Focus on Retention
Retention-focused strategies are a business imperative, yet not enough is being done -- and what is being done is often misguided.
By Bill Rehm, CEO of KASE Consulting Group Ltd.

February 2004 -- It never ceases to amaze me, when I examine the agenda of the average human resources-oriented conference, that at least two-thirds of the presenters are lawyers advising attendees on what must be done to reduce the possibility of incurring legal costs related to some compliance issue. Meanwhile, as one of New Zealand's most highly respected senior HR executives stated not too long ago, "employee turnover costs are a massive and continuous leak in many an organisation's revenue bucket."

For nearly seven years now, along with my US-based colleague Dr. Lynn Ware, an expert in employee commitment and retention, I have focused on this issue. Over the past two years I have spoken to nearly 4000 attendees at different conferences throughout Australasia and have worked with clients across the region to assist them in dealing with this increasingly growing global problem. As a result, I've some strong views on why most organisations don't deal with this costly issue as effectively as they could. But before I continue, allow me to include this disclaimer: if you don't like the message, you do not have the right to kill the messenger.

It's a business issue, not a human resources issue

Of course this issue is about people, but it's not about understanding human resources systems, theories or strategies. It's about understanding business -- your company's business and your company's customers. In my opinion, it's the lack of business knowledge that is the Achilles heel for many human resource professionals.

The flip side is that the average CEO knows about as much about employee commitment and retention as the average HR manager knows about business issues. The question to ask yourself here is whether you can discuss your company's employee retention issue in terms of what it means to your CEO or MD -- namely its impact in dollars on the bottom line or in terms of equivalent sales.

Shift your focus: external market to internal business

In a 2000-2001 study, a leading international consulting firm concluded that "the size of the retention problem is viewed primarily in relation to position in the marketplace, not in internal terms."

So what if your voluntary turnover rate is four percent less than your leading competitor, if it is still costing your company $16 million annually (a New Zealand IT company)? Who cares if your overall company employee turnover rate is under 10 percent when it's 18 percent in your sales department (another New Zealand company)? Lucky you, employee turnover is only costing your company $425,000 a year. Unfortunately, in terms of equivalent sales, this equals two thirds of your annual sales turnover (a New Zealand industrial services company).

Calculate and communicate turnover costs

The same international consulting firm found that less than 30 percent of senior HR practitioners calculate and communicate turnover costs. But in my own experience of asking this question at conferences over the past 18 months, it appears the actual percentage is a mere five to 10 percent.

It was about 25 years ago that I learned, in some Organisational Development 101 course, that to gain an organisation's commitment to solving a problem, you must first clearly demonstrate that the problem exists. How do you convince a CEO or MD that the lack of employee commitment -- and subsequent employee turnover -- is a costly problem? Heck, how does the average HR professional know how costly a problem it is, when the only information available to determine employee turnover costs are the recruitment and training items listed in the company's general ledger?

HR -- risk managers or risk-averse?

About 18 months ago I had the priviledge of attending a meeting with 30 of Auckland's senior HR practitioners to discuss why a career in human resources rarely leads to a senior executive office or a place on the company's strategic management team. The straightforward response from one seasoned HR professional was that "All the average HR professional needs to do is stop being so damn paranoid."

More recently I had a discussion with an HR manager whose organisation had employee commitment and retention problems. This person intended to "wait and see" what the organisation's new MD believed were the strategic issues that needed to be addressed.

When it comes to dealing with employee commitment and retention issues, HR professionals need to take the lead. But leadership requires vision, a desire to inspire, and a willingness to take some risks and be proactive. What are you waiting for?

It's about fire prevention, not firefighting

Unfortunately, most organisations tend to wait until they have an employee turnover problem, rather than proactively putting in place strategies and initiatives that will minimise the likelihood of their ever having a problem.

In the US, thinking has started to shift. In spite of the current recession many organisations now realize they must put employee retention strategies in place in spite of, and during, difficult financial times -- or else valued employees will jump ship as the economy recovers.

These enlightened organisations realise that if they do not take this proactive approach, it leads to a massive loss of intellectual capital and institutional memory that most companies simply can't afford to lose. In good times and bad, the reality is that a top performer always has other employment options.

Avoid seeking the silver bullet

There is a tendency by most organisations to put in place a combination of organisational systems and HR strategies that are, in effect, a 'one size fits all' prescription. Consequently they inaccurately conclude employee turnover problems will be solved or avoided. More often than not, the outcome is not what they hoped for. Yes, effective leadership is important to any organisation, and sound performance management is essential to a company's success. And of course having organisational systems in good shape is a prerequisite for retention; however, they are simply the 'price of admission' for any company that hopes to attract and retain employees.

The 'Great Workplace Secret'

It was Joseph Juran, a quality-improvement guru, who said "when making changes, focus on the critical few rather than the significant many."

In the past, managers never had a need to learn how to gain commitment and retain talented people. But most effective retention strategies today need to directly involve all levels of management, from the organisation's CEO down to, and including, its first-level supervisors. Managers play a critical role in the commitment/retention equation. They need to recognise how their behaviour affects the reasons why employees divorce them and the company, and they must be provided with the retention-specific knowledge, skills and tools to get the job done. Don't do this, and all other retention-related initiatives are doomed to, at best, limited success.

Don't kill the messenger

In summary, it is more than likely that within some pocket of your organisation there is a 90 percent chance that an employee commitment or retention problem exists and it's costing the company a bundle.

Figures released last October by Statistics New Zealand found that 90.5 percent of unemployed left their job voluntarily. The 'War for Talent' is over -- the employee has already won. However, the battle to retain the most talented employees has just begun and will rage on for some time to come.

Ted Cocheu, a well-known management consultant and author in the US, puts it this way: "There are only two types of HR professionals. Those who are part of the problem and those who are part of the solution." When it comes to dealing with the pervasive yet poorly handled issue of employee retention, this quote is, hopefully, food for thought.

Bill Rehm is the founder and CEO of Kase Consulting Group, Ltd. in Auckland, a Human Resources consultancy specializing in Retention, Organisational Development, and Selection.