Recruiting
And Retention Best Practices
Many
managers still believe an increase in base salary is the number one
factor in attracting or losing employees.
By Diane Lustenader, SPHR
It is no secret that employee
recruitment and retention are top problems for organizations in the
year 2001, including material handling businesses. With record low unemployment and an expansion of new technologies,
competition increases daily for skilled employees. Most companies recognize
that they have problems with recruitment and/or turnover, and are quick
to turn to these trends to explain their situation. More money is the
easy fix but not always the only one.
Indeed, many managers still
believe an increase in base salary is the number one factor in attracting
or losing employees, despite numerous research conducted during the
last 15 years. According to the 1998 Research Initiative by the
Corporate Executive Board, which covered 6,000 employees in technology,
manufacturing, finance and retail, four major areas influence an employee
to stay with an organization:
1.
Compensation and benefits
2.
Work environment
3.
Work-life balance
4.
Organizational environment
Remember, however, that it's
not all about money. Although the compensation and benefits category
just squeaked by the other three categories, one non-monetary factor
was number 1. The average factor was ranked 3.33. This was a survey
of employees of all ages and all levels:
5.02
Boss's reputation
4.58
Base salary
4.22
External equity: how total salary compares externally
4.02
Amount of business travel
4.02
Health benefits-type and ability to choose
3.84
Retirement contributions
3.80
Hours of work: how many were expected, flex schedule
3.64
Organization's reputation
3.62 Individual recognition received
3.59
Internal equity of compensation package
3.55
Location of work: ease of commute
3.54
Reputation of coworkers
3.41
Empowerment, independence
Replacement
Costs
High turnover can be a huge problem
hitting the bottom line directly and through reduced morale. Replacement
costs, based on recent research from multiple sources, are as follows:
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Non-exempt:
Exempt:
Executive:
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50-75%
of annual base salary
100-125% of annual total cash compensation
200+% of annual total cash compensation |
These ranges include consideration
of both direct and indirect costs such as the cost of separating the
former employee, advertising, interviewing expenses, interview travel,
agency/placement fees, referral bonuses, sign-on bonuses, lost revenue
and/or “good will” from customers during transition, temporary
help during transition (clerical through consulting help), pre-employment
tests, orientation training, “buddy” system training, lost
productivity during first three to six months, overtime and related
items.
If certain positions “churn” several times within a year, the organization can easily pay three to
four times its budgeted base salary.
When turnover increases, it
affects everyone's morale and productivity. In high-turnover organizations,
employees question why they are the only ones left.
Turnover
Demographics
It is important to consider
what an expected rate of turnover should be, depending on the demographics
of the organization and the employees. If Gen X/Y employees are expected
to have an average three year length of service with a company, and
Boomers average five to six years, that is a difference between having
a 16% turnover and a 33% turnover each year. The younger the workforce,
the higher the expected turnover. National statistics which look at
blended age groups should be factored based on the demographics of the
organization.
If there is a significant gap
between expected and actual turnover, it is best to collect data to
determine the most probable causes before determining a solution. The
information provided below is general and reflects current trends. Turnover
analysis was conducted via these factors:
- Length of service with the
company
- Length of time since entering
the job market
- Exempt/non-exempt
- Department and/or supervisor
- Employee age
- Stated reasons for both voluntary
and involuntary separations
- Gender
- Minority status.
Watson Wyatt Worldwide's Retention
Survey, released in Spring 2000, identifies the top seven factors
that keep employees loyal to an organization:
1.
Chance to use skills on the job
2.
Trust in senior leadership
3.
Competitiveness of rewards
4.
Job security
5.
Quality of company's products and services
6.
Absence of work-related stress
7.
Honesty and integrity of company's (management's) business conduct.
In the Corporate Executive Board
study, there were no statistical differences in the high value placed
on work-life balance factors between men and women or parents and non-parents.
There were statistical improvements in the satisfaction of high-value
employees by limiting overnight travel to an average of 25 to 75 days
per year and work weeks lower than 50 hours. There was 100% satisfaction
with 40-hour weeks.
Cluster
1
“Risk & Challenge” |
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Cluster
2
“Home & Family” |
24% of
respondents
High profile work
Challenging work
Risk-taking environment
Variety of roles and jobs
Enpowerment
“Best in class” senior managers
26% intend to quit within 1 year |
35% of
respondents
Location
Current company loyalty
Flexible work schedule
Low-level of business travel
On-site child care
Role clarity
22% intend to quit within 1 year |
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Using cluster analysis, this
study identified four employee groups according to their underlying
values and the factors that attract them to jobs.
On average, 25% of high-value
employees intend to quit within the next year. The younger the employee,
the higher the percentage who intend to resign. Simple assessments of
job satisfaction previously used did not identify those most at risk
to quit.
