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Employee Retention: A Discussion Model

By William A. Howatt, Ph.D., Ed.D., Post Doc Fellow UCLA, MBA(c) One of the greatest challenges in todays business world is to stay up to speed in a time of technological growth. Companies spend billions of dollars to stay on the cutting edge. As we hurl ahead at an increasing pace in the area of technology, we are unfortunately facing an increased shortage of highly skilled employees. Employee retention is a concern for companies in this strong job market. There are a great number of employment opportunities for talented professionals. The higher skilled the employees, the greater the demand for their services. Also, the workforce is not growing as fast as it once did. The axiom of trimming the fat and keeping the healthy part of the cow continues to be a serious challenge. The cost to replace an employee is becoming more documented and the news is not good for employers. It costs a great deal to replace an employee. For example, review this clipping entitled: WORKFORCE GROWTH SLOWS, AMA'S 13TH ANNUAL WORKFORCE SURVEY shows More Hiring, More Firing, More Companies Doing Both at Once; Corporate Restructuring and Reengineering Result in Both Job Cuts, and Additions NEW YORK, October 26, 1999. As more companies hire, fire and do both concurrently, the overall growth of the workforce is slowing, according to the findings of the American Management Association's (AMA) 13th annual survey of the U.S. workforce. The survey of 1,192 large and mid-sized firms shows that staffing increased by an average 5.0 percent in the twelve months ending in June 1999, compared to 7.7 percent in the prior twelve months. Of those surveyed, 77.2 percent reported creating new jobs, up from 72 percent in the previous twelve-month period, while 49.6 percent eliminated jobs, up from 40.9 percent previously. Actual downsizing, or net reductions in the workforce, rose to 24.1 percent of the surveyed companies from 21.9 previously. Many job cuts were offset by concurrent hiring: 36 percent of surveyed firms both created new jobs and cut existing jobs in the period, up substantially from 27.1 percent previously.

Above is an example of the difficulty for companies to find balance in the area of the PEOPLE FACTOR. Employees are seeing and hearing a clear message If we need you, please, please stay. If we do not, here is the security guard to escort you out. The juggling act of cutting the fat and keeping the good staff is complex. Staff morale is a huge variable that will determine success of a company and how close it will come to achieving its full profit potential. Thus the company is wise to study the topic of employee retention very carefully.
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The objectives of this employee retention model are as follows: 1. Define employee retention. 2. Offer suggestions to increase employee retention. 3. Provide a method to evaluate potential risk factors that may jeopardize employee retention. 4. Discuss how we address this issue in a corporate environment. 5. Design interventions that will increase employee retention for that specific company. 6. Measure program success via follow-up activities. In todays economy, the bottom line in business is profits. Where do the profits come from? From sales of services and/or products. We have developed the following acronym (ECP) that explains how companies will increase their profits. E Employee retention and employee satisfaction. When you have satisfied employees (who are not caught up in the quagmire of bureaucracy and leave), they are more able to help the customer. C Customer retention. The more effective the customer services the greater the customer retention. P Profit. The equation is simple from this point on. When we keep customers that are satisfied, and continue to add more, the corporation has increased the likelihood of increased profits. Employee Satisfaction + Customer Satisfaction = Increased Profits To have satisfied and effective employees, they must want to be in the workplace. There are no silver bullets. There is no one model that will work for all situations. It is important to seek to understand the needs of the corporate vision, as well as the needs of the employees, and work to align them to create an environment that is synergistic and on course. With all the competition

and world change, companies need to be proactive and are advised to follow the Japanese word kaizen (consistently improvinga never-ending process). For example, a companys vision needs to be a living document that continues to improve and grow as the company grows. NOTE: This Employee Retention Model will be supported by the theory of Emotional Ergonomics see article at the end of this text.

