How to retain employees: a high turnover rate is costly in both direct

and indirect costs.

By Shehan, Tom
Publication: Detroiter
Date: Saturday, January 1 2005
Many owners of businesses with high employee turnover find
themselves running in place instead of growing their companies. As the
economy improves, more employers are facing this issue because
employees are shopping around their resumes in hopes of landing better
positions. In fact, 83 percent of employees surveyed by the Society for
Human Resource Management said they are dissatisfied with their
current positions and are seeking new employment.
High turnover affects companies in several ways. First, when long-time
employees leave, they often take valuable institutional knowledge or
intellectual assets with them. Seasoned staff members serve as morale
boosters for work teams and help new employees progress more quickly.
Having to replace these assets costs employers a lot in both time and
money.
Second, high employee turnover often forces business owners to focus
their own efforts on staffing. Whether the employees being replaced are
senior-level executives, middle managers or entry-level staffers,
business owners often bear the responsibility of recruiting, interviewing
and training new hires. And this is at a great cost--typically the
equivalent of 30 percent to 150 percent of the salary for the position.
Furthermore, many business owners mistakenly believe that the cost of
replacing employees is merely the price of newspaper or Website
advertisements. However, both direct and indirect costs must be taken
into consideration.

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For example, employers may need to hire a search firm or a headhunter
to find the right candidates for hard-to-fill positions. An often-
overlooked indirect cost of turnover is its effect on other staff members.
While a position remains vacant, other employees usually take on
additional responsibilities. Without proper implementation and
management, this can result in low morale and lost productivity.
Why employees choose to leave
Understanding why staff members look elsewhere is a key to employee
retention. According to a Society for Human Resource Management
survey, the top-three reasons why employees search for new positions
are because they:
* Want better compensation and benefits (53 percent).
* Are dissatisfied with their potential career development (35 percent).
* Are ready for new experiences (32 percent).
While salaries and career advancement are important, many employees
choose to leave because they don't believe their work is appreciated.
Surveys reveal that more than 40 percent of people who leave their jobs
do so because they don't believe their companies value their
contributions.
A lack of appreciation, a lack of teamwork and the perception that
business owners don't care about their employees are consistently the
highest-rated reasons for low job satisfaction. This often stems from
poor communication on the part of either employees, their managers or
both.
Ways to avoid high turnover
Business owners can avoid high employee turnover by addressing
compensation and benefits, implementing training programs with clear
paths for advancement and providing comprehensive employee relations
programs.

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To make sure they are offering competitive compensation and benefits,
many business owners regularly check benchmarks for their industries
and geographic locations. One way small and mid-size businesses can
offer Fortune 500 type benefits is by working with a Professional
Employer Organization, or PEO. Through economies of scale, PEOs
provide businesses with better benefits than they could obtain on their
own.
Another key to employee satisfaction is implementing formal training
programs that provide employees with clear paths for advancement.
Employees are more likely to remain loyal to businesses committed to
staff development and promoting from within
Likewise, staff members can benefit from formal employee relations
programs that include the use of employee handbooks and resources to
resolve issues as well as personal problems that workers encounter.
Finally, hiring the right people from the start reduces turnover.
Managers should have a clear idea of the types of people they want to
hire for each position, write detailed job descriptions and commit to
hiring the best candidates rather than the first candidates who meet
minimum requirements.
Tom Shehan is Detroit area president for ADP TotalSource in Troy, a
Bronze-level member of the Detroit Regional Chamber.
[ILLUSTRATION OMITTED]
Retain your best employees
As managers, we are only as good as the people who work for us. One
way of assuring continued
success is to attract – and retain- good employees. But competition for
top talent is fierce these
days. Just hiring the best people for your business can be tough enough –
but keeping those
employees can be even tougher.

