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Employee Retention:
Now That I’ve Got Them, How Will I Keep Them...

By Don Phin

The issue of retention affects every company. It is impacted by historically low unemployment rates, the dot.com revolution, increased mobility, the growth of the home-based business market and the drive towards the increased level of self-awareness. It should come as no surprise that the strategies a company must employ to attract and retain quality employees are the same strategies necessary for creating a productive workforce with lowered risk management exposures.

1. Money, Money, Money. Lets deal with it first. The bottom line is most employees are after a fair day’s pay for a fair day’s work. Based on numerous surveys and first-hand experience, once you pay over the 50th percentile in wages the issue of a “low-wage” falls by the wayside. Today’s savvy employer will ask “How much can I pay versus how little can I pay?” To attract high-quality engineers, for example, a company may have to pay as high as the 90th percentile for that position.

Similarly, but at the opposite end of the spectrum, many “traditionally minimum-wage employers” are realizing that by paying above the norm, they not only attract, but retain, quality employees. For example, in Southern California, In-N-Out Burgers, a very successful privately owned chain, pays $1.50 an hour above the norm. This immediately defines their employees as being special. They are able to pick and choose amongst an enormous candidate pool, in large part because of their willingness to pay the extra monies. They also keep their employees for longer than their competitors. In my experience, companies that focus on how little they can pay people end up getting employees who work as little as they can to keep from getting fired.

While we are on the subject of money, do you really know how much turnover is costing you? Have you ever benchmarked it? Again, according to both surveys and personal experience, the cost of replacing an employee is anywhere from one-half their annual salary to as much as two or three times their annual salary at the executive level. There is the impact on productivity, the potential loss of customers and customer relationships, the loss of knowledge, the cost of spending time and money recruiting new employee, the cost of orientation, the cost of training — the list goes on. Do your best to get a grasp on how much turnover is impacting your bottom line. Once you have a benchmark, you can then determine whether or not your strategies are generating the benefits you desire.

2. Remember Maslow’s Hierarchy of Needs. Most of us remember Abraham Maslow’s Hierarchy of Needs from our high school or college introduction-to-psychology classes. Maslow indicated that depending on a person’s socioeconomic status, they have different motivational drives. In ascending order they are: survival, acceptance, growth and self-actualization. For example, the low-wage earner is focused on economic survival as compared with the high-earning executive who should be focused on self-actualization. While there are motivating factors that resonate throughout the different socioeconomic levels, a one-strategy-fits-all approach probably won’t work.

I asked one particularly insightful CEO how he deals with his minimum-wage-type employee and he said, “The best thing my managers and I can do is acknowledge them.” This is brilliant insight. Acknowledgement fulfills the acceptance need and is the cheapest form of retention strategy in any arsenal. The bottom line is that people will continue to work for your company as long as they feel good about themselves.

I am often asked by employers “What should I do?” when it comes to managing their employees. I begin by suggesting that they ask their employees that question first. For example, the last thing you want to do is increase everybody’s salary when what they really want is a reduction in work hours, and so on. Remember, don’t assume what people want. Ask them!

3. Working with great people. Today, employees aren’t loyal to your company, they are loyal to their career, project and team. No matter how great your employees may be, they are not going to enjoy working for your company unless they are surrounded with other people that share a desire to work at their best. Do employees have the skills and character to be trustworthy? Are their career goals in alignment with corporate ones? Are they able to communicate through dialogue and break past fear? And, are they truly committed to giving it their best while maintaining a sense of personal balance?

4. Is This Job Good For My Career? Today’s employee does not think of their career in static terms. They know that they will constantly have to be changing and growing. To what degree are you helping their career prospects?

5. Who’s Keeping Good Employees And What Are They Doing? Who are your real competitors? Attorney and CPA firms compete with dot.coms and other corporate entities. Carpet-cleaning entities compete with pesticide companies, restaurants compete with fast-food chains, and so on. Look outside your immediate circle of influence for ideas and strategies when it comes to employee retention.

6. Change, Learning And Leadership. According to Fast Company magazine, this is today’s business mantra. To what degree are you helping your employees to manage never-ending change, to what degree are you helping them to become better learners, and to what degree are you instilling them with a sense of leadership? As stated in Spencer Johnson’s wonderful book Who Moved My Cheese, today’s worker fears change more than anything else.

How do you embrace the notion of change and celebrate it as it occurs? Are they receiving the training necessary to produce for you and to increase their value to the marketplace? In today’s learning economy you should consider spending as much as 5% of your overhead on training efforts. One of the greatest fears people have today is being able to implement new technologies. This requires a constant and never-ending training system. We also have to train people in the high-touch of building relationships.

Lastly, today’s notion of leadership has changed. Today’s business owner/executive has to be less concerned with creating “followers” than a whole team of leaders. This is based firmly on the understanding that yesterday’s notion of control in the workplace has met its demise. The point is, you can’t “control” people into staying. You must empower them to do so.

7. Outsourcing High Turnover Job Functions. There are some positions that will have a high rate of turnover no matter what you do. Low-pay jobs such as a messenger or janitor come to mind. Rather than putting these people on your payroll, chances are you would be better served simply outsourcing the function in its entirety.

At the opposite end of the spectrum are those critical job functions that have a high turnover. Computer programmers and network administrators come to mind. These workers are in such high demand that they seem capable of hopping from job to job with a raise and promotion each step of the way. One president complained that as soon as his engineers became certified in the SAP process, which occurred at his company’s expense, they were immediately recruited to a new employer. Many others simply opened up their own consulting practices.

If the reality is that employees are going to treat you as if they were an independent contractor, then you should embrace that fact and build flexibility into your relationship. Either work with a Professional Employer Organization (PEO), Employee Leasing Firm, or some other entity that would allow these workers to act as a consultant to your firm, but with the added flexibility of doing outside services should they desire. The cost of this flexibility may be much less than losing the entire benefits of a significant learning and training curve. Just make sure that if you treat them as an independent contractor that they have their own business location, license, business cards and other clients or that you are hiring them through an existing entity.

Conclusion

I can go on at length about concepts such as life balance, employee ownership, recognition and reward programs, and so on. Retaining great employees is not just knowing about what to do — it’s going about doing it. Focus on first understanding the costs surrounding retention and turnover and then seek to implement no more than three programs at one time to turn things around. Launch these programs after getting input from your employees and then make sure to get feed back on their effectiveness. In light of today’s rapid change, employee retention is becoming ever more critical to the success of any organization. Only your focused effort will make a difference. 

Risk management is about possibilities and probabilities. It’s about assessing the 80/20 of exposure and then committing the strategies and tools needed to protect yourself. I hope these insights will help those of you battling on the front lines. If you have any questions regarding the trials and tribulations of managing in today’s high-risk environment, e-mail or give me a call at 800/234-3304.

riskVue | The webzine for risk management professionals
December 2000