The bulk of most business’ overhead costs are usually labor related. Until the age of machines arrives, we are still going to be dealing with real-life people with real-life issues. According to a study by the Society for Human Resource Management, employers will need to spend anywhere from six to nine months of an employee’s salary in order to find and train their replacement.
What that means is an employee salaried at $50,000 will cost the company anywhere from $20,000 to $35,000 to rehire and retrain a new employee. For a highly-skilled executive, we see losses of upwards of $200,000 to the company. That’s a lot of money!
My company was solely focused on new-entry hiring. While we were very successful in helping companies find better quality candidates through evaluations, we found that both our clients and our own company were having issues with employee retention. Since hiring does no good if candidates don't stay around, finding ways to boost retention became a top priority.
We’ve since morphed our product so it takes care of the life of the recruit until they leave the company. We found that if an employee did not work out, or could not be promoted to an open promotion, the company would have to dive back into hiring. Therefore, everything job-related be it a promotion, taking on more responsibility, transfers, or retention was really a hiring problem.
Top 5 Reasons employees leave
Through much research and data collection, we attributed the majority of employee churn to the following:
1. Employee displayed a poor work ethic and attitude. This usually starts to show after the honeymoon period. While evaluation helped weed out the majority of such potential employees, a few still make it through. The lack of continual on-the-job evaluations allows such employees to be complacent. As we all know, such poor attitudes and work ethics can spread like a disease. Before you know it, you’ve lost a couple employees, sometimes a whole team because of one such “diseased” employee.
2. Disciplinary Action. This is pretty self-explanatory. The employee was terminated due to a disciplinarian-type situation.
3. The employee was never loyal to the company. The job was just a job, perhaps even a stepping stone to somewhere else they wanted to be at or leverage for a better position with another company.
4. Employees did not see a future in the company for themselves. This group of employees did not have a clear direction of where they can be headed within the company. While I felt we did this (to the best of our abilities) in our company, I had employees who acted excited and said “yes that is the direction I want to be headed towards”, even though that was not the case. Still, that is all part of lack of communication between manager and employee.
5. The employee found a better opportunity. While this can be related to #4, a company can provide great career direction to their employees but still see the employee leave for other reasons. Such reasons may include instant gratification like higher pay, closer location, better benefits, or just a company they’ve always wanted to work for. While mostly out of the hands of employers, steps can still be taken to minimize such churns.
Churn reasons #1, #2, and #3 can be minimized through better evaluations and a stricter hiring policy. I will go through that in my next article. For now, let’s focus on churn reasons #4 and #5, and sprinkle a little of reason #3 in the mix as well. These can all be addressed with the following hacks:
Hack #1: Succession Planning
With the right Succession Planning developed for your organization, you and your employees will have a clear picture of what the entire organization structure looks like, where they stand, and how they can grow within the company. Succession planning also allows the leaders of the company to plan a leaner hiring strategy. Companies with a great succession planning structure find themselves saving at least 40% in hiring operations costs each year.
Succession planning is not merely an organizational chart. Instead, they should be made of an intricate web of pathways that connect to each other and form a hierarchy semblance.
Your first step is to identify 3 main goals the company has. Then, you will need to sit down with each department head and create pathways top-down within each department that envelop the 3 main company goals.
The reason you create top-down is so you can identify all the responsibilities the highest-paid and most qualified can do then move lesser responsibilities to the next position down. When you do it this way (versus the bottom-up approach that most companies take in hiring), you will hire fewer worker-bees and develop more employees that can make a greater impact.
From there, you would have created the organizational chart for your company and see all the gaps there are within your organization. By gaps, I mean missing skill-sets or roles needed to help your company get to the next level of success. When you can identify what those gaps are, you will be able to formulate more effective training to either promote or hire for the roles that you really need.
Hack #2: Pathways
Once you have your 3 prioritized and clear company goals, you need to make it work. The next step is to find tools and software that first allow you to create Pathways. Pathways are vital to retention and succession planning. Every job should have a pathway leading up to it and every employee should be on a pathway.
A pathway should include training, milestones/KPIs, interactive evaluations and feedback. Pathways can be used with new hires for smooth onboarding and growth within your company. If I was hired as a junior content editor, my pathway should clearly include training and development that will eventually lead me towards becoming a senior content editor.
While a promotion is based on the milestones and evaluations I hit, a proper feedback loop should tell me how close I am to such advancement. If someone else on my team is promoted over me, I should have a clear understanding based on my personal pathway progression where I fell short.
The goals on the specific employee pathways should lead to accomplishing the 3 main company goals vs a promotion.
Hack #3: Training and Development
How many of you have been to corporate training and left wondering why you just went through it, especially since it will not affect your pay grade? Yet, companies pour a ton of resources into training and development for their employees.
By incorporating training and development programs into pathways, you can test the effectiveness of such training. Your employees should be advancing in skill-sets and attitudes based on the training provided. You should be developing your employees into larger roles, all of which will, in turn, help your organization to be more successful.
At the end of all the training within a selected pathway, if an employee is unable to advance to the next level, there probably is an issue with your training content. Start making training and development work for your company and not the other way round.
Hack #4: Mentoring Program
Create a mentor network within your organization. Lyft has an excellent mentor program. Every new hire at Lyft is paired with a mentor, who is not their supervisor or on their team. Such networks create camaraderie within the company, making it a more pleasant place to work at. When employees create a friendly network within the company, they will feel less inclined to leave the company.
A great mentor network can also remove lack of diversity issues. Imagine if you had a mentor network system, where employees can find mentorship based on skills, expertise, and even hobbies! A Latino new hire can find mentorship in more senior Latino employees and learn to navigate the company to attain a higher career progression. A Republican can find commonality with like-minded co-workers and not feel like the oddball in a Democrat-centric tech company.
Mentoring can also give employees a bigger vision of how they can attain career progression within the company. It’s one thing hearing it from your supervisor but another from a higher-ranked employee on how they got there. Employees will be able to see a more definitive future for themselves within the company. Employees who are mentors will feel appreciated that the company entrusts such leadership positions to them and in return, be more loyal to the company as well. Mentoring is crucial in creating a strong work environment to retain talented employees who may feel out of place or confused about where they stand.
Hack #5: Strong Company Culture
DO NOT create culture by deciding what office decor, what activities, or what perks are needed for the company to create that “vibe”. By being transparent in career progression through pathways and showing your employees you care, not through perks, but by developing their professional and social aptitudes, you will create a culture of growth within the company. You will create employees whose attitudes are not defined by the quality of the espresso machine they have or how many free lunches you’re giving them.
By creating a strong foundation where you show them that you want to work with them for the long haul, you will create a culture where employees are eager to learn and hungry to grow, which in turn will help the company grow.
Quirky but positive culture sets will develop by themselves over time by the employees themselves. You will find yourself hiring and retaining employees who are not just there for the perks but who are there because they know they can grow professionally and socially within your organization. Those are the employees you want to have and keep for the long haul.
At the end of the day, employees are humans and deeply affected by the people they surround themselves with. Create the foundation that will keep the great employees, amazing culture will follow suit! If done systematically, you will weed out toxic employees, develop and retain great employees, and create a company with amazing culture and purpose.