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The following tips can help you keep your top talent happy and have
them ignore your competitors’
recruiters and head-hunters:
1. Identify and focus on your real achievers
Have you determined which people are the most valuable to your
business? Who can you counton daily to follow through on projects and
deliver results? Make a list and consider these timely
tips:
Don’t confuse activity with performance: Those constantly on the
phone, at the keyboardcalling meetings or dashing about aren’t
necessarily producing – they may not be your thinkers,problem-solvers
or decision-makers.
Consider performance, not noise: The quiet ones are not
necessarily daydreamers – they
may be too busy getting things done to talk too much.
Remember, doers come in all shapes and sizes: Don’t fall for
stereotypes – the wiry or muscular type may not necessarily be action-
oriented.
The top one-third of your employees should receive 90% of your
retention attention. Managers don’t have the time or resources to lavish
attention on everyone.
The secret is to spend time with these key people so that you know what
are their “satisfiers” – the things that make them happy. In this way, if
they ever contemplate leaving, you’ll know what buttons to push to
retain them.
2. Know why top quality employees leave
Your best employees change jobs for a reason – and it’s rarely only for
more money, more perks or better benefits. Often they leave because
their satisfiers are not being met in the current job.
Consider the following:
I’m not appreciated: “I make a valuable contribution and I get no
thanks. My talent will be appreciated elsewhere”.
I’m bored: “I want to be challenged, stretched and tested so I can
show off my talents, experience and skills.”

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I have no career prospects here: “I’m a cut above the rest but I can
see no opportunity for advancement. I want a career, not just a job.”
I’m just a small cog in the overall machine: “I seek a sense of
purpose, of contributing to something bigger than myself, and a sense of
belonging.”
I want to grow: “Here I have limited opportunities for growth and
the development of new andvalued skills.”
I want to work for an insightful manager: “As a prized employee, I
respond positively to good supervision.”
3. Develop a retention plan for each top employee
Once you identify your best people and recognize that they have
different needs or satisfiers, you must develop a strategy to show that
you are intensely interested in them and their future within your
business. You need to consider what you are willing to do to retain each
key employee, and begin to prepare individual retention plans that will
help tie each key employee to your business.
Talk to these people in turn, asking them what they want from the
business in the short and long term – “What will it take to keep you
motivated and part of our family?” From this employee focused
conversation comes a vulnerability report which leads to a retention
plan. Reach agreement with each key employee on how to approach
their needs through a concrete strategy for the future.
4. Work proactively to retain your best employees
As a manager, your goal should be to do everything possible to keep
your best employees for as
long as you can. The following strategies can assist in the retention of
your best employees:
Set challenging goals and reasonable deadlines: Outstanding
workers thrive on challenges.
Raise the bar: Hold high expectations and don’t be surprised if your
employees live up to them.
Promote from within: It’s a powerful morale-booster.
Give full credit for achievement and effort: Recognition is a reward
in itself for workers who take pride in what they do. Be quick with
praise.
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Delegate authority: Encourage key employees to take on added
responsibilities.
Pay attention: Listen and act on employee suggestions.
Let employees participate in making decisions: This is particularly
relevant to the decisions that directly affect them.
Be committed to excellence: Don’t accept second-rate
workmanship.
Preach, teach and practice teamwork: Celebrate each other’s
success.
Be open, honest and upfront: Keep key employees informed –
what’s going on and coming up – both good and bad.
Encourage risk-taking and innovation: Allow failure once in a
while.
Set your employees up for success: Be their advocate. Fight to get
whatever they need to
do their best work. You won’t always win, but you’ll engender a lot of
loyalty in the process.
Encourage experienced workers to become mentors for new
employees.
Promote life-long learning: Make continuous growth your catch
cry.
Cultivate organisational culture: Build workplace values of hard
work, fair play, honesty and mutual respect.
Have fun at work.
Further information
The following fact sheets provide further information on these issues:
Develop a succession plan
Leadership - introduction
Motivate employees

