HRANB Newsletter

Over the years, there has been a significant body of work published on the subject of employee retention with no shortage of concepts, theories and associated programs all attempting to bridge the gap between the theoretical and practical aspects surrounding this issue.

Yet, survey after survey continues to show that it remains one of the biggest challenges for Canadian companies. That challenge continues to grow within the context of a global economy meltdown and thus the need to develop and retain a true competitive advantage. These surveys show that while most companies attribute their success to people, employees remain their Achilles heel in their organization.

The challenge will only increase as Canadian companies face a 33-year low unemployment rate accelerated by the retirement of the baby boomer generation. It is not solely an issue of numbers but a changing of the guard, as experience and leadership give way to a more mobile and less patient generation. Statistics clearly show that the average term of employment for a new hire is just under four years, compared to 10 years in the 1980’s.

It is the age of free agency, even in the workforce, where top talent commands a premium with less certainty of “retainment”.

While recent talk of recession may give some pause, most experts believe it will do little to alleviate the current situation. The pressure on an organization’s Human Resource department is growing and is compounded by a shortage of qualified H.R. personnel for the same reasons outlined above.

Then there is the other side of the equation. A recent survey of 11,000 workers by Kenexa Research Institute found ineffective supervision to be a leading cause of employee turnover. The study highlighted that weak management skills and poor communication as the main reasons cited.

All companies understand the costs surrounding employee retention. Replacing a mid level supervisor is estimated at $8,500 without the services of an employment agency, where that figure can be easily doubled. Add the costs of “time” required bringing an individual to speed, and those costs become more significant.

Then there are the “soft” costs related to losing an employee as it relates to intellectual property and corporate memory, which are difficult to quantify, but run high in certain sectors.

Opportunity cost is perhaps the highest but least quantifiable of all. The inability to attract and retain the “right” individuals may have the biggest impact on a company's ability to achieve its corporate mission and objectives.
The difficulty with employee retention is that it is far from a one-dimensional problem. The simple formula below captures the matrix associated with a program for effective employee retention.

Remuneration
While most companies and H. R. departments focus a great deal of attention on this metric, studies have consistently shown that it is not the strongest correlation with employee satisfaction and therefore retention.

Respect
This is a “soft” metric and one often misunderstood by companies and H.R. departments. The core of “respect” is communication, consistency and fairness; studies have shown that there is a higher correlation between employee retention and this metric than with remuneration.

Recognition
Recognition is usually associated with tangible items such as bonuses and awards. The most effective form of recognition is the ongoing process of communication between a manager and/or supervisor and the employee.

Relationships
This represents another “soft” metric but it is a critical one, as many companies fail to recognize that an organization also acts as a social catalyst for its employees. The ability of a manager or supervisor to connect with all his-her subordinates is a key requirement and should be an integral part of management's function and responsibilities.

Currently Canada lags in the development and application of retention programs with only 6% of companies having formalized the process. This compares to 17% in Europe and 24% in Asia. This should be seen as an opportunity to enhance a spirited advantage.

The ability of a company and its management to understand and effectively integrate these four metrics through the development and implementation of formal processes guarantees a competitive advantage in the area of employee recruitment and retention.

Richard Malekos is president of ECOS – Employee Creativity & Objectives System, a company that specializes in unique approaches and programs in the field of employee development and wellness.

Comments or inquiries should be directed at info@ecos-creativity.com or at www.ecos-creativity.com.

He may also be contacted at 514 975-ECOS (3267) or his direct line at 514-531-ECOS (3267).