Cluster
3
“Cash & Stock” |
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Cluster
4
“Work to Play” |
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17% of
respondents
Internal equity
Performance bonus
High base salary
Pay above market rate
Stock options
High-quality manager
30% intend to quit within 1 year
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18%
of respondents
Low-level business travel
Low-level workload
Location
High base salary
High quality manager
Vacation
23% intend to quit within 1 year |
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When able to segment the workforce
based on values, companies were better able to customize their offers
to retain high-value workers. Since the single most important factor
to high-value employees is the quality of their immediate manager, efforts
to improve manager quality will pay high dividends in attraction and
retention.
Retention
Successes
According to a recent
Manchester Partners International survey, 52% of organizations have
experienced increased turnover. Using the following methods, 76% of
survey participants reported moderate success.
Since the single
most important factor to high-value employees is the quality of
their immediate manager, efforts to improve manager quality will
pay high dividends in attraction and retention.
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Top five methods businesses
are using to retain senior-level executives:
67%
Better compensation and benefits
52%
Stock options
47%
More careful selection in hiring
27%
Profit sharing
26%
Retention bonuses
Top five methods businesses
are using to retain middle managers:
61%
Better compensation and benefits
54%
More careful selection in hiring
41%
Tuition reimbursement
32%
Stock options
31%
Casual dress code
Top five methods businesses
are using to retain non-exempt staff:
57%
More careful selection in hiring
50%
Better compensation and benefits
47%
Tuition reimbursement
45%
Improved training programs
39%
Better orientation programs
Selected anecdotally from over
40 articles published from 1997 through 2000, the following are retention
activities reported to have success for the organizations reporting
on them. This list is presented alphabetically. Select retention activities
based on an analysis of current turnover causes and the creation of
an overall retention strategy. Remember, there is no magic bullet.
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According to surveys, the most often-cited reason why an employee stays with a company is the boss's reputation! Second is base salary.
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75% of employees want rewards
based on employee feedback;
- Access to on-site cafeteria,
food service;
- Business travel opportunities
for everyone;
- Commuting allowance;
- Compressed work week: four
10 hour days;
- Compressed workweek: nine-hour
days with every other Friday afternoon off;
- Drop low priority work or
hire out to temps during workload crunches;
- Financial rewards: signing
bonuses, retention bonuses for hot-skills jobs (average of 5 to 10%
range for exempt, non-management staff);
- Gifts from Internet: cardex.com,
Flooz.com, Giftcertificates.com, Giftpoint.com, kudos.com;
- Increased commitment to and
investment in training (high performing companies average 40 hours
per year per employee);
- Individual retention programs;
custom tailored retention program for high performing employees;
- Informal perks such as monthly
drawings for desirable services for the next month: house cleaning,
car wash/oil change books, movie tickets, babysitting subsidy, groceries
for a month, one rent or mortgage payment (not to exceed $1,000);
- Institute small group “Meet
the Prez” luncheons, snack breaks, etc. where six to eight employees
get 30 minutes to chat informally with top executives learning more
about directions and strategies first-hand;
- Internal expert classifications,
especially in technology arena: have individuals who are applications
experts or client experts answer other staff's questions and conduct
mini-training sessions;
- Job rotation: opportunity
to rotate to another department/project; high-potential employees
should rotate twice as often as the general population; side benefit:
break down solo mentality and inter-departmental barriers;
- More frequent salary reviews
for hot-skills and high-performing employees;
- Never stop “recruiting” the people you work with;
- On-site doggie daycare;
- Organizational development
activities;
- Orientation process with
messages: “We want you to pursue our organizational goals in
ways which help you pursue your own goals.” and “Many of
the relationships you build with individuals here are likely to outlive
your tenure with this company.”
- Peer recognition programs:
thank you cards;
- Prestigious job titles; not
necessarily management titles, but hot technology/skill titles;
- Professional career counseling
and education stipend, self-directed career development with professional
mentor/career counselor;
- Random fun hours; close office
for a random hour for unscheduled “all company meetings”
and just socialize: show short humorous movie, do puzzles, board games,
have refreshments; stress-relief hours. Avoid late afternoons so that
employees don't have “unfinished” business stresses;
- Sabbatical: six-weeks' paid
sabbatical after three years of service;
- Schedule praise meetings
with employees on a regular basis. Praise them and ask them to identify
their accomplishments—regularly—at least once every six
weeks;
- Subsidized community day
care and/or referral service;
- Telecommuting (three days
home/two days office or other similar arrangement) at all levels;
- Theme Days: hat day, lemonade
day, color themes, media/music/ movie themes;
- Upward and/or 360° feedback
for all managers annually at a time separate from performance appraisals
for developmental purposes;
- Visible communications to
praise employees and share information (at a level with their use
of technology) from Intranet praise shared within work group to department
praise boards;
- “We Invest in You” campaign to better educate employees about the benefits provided and
to promote participation. Feature one benefit every six to eight weeks.
See
related article, “Today's Workforce
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