Costliness of Employee Attrition May Increase During Economic Downturn; In Tough Times, Retaining Best Employees Becomes 'Mission Critical'

To do so, Focus on 'Career Development' and 'Leadership,' - Not on Pay,

Says Newly Published Research from Hay Insight



Apr 24, 2001, 01:00 ET from Hay Group

    PHILADELPHIA, April 24 /PRNewswire Interactive News Release/ -- Employee
 attrition has been a major issue for American business, and, paradoxically,
 the cost of attrition can be more devastating in an economic downturn,
 according to Dawn Sherman, Managing Director of Hay Insight, the employee and
 customer survey practice of Hay Group and author of the new Working Paper,
 "The Retention Dilemma: Why Productive Workers Leave - Seven Suggestions for
 Keeping Them."
     Attrition costs companies 18 months' salary for each manager or
 professional who leaves, and one-half a year's pay for each hourly employee
 who leaves.  This amounts to major organizational and financial stress,
 considering that one out of every three employees plans to leave his or her
 job in the next two years, according to Ms. Sherman's just-published Working
 Paper.
     "The last thing managers should do during a down cycle in the economy is
 stop thinking about employee retention," said Ms. Sherman.  "The rub is that
 when an organization is squeezed by the economy and the market, the cost of
 employee attrition is especially crippling.  In trying times, the commitment
 and energy levels of the best employees are critical to the organization --
 yet often in a fragile state."
     She added, "While the economic downturn could slow the rate of attrition a
 bit, it remains a pressing problem that's on a steady, upward trajectory.
 Attrition has surged by more than 25% over the past five years, and
 unemployment and joblessness rates remain quite low despite layoffs in the
 technology sector."
     "The Retention Dilemma" points out that there are proven, scientific ways
 to predict attrition and identify its causes.  "With those insights, which
 come from asking employees the right questions, managers can control attrition
 and promote retention," said Ms. Sherman.  "We believe economic downturns
 actually give companies the opportunity to invest in listening to their people
 -- when there's time for reflection, and when making other, larger capital
 investments doesn't make sense."
 
     Costs of Attrition Are Harder to Bear in Tough Times
     In a company with 5,000 employees earning an average annual salary of
 $35,000 each, standard attrition rates (14% for clerical workers, 12.5% for
 professionals and 5.5% among managers) collectively cost more than $20 million
 per year.  If this same company has annual revenues of $500 million and a
 profit margin of 10%, this attrition loss would represent 4% of total revenues
 -- and 40% of profits.
     "As the economy slows, companies will be under pressure to curb costs and
 stretch every dollar. While the gut reaction of management will often be to
 focus primarily on the business at hand, and put 'people' issues on the back
 burner, this is actually the time to focus on retaining high-performing
 employees and keeping them motivated.  The best companies know that, in all
 business climates, taking measures to retain valued employees saves money,
 preserves margins and leads to better business opportunities," said
 Ms. Sherman.
 
     Retaining Employees:  It's Not About the Money; It's About the Job
     The Working Paper makes a point that is particularly relevant during times
 when budgets are tight: it's usually not money that makes valued people stay
 with or leave a job.
     According to research based on Hay Insight's normative database -- which
 contains survey responses obtained in the past four years from about one
 million employees at more than 330 companies -- pay is not likely to have the
 greatest impact on employees' decisions to stay or leave an organization.
 Instead, the data suggests that employees who are planning to leave are most
 likely to do so for opportunities that allow them to use and develop their
 skills -- or for opportunities in a company with strong leadership.
     Hay Insight compared the satisfaction levels of "committed" employees to
 those "planning to leave soon" on 40 different topics of organizational
 importance, such as strength of management, compensation, training and
 workload.  The topics with the widest disparities between the two groups of
 employees -- called "satisfaction gaps" -- are the key drivers of attrition.
 
     -- The widest gaps (between 32-34 percentage points) were found in areas
        such as "using my skills and abilities," "ability of top management"
        and "company has a clear sense of direction;" consequently, those are
        the three major indicators of attrition.
 