Sixty-six Ways to Retain Employees and Gain Commitment in this

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Compiled by Baillee Serbin
Here we are, we live in the California, with Silicon Valley, Media
Gulch, the dot.com start-ups and twenty-somethings, with the market
down and up and down. Folks are finding jobs then losing jobs and
gazillions of dollars coming and going. We nonprofits had unfilled jobs
just one year ago and now we are considering tightening our belts with
layoffs and downsizing. Yet there are still some job openings waiting to
be filled. We want to gain commitment from our current employees and
provide a healthy work environment for our staff.
The following list can be used as a check-list, to see how many creative,
proactive approaches you already have in place, or want to add to your
methods of retaining great employees:
WORK/LIFE BALANCE AND CLIMATE
Help staff design a healthy work/life balance for themselves Implement
Good Management Practices Keep your promises Maintain positive
employee relations Hire a meeting planner for special occasions
Make the workplace a more fun place, and Make sure there is time for
Celebration, Joy, and Play Ergonomically correct equipment and offices
Fifteen Minute Shoulder massages Environmentally clean and correct
office space and use of products, and windows that open, if possible
Outdoor activities, like planting trees in the park near your office
combined with a picnic Freshen up the environment Snooze Tent: a
roomy 4 person tent, with relaxing tapes and alarm clock, for a quickie
nap Helping employees dealing with the stress of these painful times,
with war and disasters, through meetings, and grief counselors and
Employee Assistance Programs. Praise and positive feedback
Halloween Costume Day “Thank You” Board Valentines’ Day: Board
with all employees’ baby pictures, and have guessing contest, with the
winner receiving a box of chocolates Wellness Program Pot Luck
Lunches
Bring children to work, one day a year, to see the office and play
Pets in the office
COMPENSATION & BENEFITS
Each year make sure that salaries are competitive and priced consistently
AT MARKET VALUE and be sure to provide fair “merit increases”
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Make sure that benefits are competitive with market, and are fair, and a
win/win. Maybe include “cafeteria style” benefits, where employees can
select those benefits that they need, such as child care for parents, or
health clubs, etc.
Section 125, pre-tax dollar arrangement to pay for child care and elder
care and alternative health practitioners, such as chiropractors and
acupunctures Modify your medical insurance plan to allow for more
choices for the employees, like providing multiple H.M.O. choices
Convert to self-insured dental and vision plans
Add short-term disability insurance for your staff
Add long-term disability insurance as a benefit
Add group long-term care benefits
Add group voluntary whole life insurance benefits
Sweeten the retirement pot
Paid Maternity/Paternity Leave for three months
Provide Domestic Partner benefits
Child care vouchers or on premises child care
Informally hand out two tickets to a current movie for great ideas, or
extra ordinary helpfulness
Offer lunch for two as an extrinsic reward for work well done above and
beyond the call of duty.
If Staff has worked for four months on a big initiative, project, or event,
gift them with four consecutive days off
Implement flexible scheduling
Implement Job Sharing
Help pay for the “daily commute” to work, through public transportation
pass subsidy
SUPPORT
Create Real Team Work
Kayak half day, practicing teamwork and leadership exercises
Team parties at the leader’s house
Paid community service days, once a month
Cross train staff, so employees can learn new skills