True Cost of Employee Turnover

1. According to the American Management Association, the cost to replace an employee who leaves is, conservatively, 30 percent of their annual salary. For those with skills in high demand, the cost can rise to a frightening 1.5 times the annual salary to replace them
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2. Research of the most profitable companies in America indicates that happy employees produce more, and are less likely to leave. The companys ability to retain the kind of workers wanted and needed has a direct impact on its profitability and effectiveness. The costs are both direct and indirect. There are the direct costs to recruit and train, and even greater indirect costs in loss of productivity. Less obvious are the costs of maintaining morale when there are change and threats of job cuts. Imagine, in a bank which is employing 1,000 people at an average of $10/hour and with a moderate turnover rate of 10 percent, the annual impact on profits is a staggering $840,000. How does this affect the bottom line of profit? 3. Report from 1999 AMA Human Resources Conference Onsite Survey352 respondents

SECTION I: RETENTION AS ISSUE IN ORGANIZATIONS

1. The current availability of skilled manpower in the industries or fields from which respondents recruit: 2.6% Abundant supply 35.2% Adequate supply 60.2% Scarce supply 2. Long-term availability (through the year 2001): 2.0% Abundant supply 29.3% Adequate supply 66.2% Scarce supply 3. Significance of retention for respondent organization: 46.0% Very significant 27.6% Significant

15.3% Somewhat significant 7.1% Hardly significant 0.9% Not at all significant 4. Current concern about retention compared to last year: 23.3% Far more concerned 40.6% More concerned 28.1% Equally concerned 4.5% Less concerned 1.1% Far less concerned 5. Expectation of importance of retention next year as compared to current importance: 23.6% Far more important 41.2% More important 26.4% Equally important 4.3% Less important 1.1% Far less important

Rationale for Turnover:

Employee turnover is always going to happen. The purpose of this Employee Retention Model is to increase the likelihood that an employee will stay. In other words, work to find out what is
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not meeting the masses' needs, and work to correct that. The result will be loyalty in the workplace. The paradox is that many companies are still cutting positions, though they are at the same time trying to keep the workforce they have. Research shows the following three challenges for keeping employees: a) Employee feels respected and valued. b) Employee perceives they are being paid well and have a bonus plan. c) There is growth within the organization for advancement. Following are other observations of what contributes to staff turnover in many workplaces: 1. Employee does not believe that they have been given the tools needed to do the job. 2. There is a lack of trust in the workplace. There is too much of a survival of the fittest mentality bred into the culture and the environment. The result: the fear factor is high which, suppresses creativity and increases stress. 3. Employee is unwilling to change with the company's vision. They feel betrayed or for whatever reason they want to take another path. 4. Confusing reward and bonus systems that do not recognize what they were intended to. People are getting rewards for wrong reasons, such as favoritism, not productivity. 5. Employees feel unappreciated and there is lack of meaningful feedback and information

as to what they are doing. Many employees know that they need to be responsible for their own career planning, though it is still important for employee sto be acknowledged for what they are doing that is proactive and positive. No one is to be taken for granted; we are all still human. 6. Cultural insanitythe company front line is out there, but behind the scenes no one believes. This environment type is so confusing that employees forget what they are there for, and often lose their job passion. 7. No vision for the employee to follow. Or the vision is a crisis-to-crisis view with the emergency of the day as the focus. This creates a great deal of secondguessing and wondering what the employee is supposed to be doing. 8. Employee is unclear or unmotivated to obtain the company's goals. The corporate goals are not in line with the employees. It is important that all employees be responsible for their own goals, so that they can build them to be congruent with the company's. 9. Employees do not get a sense of what their role and expectations are. 10. Employees have poor leadership. Employees want to be led. Leaders lead by example and role model. Executives customers are their employees. They need to model for them how they want them to treat the customer. The customer is the one that drives the profits.
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11. Employees will not stay if they are not involved in decision making, especially if it is in their area of expertise. They see themselves as devalued in this case. 12. Employees will leave due to personality conflicts. The number one reason employees leave is not money; it is conflict with their direct supervisor. Most personality conflicts are rooted in poor communication and a lack of communication skills focused on achieving agreement. 13. Employees find the job is meeting their needs, but another area of life is in need. For example, they feel that they cannot balance home and the demands of work. Many talented people are looking at balance vs. money and stature. 14. Employees leave because of poor management practices. We must manage systems and

we must lead people. For example, when management is cutting staff, many will take the stance, I am next, or ask, Am I going to be next? People in turmoil will sometimes want to jump ship in an effort to maintain self-preservation. 15. Employees do not see any opportunities to grow and advance in their positions; they feel boxed in.

