Turnover at one mature organization I have spoken with recently has reached close to 100% for its key engineering talent. This is not because the company is a poor performer or because it doesn’t pay well. In fact, it is doing very well and pays above the average.
The reason they are losing people is because they are well-paid, have made significant income, and have built up large 401(k) accounts. They are leaving because they are successful and able to pursue other interests.
The causes of turnover are changing and wise organizations are looking deeply at those causes and learning new ways to respond.
I often hear managers, CEOs, and supervisors promising this and that and making speeches about how committed they are to their workers.
When it comes time to allow workers some say in their work, or the opportunity to transfer to another department, or the chance to try something new, they just as often hesitate. Words can take on many meanings and can be twisted to fit any occasion. Deeds speak for themselves.
Back in the “good old days,” turnover levels were very low in most organizations, often approaching less than 2% in firms such as Hewlett-Packard and IBM. Employees expected to be retained until retirement and to receive a living retirement income after 25 or 30 years of service. There was loyalty and commitment to the firm and frequently in the best of these companies, strong cultures matured. These cultures provided an unwritten behavioral guide and a sense of pride and friendship. People were proud to be knows as an IBMer, for example, because it was like being admitted to an exclusive club. Their friends who were not IBMers were jealous.
But somewhere in the early 1980s, things began to change. The first crack came with the advent of the 401(k) and (b) plans that freed employees from the corporate retirement programs. The 401 programs are, in effect, portable pensions. In effect, you take your accumulated savings and add to them somewhere else.
Silicon Valley companies had never set up pension programs because the young companies there, with young non-union workers, did not feel any need to establish retirement programs. So they were the first to feel the impact of 401 programs as workers started understanding what they were all about.
Later the downsizing and re-engineering movements began reducing the workforce and began to crack the idea that a company would take care of you until you were ready to retire. Thousands found themselves on the street with no jobs and no retirement benefits. Loyalty crumbled and the idea of staying with an employer for decades became less attractive.
In fact, for many young people the idea of working for a single employer for some long period of time is frightening and is seen as career limiting. How times change!
Now as we enter a couple of decades where it will be very hard to find good people and even harder to keep them, we have corporations interested in preventing both their baby boomer experts and their newly recruited Gen Y superstars from leaving. It is tough to convince them to stay.
Most organizations find themselves with benefits packages that are increasingly the same: portable pension plans, good cafeterias, and lots of other perks. Nothing really differentiates them in material aspects from the competition.
From an employee’s perspective, there is almost no negative stigma to having frequently changed jobs. In fact, changes that make sense are considered a plus as they mean the employee has added experience and competitive knowledge.
So how do you make it more attractive to keep employees? Here are a few ideas:
- Make it easy for people to move around in your organization. Do not limit transfers. Let people try out areas where they have little experience. Encourage cross-fertilization and give people the support and development they need to succeed in the new position. Never tell an employee they are not ready, too junior, not educated enough, or haven’t worked at the firm long enough to do whatever it is they want to do. To tell them any of those things is a guarantee that they will leave you soon.
- Provide lots of free development and training. Encourage employees to get more education by offering to pay for 100% of college tuition or for 100% of a certification program. Pick key employees and offer them the chance to participate in longer-term development programs. Make a big deal out of development and then pay the employee more money when they complete the program. Gen Y, in particular, is attracted to any company that helps them gain more skills.
- Allow employees to volunteer time outside the organization. For example, Google allows employees to donate time to charities while still being paid. Letting employees participate in community, social and charitable activities not only improve your organization’s reputation, but acts as a retention tool.
- Pay at market rates or more. Don’t think that your benefits or loyalty will keep employees happy. Err on the side of generosity when you offer pay increases and never let pay be an excuse for an employee leaving. Pay is never the real reason people leave a firm, but it sure makes a great excuse for employees. Most organizations can’t defend themselves on this issue because they don’t pay that well.
- Manage the performance of your managers. Track the turnover of employees for every manager. Managers who have any significant turnover need to be educated and mentored and, if things don’t improve, removed from managing people. Every survey shows that one of the major reasons people leave a firm is because of mistrust, dislike, or incompatibility with the immediate manager. While these suggestions are in no particular order, if asked I would put this one first. Poor managers are the worst enemy of retention that an organization can have. Reputations spread and can infect many people and can start a negative buzz about working for the company in the marketplace.
- Remember that we have entered a time when the employees are in charge. They can cripple your success and they know exactly how. They own the tools of production, and management needs to understand that the best companies, those that are most financially successful, have employees who enjoy “just enough” management and a lot of freedom. Today’s employees are better educated, more independent, less afraid, more secure, and far more entrepreneurial than those of even 10 years ago. This means that HR policies and management styles have to radically change.
These are the best ways to reduce turnover and develop a workforce that is energized and productive. It requires a committed management team and a lot of new thinking, but these methods can really work.