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Telecommuting possibilities
Keep employees well informed, schedule staff meetings regularly with
your department, once a week if possible, and once a month for full staff
meetings.
Break bread together at events such as a catered lunch or potluck
breakfast.
Make sure your employee handbook is clear, easy-to-read, and current
Engage in corrective action, with opportunities for the employee to
improve with coaching, mentoring and specific types of improvements
with timely deadlines
Implement Excellent Orientation Practices: Provide a week-long
orientation process where the new employee works along side each
department for a few hours. This process gives the employee a chance to
see the real mission at work, as well as how the organization functions.
Emphasize Great Communications, top down and bottom up Offer
Strategic Planning with employee input Include employee input and
suggestions in yearly Budgeting Process
Be honest in Performance Reviews, but also be constructive
Make sure Performance Reviews are timely and fair using the
S.M.A.R.T.[Specific, Measurable, Attainable, Relevant, and Timely]
System
PROFESSIONAL GROWTH
Breed Talent!!!
Projects where employees have autonomy, and can see a project through
to completion from start to end Establish a tuition reimbursement plan
Send top performers to professional meetings out of town Mentor
employees Provide Succession Planning
Provide Career Pathing, opportunities for staff to see possibilities of
advancement within the organization.
Provide a “Job Description Binder” of all of the jobs in the organization,
for staff to see jobs that might be available for advancement, and what
the requirements are for that job, and how to train and prepare for that
job ,
A meal with the top leadership just for communications and fun
Provide Management Trainings and New Learning Brown Bag Lunches
9
Opportunities for autonomy and brainstorming
If you have more to add to this list, please email or voicemail me so I
can keep updating and expanding the list. [415.383.6538
[email protected]]
BEST PRACTICES: RECRUITING AND
RETAINING TALENTED EMPLOYEES
In today.s challenging business climate, management of your company.s
human capital is critical to success. Is your approach to recruiting and
retention aligned with your company.s
strategic goals? This article explores the key principles and business
processes that will
help drive long-term business benefits.
This article is one in a series from Microsoft Office System that explores
issues and perspectives
facing human resources executives.
Recruitment and Retention: A Brave New World
Just a few years ago, as job growth in Europe and the
United States outpaced the supply of employees, most human
resources professionals were grappling with the serious
challenge of recruiting qualified workers to fill available
positions. Retaining these workers in an overheated job market
was a serious challenge. While the business landscape has
changed dramatically, recruiting and retaining the right people is
just as important as before. But the stakes are higher now that
the margin between success and failure is razor thin. In today’s
climate, HR is expected to deliver business results on a much
tighter budget. Lower headcounts mean that each new hire is
that much more crucial to the firm’s success, and the departure
of a star performer can impact financial results that investors are
watching more closely than ever. In this environment, HR
leaders need to develop business processes that allow their

10
teams to be more efficient and productive. At the same time,
they will need to build airtight business cases for any proposals
to spend money on initiatives related to recruiting, training and
retention efforts.
Just as the business climate has shifted, employee attitudes
toward work have undergone a radical transformation
in just a few short years. Widespread layoffs, corporate financial
scandals and the dramatic decrease in public perceptions of
global security that followed September 11, 2001
have all contributed to a re-evaluation of career and life
priorities among many employees. Attracting and retaining
the best people is no longer simply about compensation. As
these trends interact with deeper economic shifts, HR executives
face pressure from both management peers and employees to
evolve a new, more strategic approach to recruitment and
retention. The new holistic approach to workforce management
is often referred to as human capital management (HCM