Value of Employee Retention Model

An Employee Retention Model is a philosophical and newly touted theory. It states that to keep employees, we must understand what they like and do not like. What they do not like we need to address, focusing on the masses needs. We work to meet the overall big picture first. Once we have the process in place, we have more chances to help employees meet their individual needs. We can never satisfy all employees, but if we have a workplace that is driven to help all team members feel good about what they do, employees will more likely want to stay in this culture. For example: the SASS Institute in Raleigh, North Carolinathe staff loves to work for this employer. They believe in taking great care of their employees. The result is employee retention is high and profits continue to soar. Why? Because it takes time to build strong teams. This company understands this, so they want to create an environment where people want to stay. Employee turnover will continually slow the formatting of teams and eventually maximum performance. All teams of people go through four stages of the group adaptation process before the team will work to its potential: (Tuckman in the 1970s) 1. Forming group is starting to deal with each other and minimal work gets done. 2. Storming group is starting to address internal conflicts and is are sorting out and negotiating to just get along. Work is still minimal. 3. Norming group members are accepting their roles and are clear of their expectations. They know what they can and need to do. Safety is high so the corporation is functioning highly. Each member of the team is much more willing to help each other.
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4. Performing group members are all working independently, doing their jobs to maximum potential. The team is performing at an outstanding level. The team has

learned how to increase productivity, make decisions, share resources, and create independent satisfaction. If there is a great turnover in staff, many teams are always in the first two phases of the Tuckman model. The goal is to get as many teams in the workplace as possible to the FOURTH PHASE of PERFORMING. Some of the obvious values of having an Employee Retention Model: 1. Increased ability to find out how to increase employee satisfaction. 2. Increased employee satisfaction will increase employee retention. 3. Reduced costs of recruiting. 4. Increased customer service and profits. 5. Keeps the talent pool deeper. The very talented are less likely to be motivated to leave just for money when the workplace meets their needs and they see a positive culture. 6. Increased loyalty in employees when they know the employer is interested in their perceptions and values. 7. Increased company effectiveness. When implementing employee retention programs, companies discover their employees have many valuable suggestions to increase efficiency. 8. Provides a venue to offer staff valuable training to help them balance work and home to reduce their stress levels. 9. Enhanced communications in the workplace 10. Helps the leader of the organization see if employees have bought into their vision, and if not, what concerns and issues must be addressed. Knowledge is power and sometimes very helpful when employees are given knowledge of what is happening and why so they feel empowered. Knowledge helps prevent hallucinating the worst. 11. Increased clarity in the workplace. The business is a living process, and it is not good enough to adhere to a static set of goals; employees need to know the dayto-day changes in direction. It is important that employees have a process where they are obtaining clarity on a daily basis (high priorities, accountability, strategies to overcome barriers, conflicts with others need to resolved, leadership needs to adjusted to meet the needs of the day, daily evaluations of communication and ways to improve both interand intra-communication). This is the legacy employee retention models want to leave

behind: the ability to obtain clarity. 12. Increased team building and self-leadership, so more employees can take responsibility for themselves and work more effectively as part of a team.

Breakdown of Employee Retention

The following section is a breakdown of things to consider in increasing employee retention. This providesan overview of where we see concerns that represent the origin of employee turnover.
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E Evaluate what is happening in the workplace on a continuous basis to ensure that the staff is satisfied with the leadership, vision, operations, and management styles. TIP The following methodologies are a few examples of how to stay in touch with the employees perceptions: focus groups, 360-degree feedback, surveys, staff meetings, mentoring programs, and in house coaching programs. As a great side benefit, it will keep the company abreast of who deserves rewards and recognition. For many employees, all they need to hear is thank you for a good day of work. Rewards do not always mean money or benefits; many times some kind of acknowledgment is enough. The ultimate goal is for the company leaders to have their pulse on what is REALLY happening out in the workplace; it is too often miles apart from what they THINK is happening. MManagement goals are well defined. The goals must include the effective balance of four independent and important domains: Operating Systems, Products, Services, and Staff (People). TIP Management must ensure that the people are supported with effective training and tools so that they can stay current in the ever-changing workforce. Employees today also need to have employers who are aware of the importance of home life. It is not possible to separate the employee from their home. The young MBA crash and burners are also becoming more aware of the importance of life balance. P Plan to create a proactive environment in which all employees have had input into the roles, rules, expectations, and companys vision so that there is a sense of ownership. TIP Plan to FOCUS a great deal of energy on employee satisfaction. There needs to be high involvement of the staff. The ultimate goal is to build healthy communication channels to reduce the breakdown of communication, which is the antecedent to conflict.

