The cost of losing good employees
One of my firm’s best financial auditors told me recently that she was worried about a client. Even though this firm’s financials are great, she said, the company is at risk because their people are unhappy and many are actively looking for other opportunities.“If this company loses any of their skilled front-line workers they’re not going to be able to afford to replace them,” she explained. “They could lose their competitive edge, given the nature of their industry and the need for proprietary intellectual capital. They need to figure out, fast, how to keep their key resources in place.”Add to that conversation a warning I recently heard — that stabilization in the job market will result in an uptick in employee turnover — and I began to puzzle a problem facing a number of mid-size companies in New Hampshire: How to prepare for, or mitigate against, worker defections.As a CPA and business management adviser, I have come to know many of the companies facing this challenge. Several are looking for creative ways to keep their employees motivated and focused while revenue and profits are down — and in place once the recession turns around. For example:• A prominent Hanover technology firm supports employee-led activities such as canoe and kayak trips, theater and golf outings, noontime volleyball and touch football games.• In another New Hampshire office, job-sharing reduces boredom and permits more flexibility in employees’ lives.My own firm offers paid time off for volunteerism, and supplies the ice cream for our occasional sundaes on Friday.Forward-thinking organizations such as these will be better positioned to get back up to speed quickly once demand increases, and will have a significant strategic and cost-saving advantage over their competitors.According to a recent Reuters survey, nearly two-thirds of U.S. workers intend to look for new jobs in 2010. Thus securing your human capital — the people who make a difference at your firm and would be the most difficult to replace — makes good financial sense.For the record, the average cost of replacing an employee is approximately 150 percent of salary – in other words, it takes about $75,000 to refill a position that pays $50,000 a year.
Recommendations for retaining key people do not have to be expensive. The following suggestions come from my work with clients throughout New England:• Share the company’s financial information with your employees. One manufacturing firm spends at least eight hours teaching each employee how to read the company’s financial statements. They connect the dots between the work that is done on the shop floor and the monetary success of the organization, with 25 percent of each worker’s compensation tied to the company’s bottom line.Many companies tie performance to results, but this company puts real muscle in the process by making sure that finances are transparent to everyone along the line not just to the management team. Not every company is comfortable with this level of disclosure, but the difference it has made for this firm is significant.• Learn more about your team members. Reaching out in new ways to employees can make a big difference in both turnover rates and, in many cases, company success.A little more than 20 years ago, two brothers founded a small family-owned business in southern New Hampshire. It turned out that the skilled workers they needed represented a wide variety of cultures and languages. One of the brothers took it upon himself to learn key phrases in seven languages so he could communicate personally with his employees. He learned about their cultures, and by so doing sent a message that each worker was valued. Turnover was minimal and the company has thrived.• Invest in training and retraining and training again. When the recession reduced orders at one local company, management decided to weather the slowdown without laying off workers. Instead, they focused their teams on process improvement and innovation, and in some cases simply shifted workers to new jobs.The reality is that most people prefer reassignment to unemployment and are willing to work with their employers to stay with the company. By investing internally, this company turned their skilled workers toward self-improvement, adding value both to the individual worker and to the organization as a whole. They also kept morale high and turnover low. This is sure to pay further dividends when the economy picks up. When it does, they will have workers prepared and able to perform in more than one function and can move resources to the appropriate places to meet demand.I frequently counsel clients to embrace these disciplines, whether the economy is up or down. And since employee surveys have shown that non-monetary benefits are the key drivers of job satisfaction, I also support the use of such techniques as recognition, empowerment, good internal communication, clear expectations, a comfortable work environment and challenge.It also is critical for managers and leaders to pay attention to their own morale, since their attitude plays a role in setting the tone for the entire office. My own experience in a variety of financial, ownership and executive roles has helped me learn, firsthand, how much easier it is to stay in a job you enjoy than it is to find a replacement.Mike Jurnak is principal and head of the Manchester office of Berry, Dunn, McNeil & Parker.