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The time and cost to a company to replace employees who have resigned can become crippling if the retention rate keeps going in the wrong direction.
Research done by several international research bodies indicates that the cost of having to replace an employee could be as much as 400% of the annual salary if the position requires a highly skilled person.
Many companies can also attest to the fact that they lose more competent people to resignations than they do to firing incompetent people.
Renate Scherrer, MD at JvR Consulting Psychologists, says talented people are more mobile, and are more in demand.
Therefore, it is important to have a strategy in place to keep them.
A company’s retention strategy should be similar to succession planning – it is about the ability to objectively identify the people you want to invest in.
OId goal
In an article published in the Harvard Business Review, Peter Cappelli, the George W Taylor professor of management studies at the Wharton School in Philadelphia, says the “old goal” of minimising overall employee turnover must change.
“It must be about the ability to influence who leaves and when,” wrote Cappelli.
However, retention strategies in South Africa are based to a large degree on a “top-down hierarchical management structure”, says Cobus Oosthuizen, executive director at motivational and mentoring firm LifeXchange.
High employee retention is directly linked to positive company culture, which comes from a deep understanding of human motivation and behaviour.
“There has been significant research done, and several times duplicated by reputed institutions, proving that money is not a motivator that will retain people,” he remarks.
“Yet we continue to swing that carrot in front of people thinking that this one vegetable will do the trick, while in the rest of our lives we always talk about the importance of balance.”
New goal
Scherrer says it is important for the company to consider what is required to lead its people into the future from the perspective of increased complexity, ambiguity, and constant change.
The company has to align its organisational strategy with its people strategy. If the strategy is to grow, expand or achieve greater market penetration, the company has to align its people strategy to that.
“Ask yourself if you need more people, more skilled people, or differently skilled people. If the two strategies are aligned, then you will obviously get more congruency in the structure and systems that need to be put in place,” explains Scherrer.
The three key pillars of a retention strategy are attracting, retaining and rewarding. When attracting people, companies need to understand the job and role requirements; whether people fit into the values of the company and what it is the company requires of them.
Part of the success of bringing people into the organisation – and ultimately keeping them – is the process of “onboarding” them.
“They need to know and understand the organisation; its strategy and what role they must play in ensuring the strategy is achieved,” she says.
There must be a clear “behavioural charter” for the company. What do we adhere to and what do we ascribe to?
Enabling and empowering the newly attracted employee to perform in their new role can take up to six months if it is someone in a leadership position.
Know the needs
Scherrer says in order to reward your talent you need to know what they want.
“Although you have to have scalable solutions for development, you also need to be specific, unique and individualistic enough to cater for people with different skills needs and different development gaps.”
Cappelli says there are a number of mechanisms to encourage (reward) targeted employees to stay.
These include money, social ties, location and job design and job customisation.
“By thinking carefully about which tasks to include in which jobs, companies can exert considerable influence on retention rates.”
Employee retention is more like managing a river than tending to a dam that keeps a reservoir in place, he adds.
“The object is not to prevent water from flowing out, but to control its direction and speed.”
Oosthuizen says their findings after conducting employee surveys to determine a retention strategy for companies show that 21% of employees want to feel a sense of appreciation; 18% want to be challenged; and 11% want to feel their opinion or views count.
Only 9% say their salary is important.
The criteria for determining who the critical talent in the organisation is, has changed significantly over the years, says Scherrer.
“Previously it was mostly the people who will be able to move into leadership positions. That is still important, but what has been added into the mix is people who do not want to move into management, but they have critical or scarce skills that you have to have to ensure your organisational strategy will be achieved,” she explains.
Getting it wrong
When a strategy is based on nepotism, there will be envy and bitterness.
When the company restructures and the executive committee members get bonuses there will be conflict and unhappiness.
Base the retention strategy on facts, realities and bring science into it, says Scherrer.
If everyone is clear about the organisational strategy, and it is communicated clearly, people will understand if those with different or critical skills are valued more for the success of the company.
Oosthuizen says there is conclusive research that shows when an employee finds a sense of autonomy, mastery and purpose in their work the chances of them excelling and staying with their employer, regardless of other opportunities, are far greater.
In the next issue: Retention strategies – Part 2: How to develop the underperformers.
This article originally appeared in the 22 November edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