L Leadership of self is the new philosophical underpinning of management theories in the new organization. TIP As Deming taught, for people to produce quality they first must be taught what quality is. Management must role model leadership skills, then each employee actually acts like their own boss, breeding a community of internally motivated employees who see themselves as valuable and important to the company. O Orientating Staff to new corporate directions is a continuous process. TIP In this Information Age, there is so much to learn and so much is changing that companies must continue to train and inform staff. Change is always occurring, so companies need a healthy change model to assist employees through the transitions that they are expected to make. Fear is real in corporate America. Employees need to be educated as much as possible as to what is happening in the workplace and what they can do to adjust to it. Y Yearly performance reviews (at a bare minimum) that are of value and focus on how to help the employee improve and grow. TIP They need to be done with a sense of purpose and not just an exercise. They need to have new goals and must always be followed up on. Evaluate to ensure that the system you are using is getting the expected return.
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E Educate upper management as to what is needed to help the employee be more effective in the workplace. TIP Management does not need to carry out all recommendations, though they would be wise to evaluate the impact of their choice over the next 12-18 months. Management must be aware of the differences between team and individual needs. Employees are going to have individual goals that are separate from the company or their assigned teams. It is important that the employer understand that todays professionals are struggling to balance home and work, and they need your support. E Environment and Atmosphere are so important for the employee to want to stay. TIP The environment will benefit from having elements of both structure and flexibility.

The goal is to work towards each employee being able to perceive that they are a part of a team. To do this, they need to perceive that they have an affiliation, recognition, and ability to share ideas, all of which assist the employee to develop a sense of personal self-worth. We all want to have the sense we are listened to. The Bible teaches that food feeds the body and words feed the soul. R Relationships need to be healthy in the workplace. Broken or weak relationships are the number one reason employees move on. TIP Relationships are much more important to the average employee than money. People are looking for ways to balance their home and work so that they can have healthy relationships at both. In the workplace, it is common practice to put people in teams to build relationships. Team can be defined as a group working for a common purpose. Positive chemistry in a team is based on each member doing their individual jobs, with everyone comfortable enough to be relaxed, calm, and having fun doing what they do with high trust and communications among the group. This takes time and effort to achieve. Chemistry is important so that the group can believe in the outcome, and members feel comfortable to go to the boss and continue to ask questions until they are clear of the expected outcome. They support each other through the gray and frustrating times. This is why team building is so important. We cannot assume all employees have the skills to work cooperatively and independently, which is what employers are asking for. E Evidence of what is not working needs to be addressed. This information is good only when it is acted upon. TIP When management hears a certain theme over and over, and they do not act on this evidence, things will not get any better. As Einstein said, the significant problems of the world cannot be solved with the same thinking that created them. Companies need their employees to believe that they will hear and listen to feedback from employees and consultants. Ego alone will not build a kingdom. T Trust is paramount. This is when the employee believes what they are doing is in line with