Best Practices: Recruiting and Retaining Talented Employees

11
The Human Capital Revolution
A key business lesson of the Information Age. is that strategic
value is shifting from tangibles , factories, inventories, physical
infrastructure to intangibles.
As noted in an article in London-based finance publication The
Economist, .Economies are increasingly based on knowledge .what is
new is that a growing chunk of production in the modern economy is in
the form of intangibles, based on the exploitation of ideas, rather than
material things.. Among companies. increasingly valuable intangibles .
which include intellectual property, brand value, and customer
relationships .human capital is perhaps the most vulnerable to erosion.
The very definition of human capital is that it walks out the door every
evening, and exits permanently with an employee who leaves a
company. Nobel Prize winning economist Gary S. Becker, who coined
the term
.The very definition of human capital is that it walks out the door every
evening, and exits permanently with an employee who leaves a
company..
.human capital,. explains it this way in his book of the same name: .You
cannot separate a person from his or her knowledge, skills, health, or
values the way it is possible to move financial and physical assets while
the owner stays put.. Knowledge management efforts, which
increasingly involve HR organizations in their implementation,
are one approach to mitigating human capital losses, but Becker’s work
shows that reducing the number of people who leave voluntarily is
critical.
In a recent interview with LiNEZine, an online publication about
learning in the New Economy, Becker restated his famous formulation
in a novel way. .I would start out with some obvious things that are still
sometimes forgotten: the basic resource in any company is the people,.
said Becker.
.The most successful companies and the most successful countries will
be those that manage human capital in the most effective and efficient
fashion.
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.
Becker’s statement serves as an excellent checklist for the approaches
that leading companies use not only to keep the employees they have,
but also to set themselves apart as .employers of choice. that attract the
best candidates to start with. Though recruiting and retention are
separate issues that each require specific business processes, a strong
understanding of the principles of human capital management . shared
throughout the organization . can unite your efforts. Once the principles
of human capital management are established internally, experts offer
clear direction on a number of practical steps that will help advance
recruitment and retention success. Dave Lefkow, an interactive solutions
consultant with global HR communications and solutions provider TMP
Worldwide, offers several insights in a recent article in specialist online
publication Electronic Recruiting Exchange. Examining companies like
Nike and Microsoft that he cites as having leading recruitment efforts,
he observes several trends ,including
!Centralization of HR efforts. Centralizing he recruiting team not
only allows economies of scale, but also brings together expertise
formerly distributed throughout the organization to create a center
of excellence.
! Specialization. Aided by centralization, developing specialist practices
within recruiting allows innovation around key functions like workforce
planning, hiring process management, business analysis and others.
! Focused recruiting. As basic HR processes like applicant tracking
become ubiquitous, HR staff can spend more time on activities
focused on identifying successful professionals who are most likely
to offer your company high value. and the least likely to be in the
general pool of job-seekers.
These three efforts are interrelated and each puts a premium on
having an infrastructure that allows efficient teaming, process
management and collaboration. As process improvements
to support these efforts are implemented, it is important to measure
recruiting success against overall business goals and communicate
these metrics within the HR organization and the larger enterprise. For

