By Sharon Daniels
The Conversation Blog, Harvard Business Review
July 7, 2010
In each of the past three months, more employees quit their jobs than were terminated, according to the US Bureau of Labor Statistics. This is good news for the economy but bad for individual businesses: when jobs become more plentiful, the first to exit are often the business's most ambitious employees — the innovators, the risk-takers, the future leaders. The cost of replacing an employee is estimated at up to 250 percent of annual salary.
An AchieveGlobal survey of 738 managers revealed that about one in four employees planned to leave their jobs within a year. A study reported in the May issue of Harvard Business Review revealed that 12% of high-potential employees were actively searching for a new job.
Why are employees walking away from their jobs, even with unemployment still hovering near 10 percent? Our studies show that the three biggest reasons are a lack of growth opportunities, dissatisfaction with compensation, and employees feeling their contributions aren't being recognized. Growth and recognition are particularly important to younger workers, who have higher expectations of their employers than others do and are defecting in large numbers.
Regrettably, too many managers unwittingly encourage employees to walk out because they regard them as replaceable cogs in a wheel. The key to retaining valued employees is to manage them person-to-person rather than with one-size-fits-all management. Every employee marches to a different drummer; successful managers don't make them parade in lockstep. Here are two keys for managing person-to-person:
1. Personalize the position. Not everybody wants to manage people. Don't force a brilliant solo performer to do it. Let those with bean counter personalities count the beans and let free spirits become free of boring tasks. Not everybody likes to travel. Don't put those employees into sales or service jobs that cover large territories. Understand employees' preferences before you create a team.
When you set up training programs, ask employees to identify the strengths they want to develop and weaknesses to shore up. Ask employees to suggest special projects they'll find interesting; they can provide valuable ideas for the business. All this is increasingly possible as work becomes more specialized and there's less need for can-do-everything employees.
2. Personalize the rewards. Businesses are giving Christmas turkeys to employees who don't have an oven. They'll do much better by learning what each of their valued employees wants most and providing it. Young parents often put flextime at the top of their wants list. Many young people expect a collegial environment and lots of mentoring and encouragement.
Across-the-board perks eventually become seen as entitlements, anyway. Witness what happened in April at the Carlsberg brewery in Copenhagen: It allowed the brewers unlimited beer drinking at lunch and gave each brewer two cases of free beer monthly — but when it eliminated drinking during working hours the brewers went on strike.
The most common reason why managers are recognition misers is lack of time, our studies show. But it takes little effort to make a commendation that has impact. Be specific with your praise: A perfunctory "You did a nice job" isn't nearly as strong as "I want to thank you for what you did on this project because it increased output by 24 percent and our department's number one in the company."
Retention initiatives do pay off, even in high-turnover industries. Over the past three years Service Experts LLC, a business segment of Lennox International Inc. (and, full disclosure, a client of ours), has reduced the voluntary attrition rate of its service technicians by over 50% in the US and Canada. This is notable for an industry (maintenance, repair and replacement of heating and cooling systems) where technicians often leave for small pay increases or self-employment. One of the company's top mandates was to improve its retention rate. It made retention metrics and incentives part of the managers' balanced scorecard.
UPS has made retention work by making employee development one of managers' prime responsibilities, and by giving employees a shot at upward mobility within the firm: more than three quarters of its 44,000 managers and most of its vice presidents began their careers loading or driving trucks.
Sometimes you can even increase retention by recognizing that employees may want to leave: My Maid Service, a small house cleaning service, has lost only one employee in a 42-member workforce this year and last — because, recognizing that cleaning other people's houses isn't a career of choice, it builds the employees skills for work elsewhere if they agree to stay for two years. Earlier average tenure had been four months.
But if you don't have the pull to redesign your company's retention program, the simplest way to keep the employees you value is to ask them: What do I need to do to keep you here?
Sharon Daniels is chief executive of AchieveGlobal, which provides performance improvement consulting and solutions in leadership, sales, and customer service. With offices in 42 countries, the company offers customized learning in 30 languages and dialects. Contact Ms. Daniels at email@example.com.