the company's vision set out by the leader. They trust that their actions will make a
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difference in the long term. They know that their tasks, personal expectations, level of performance and deadlines are important to help the customer at any level. The work they do is meaningful and of value, and they understand why it is. When trust in the workplace is depleted, it will take time to get it back. TIP Employees must trust their leaders in order to be peak performers. Leaders must answer the why should I trust you? question. They cannot hide from it. E Escape bureaucracy. The layers of bureaucracy are often not needed, and they are usually of little importance or value. TIP Ensure that all systems have a purpose and there is not a tremendous amount of duplication and overlap. Toxic environments will develop and lead to lack of healthy karma in the company. When this smog is in the workplace because of confusion and stress over operational bureaucracy, many employees will look for new employment. N Needs of the individual employee must be addressed. The company will benefit when all employees feel that they have an impact in decision making. Tip Do not use Napoleons management method. Avoid using the Napoleonic way, as he did in Waterloo, where he lost the war because of poor decision making. He did not get input from others; he did not see the entire picture, and this lost him the war. Employees need to know that they are making decisions that are of importance. This is one of the main tenets of William Edwards Deming, who taught that we need to teach employees how to make decisions so that they can produce quality on their own. T Talent. Companies must acknowledge the value of their employees. Many employees want to be perceived of value. The company must look at ways to get input from staff so that they feel they have been heard. TIP Companies need to be creative and look at ways to keep their employees motivated and happy; this does not mean only money or perks. There are lots of ways to acknowledge employees. Employees will feel of value as the company invests in their development as well; they believe the company is recognizing existing talent by investing in them further.

I Individuals need to know exactly what is expected of them. They must be aware of their daily tasks. It cannot just be assumed; tasks need to be shown and defined. TIP Regardless of your level in the company, to do the job you need to know what needs to be done daily. There is always an expectation that needs to be obtained. All employees need to be clear on their roles and responsibilities. They know that there is work that needs to be shared, such as paperwork, phone calls, evaluating people, and filling out reports. On the other end of the continuum, the glory assignments must also be shared. This breeds a sense that the team is in it together and all facets of the work will be shared at an individual level. Personality differences are always evident. Employers who are aware of this will have more insight on how to group employees into teams that blend personality types for maximum success. O Organizations need to be well organized. The company must create business systems to
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address how to lead their people, the companys most valuable resource. TIP High technology still needs people to run it. Companies must have systems in place that allow individual teams to build goals and objectives that are congruent with the big picture of the organization and the leadership vision. The leader must have a clear vision as to the direction of the organization. If the leader is not clear in where the company is going, the company has no chance of getting there. Leasers need to have a vision toward the sunset that the company is always striving for. As the great CEO Jack Welch says, Change before you have to. Employees need to know who is in charge; the leader must be front and center in everyones mind. N Never use coercion, fear and/or pain as a motivator. Employees will perform better when they feel safe. It is OK to have expectations and consequences for poor performance. They are predictable, like a speeding ticket. TIP Having poor, outdated, unused policies and procedures in place influences the culture of the organization in a negative manner. When helpful policies are not in place, it leaves room for knee-jerking management. Have processes that are people driven that make sense to the employees. Have employee manuals that are up to date and that reflect current

thought. All of these documents should bridge people, systems, structures, and processes. Employee Retention Model The model we use is structured, though flexible. The following section is an overview of what we do. The SUCCESS mnemonic sets up what needs to be done in coaching to help you find your niche and path in your workplace. S See the priorities and pick out the critical issues and goals that need to be addressed. U Understand the needs of the employee from their frame of reference. Learn and practice the Success Touch that is treating others not as you want to be treated, rather as they want to be treated. C Create the programs and services that are needed for staff to perceive they are of value and importance. C Concentrate on what is working, and reflect and learn why it is. Once we do this we are able to continue to extrapolate the hows in regard to employee motivation. Be aware of how to help employees choose to be motivated. E Evaluate if both the employees and upper management are working for a common goal. S Study the learning from the above steps and learn what can be done to enhance the workplace. S Set the task to continue to look for feedback. Support the staff and transfer what is learned so that there is a reduction in the same mistakes being made, so that it does not work against staff morale or motivation.
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In Closing . . .

Consulting, 360-degree feedback, focus groups, and surveys are a few tools to help you flush out what you need to do to obtain the most out of your present career. Employee retention is an issue and it is like the flu; the more it is talked about, the more it will spread. The goal here is for you not to look at what is not working but at what is working and what you can do to feel good about what you are doing. Your employer is investing in you for the long term. Employers want to keep employees who want to stay and be productive. Your involvement is needed in this dance. Many of you are in management positions, so one of your main roles will be to coach

and help retain staff. This section will give you a frame of reference to start to improve not only your staff, but yourself as well.