     -- Pay, usually considered the most emotional factor in the
        employer/employee relationship, only ranked as the seventh most
        significant driver of attrition.
 
     Said Ms. Sherman:  "Our research underscores that people want to find
 meaning in their work -- and it's derived from non-economic factors, such as
 being able to deploy one's skills in a challenging effort, to be useful and to
 serve on a team led by capable managers with a clear sense of direction."
 
     Roots of Attrition Vary By Job Level and Industry
     While issues of "career growth" and "leadership" are the major factors
 that drive attrition and promote retention, there are, according to the
 Working Paper, important nuances related to occupation level and industry.
 
     For instance:
 
     -- Among management-level employees, the key attrition drivers are such
        concerns as "opportunities for management," "ability of top
        management," "use of skills and abilities" and "work/family balance."
 
     -- For professional-level employees, the key attrition drivers are
        concerns about "coaching and counseling from one's supervisor,"
        "company having a clear sense of direction" and "chance to do
        interesting and challenging work."
 
     -- Among clerical employees, the key attrition drivers are such concerns
        such as "type of work," "use of skills and abilities" and "opportunity
        to learn new skills."
 
     -- For hourly employees, the key attrition drivers are concerns whether
        "supervisor treats me with respect," and about "ability of top
        management" and "chance to do interesting and challenging work."
 
     Insights from Employee Surveys Can Help Reverse Attrition
     Carefully designed and executed surveys of employees uncover if, when and,
 most important, why certain employees -- such as sales reps, engineers,
 programmers -- may consider leaving.  These insights provide management with
 the information they need to create and enact programs that address and
 reverse situations that feed attrition.
     Said Ms. Sherman, "Effective employee surveys yield objective,
 quantitative data and insights that empower companies to manage by fact, as
 opposed to by gut feeling, which isn't always correct.  Good surveys usually
 prove to be valuable investments, especially in light of the huge costs
 associated with attrition."
 
     Scientifically Proven Maxims for Retaining Valued Employees
     Hay Insight's data from years of employee surveys have yielded "truisms"
 for management regarding attitudes and approaches that are proven to fend off
 attrition and build employee loyalty and engagement.  The Working Paper
 details these imperatives.
 
     They include:
 
     -- Fostering a Culture of Management Concern - Companies today are too
        often sending a message to employees that "you are in charge of your
        own career; we will not go out of our way to help you develop."
        Management must show an interest in helping people develop to their
        fullest potential.
 
     -- Providing Relevant Training, And Early On - Companies should think of
        training as career development, and be sure it's relevant to an
        employee's job and offered early in a worker's career.
 
     -- Permitting Job Enlargement - Don't lock people into positions because
        they're "so good at it."  Managers must continually ask:  "What's the
        next step for this employee?"
 
     -- Walking the Talk - Having a strong strategic vision and communicating
        it to employees is not enough to guarantee high retention.  Behavior
        must be consistent with strategy.
 
     -- Rewarding Managers Also On People Skills - Many companies say they
        value people and train their management team to cope with people
        issues.  Yet these same managers are too often rewarded solely on their
        technical skills and financial results.
 
     -- Strengthening the Management Team - According to one expert:  "People
        don't leave jobs, they leave bosses."  Marginal performers in
        management must be weeded out.
 
     Hay Group works closely with companies around the globe to help them
 navigate and solve a range of important people issues, including compensation
 and benefits, management development, leadership transformation,
 organizational effectiveness, employee and customer surveys, human resources
 policy and information.  Founded in 1943, Hay Group has more than
 2000 consultants in 71 offices around the world.  For more information, please
 visit http://www.haygroup.com.
 