13
example, is one business unit more successful in closing offers with high
value candidates? Knowledge of this success is a key step in replicating
it throughout the organization.
Similarly, employee retention requires business processes that
combine measurement, training and collaboration.
Beyond the top-line strategic value of proper management of human
capital, a strong retention program can offer dramatic cost savings
and productivity gains. Turnover is a serious business problem in every
industry and requires a strategic, process-based retention program to
stop the losses and enable human capital value creation.
..if your budget is limited, a retention program that focuses on the
highest-profile, highest- value contributors is a logical place to start..
There are numerous approaches to measuring the many factors that
impact employee retention. For example, The Gallup Organization, well-
known for its polling and market research, also offers diagnostic tools
that can assist HR professionals in gauging employee alignment and
engagement. Some of Gallup.s .12 Questions. May appear .soft:. .
In the last seven days, have you received recognition or
praise for doing good work?
Do you have a best friend at work?
In the last year, have you had opportunities
at work to learn and grow?
However, Gallup reports that in benchmarking their use with over 1.5
million employees in over 87,000 divisions or work units, organizations
with .high Q12 scores have also experienced lower turnover, higher
sales growth, better productivity, better customer loyalty or
other manifestations of superior performance.. Moreover, the
quantitative nature of the study helps ground subsequent discussions
between employees and managers in data, which helps defuse tension
and produce actionable results. Continual tracking of these attitudinal
metrics . along with data on business results . helps employees
understand that their satisfaction is valued; this in itself can lead to
higher retention.
Companies are increasingly tailoring related but separate programs
for rank-and-file workers and high performers. Analyst Monica Barron
14
with IT consulting firm AMR Research notes that institutional investors,
ever more aware of the human capital value of high-performing
employees, are beginning to ask companies about retention plans that
focus on the employees whose hard work can make or break a
company’s short-term earning and long term success. While looking at
retention across the board makes good financial sense, if your budget is
limited a retention program that focuses on the highest-profile, highest
value contributors is a logical place to start.
Recruiting and Retention for a Global Workforce
The need to increase recruiting and retention effectiveness is not just
an issues in the United States and Europe, but is in fact a worldwide
issue.
The business benefits of these approaches are reaching into the
developing world.an encouraging sign that the learning’s of human
capital management can help raise global workforce standards.
Several Indian companies offer examples of comprehensive retention
programs that include employee stock option plans (ESOPs). Business
leaders in India are increasingly concerned with the challenges of
recruiting and retaining talented employees, despite a population of over
one billion. The Workforce Stability Institute, a U.S.- based not-for-
profit research and educational organization, reports that the Indian
mutual-fund industry has been a leader in creating ESOPs designed
to help address the problem.
Templeton Asset Management (India) launched one such program:
Templeton India CEO Rajiv Vij stated that the program is .designed
to retain our best talent by enhancing the feeling of ownership. at a time
when the industry as a whole is facing an attrition problem.. Vij sums up
the logic of human capital management by adding, .People are the key
asset for us..
.Business leaders in India are increasingly concerned with the challenges
of recruiting and retaining talented employees..
Pacific Bridge Consulting, a U.S. - based human resources
consultancy focused on Asia, reports that retention is also an increasing
focus of both state-owned enterprises and foreign firms operating in
15
China. In an indication that cultural differences play an important role in
creating effective retention plans, Pacific Bridge notes that to an even
greater degree than in other nations, .one of the most vital elements of
employee .compensation. and retention is treating employees well. This
means that companies in China must make real efforts to engender
employee loyalty, feeling of belonging, and commitment to the firm..
Beyond these .soft . retention efforts, compensation programs that
involve personal and team incentives are increasingly important in
China.
Political and economic issues in China make stock-option programs for
Chinese employees challenging, but this has not stopped companies like
Lucent and Intel from developing innovative incentive programs that
offer similar rewards tied to corporate performance.
As these global developments make clear, sophisticated employee
recruitment and retention programs are increasingly seen as integral to
business success.
Our Assessment: Opportunity in Value Creation
True competitive advantage increasingly will be gained by integrating
employee retention programs into a holistic human capital management
framework that includes ongoing training and management, based on an
infrastructure that maximizes the productivity of individual contributors
and HR teams. Leading global consulting firm McKinsey & Company
sums up the opportunity for HR executives this way. .Attracting,
developing, and retaining talented people can be the stuff of competitive
advantage. Therefore, HR leaders will have a much more strategic role
to play in the years ahead, arguably one equal to that of the CFO.. Along
with this strategic role comes bottom-line responsibility, and HR
executives will need processes to measure their results against overall
business goals and share best-practice information within the
organization...HR Leaders will have a much more strategic role to play
in the years ahead, arguably one equal to that of the CFO..
Over the past several decades, human resources executives have been
steadily increasing their ability to drive business results while positively
influencing the quality of work life among their companies. employees.
Human capital management provides an opportunity for thought
16
leadership about the links between job satisfaction, employee alignment,
productivity and value creation. As this understanding spreads around
the world, the real challenge will be to drive these insights deeper into
integrated processes; competitive advantages will accrue to those
companies that maximize the benefits of strategic human capital
management more quickly than the competition can. For companies that
stay ahead of the curve, and the human resources executives that fuel
that success, the rewards will be significant.
Best Practices: Recruiting and Retaining Talented Employees Microsoft
5
Additional Resources
Microsoft Office System
www.microsoft.com/office
Workforce Stability Institute
www.employee.org
OfficeTeam
www.officeteam.com
LiNEzine
www.LiNEzine.com
Electronic Recruiting Exchange
www.erexchange.com
Gallup Performance Management
Systems
www.gallup.com/management/
Q12_system.asp
Pacific Bridge, Inc.
www.pacificbridge.com

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