
00:39:55 According to a study conducted in 2008, 1,000 top-managment polled believe that employees tend to leave because they feel there is (in order of importance):
- A lack of career opportunities and development paths
- Salaries do not compare favorably with industry peers
- Undesirable work-life balance (long hours, frequent business trips, etc.)
- Lack of challenging, exciting tasks (job fulfillment)
- Lack of leadership/support from senior managers
- Benefits do not compare favorably with industry peers
- Image problem of the industry/company
- Lack of training
00:44:00 The traditional perspective on work is that people work because they need money to live and feed their family. But studies have shown that work is based more on a hidden, implicit, give-and-take psychological contract between the employee and the employer.
Further, these psychological contracts change in your own lifetime, and they change from generation to generation.
[EDITOR’S NOTE: In our interview, Product Designer Timoni West points out that the way many companies set up rewards systems means that they are sort of doomed to lose their talented people after a certain number of years. They won’t keep innovating forever, people will move to other companies, and their product will slowly lose value.]