     TO RECEIVE A COPY OF "The Retention Dilemma: Why Productive Workers Leave
 - Seven Suggestions for Keeping Them," CONTACT DAWN SHERMAN, MANAGING DIRECTOR
 OF HAY INSIGHT. OR, TO SET UP AN INTERVIEW WITH MS. SHERMAN, PLEASE CALL
 ELIZABETH CASE AT SOMMERFIELD COMMUNICATIONS AT (212) 255-8386, OR EMAIL:
 mail@sommerfield.com.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X27736661
 
 

SOURCE Hay Group
    PHILADELPHIA, April 24 /PRNewswire Interactive News Release/ -- Employee
 attrition has been a major issue for American business, and, paradoxically,
 the cost of attrition can be more devastating in an economic downturn,
 according to Dawn Sherman, Managing Director of Hay Insight, the employee and
 customer survey practice of Hay Group and author of the new Working Paper,
 "The Retention Dilemma: Why Productive Workers Leave - Seven Suggestions for
 Keeping Them."
     Attrition costs companies 18 months' salary for each manager or
 professional who leaves, and one-half a year's pay for each hourly employee
 who leaves.  This amounts to major organizational and financial stress,
 considering that one out of every three employees plans to leave his or her
 job in the next two years, according to Ms. Sherman's just-published Working
 Paper.
     "The last thing managers should do during a down cycle in the economy is
 stop thinking about employee retention," said Ms. Sherman.  "The rub is that
 when an organization is squeezed by the economy and the market, the cost of
 employee attrition is especially crippling.  In trying times, the commitment
 and energy levels of the best employees are critical to the organization --
 yet often in a fragile state."
     She added, "While the economic downturn could slow the rate of attrition a
 bit, it remains a pressing problem that's on a steady, upward trajectory.
 Attrition has surged by more than 25% over the past five years, and
 unemployment and joblessness rates remain quite low despite layoffs in the
 technology sector."
     "The Retention Dilemma" points out that there are proven, scientific ways
 to predict attrition and identify its causes.  "With those insights, which
 come from asking employees the right questions, managers can control attrition
 and promote retention," said Ms. Sherman.  "We believe economic downturns
 actually give companies the opportunity to invest in listening to their people
 -- when there's time for reflection, and when making other, larger capital
 investments doesn't make sense."
 
     Costs of Attrition Are Harder to Bear in Tough Times
     In a company with 5,000 employees earning an average annual salary of
 $35,000 each, standard attrition rates (14% for clerical workers, 12.5% for
 professionals and 5.5% among managers) collectively cost more than $20 million
 per year.  If this same company has annual revenues of $500 million and a
 profit margin of 10%, this attrition loss would represent 4% of total revenues
 -- and 40% of profits.
     "As the economy slows, companies will be under pressure to curb costs and
 stretch every dollar. While the gut reaction of management will often be to
 focus primarily on the business at hand, and put 'people' issues on the back
 burner, this is actually the time to focus on retaining high-performing
 employees and keeping them motivated.  The best companies know that, in all
 business climates, taking measures to retain valued employees saves money,
 preserves margins and leads to better business opportunities," said
 Ms. Sherman.
 
     Retaining Employees:  It's Not About the Money; It's About the Job
     The Working Paper makes a point that is particularly relevant during times
 when budgets are tight: it's usually not money that makes valued people stay
 with or leave a job.
     According to research based on Hay Insight's normative database -- which
 contains survey responses obtained in the past four years from about one
 million employees at more than 330 companies -- pay is not likely to have the
 greatest impact on employees' decisions to stay or leave an organization.
 Instead, the data suggests that employees who are planning to leave are most
 likely to do so for opportunities that allow them to use and develop their
 skills -- or for opportunities in a company with strong leadership.
     Hay Insight compared the satisfaction levels of "committed" employees to
 those "planning to leave soon" on 40 different topics of organizational
 importance, such as strength of management, compensation, training and
 workload.  The topics with the widest disparities between the two groups of
 employees -- called "satisfaction gaps" -- are the key drivers of attrition.
 
     -- The widest gaps (between 32-34 percentage points) were found in areas
        such as "using my skills and abilities," "ability of top management"
        and "company has a clear sense of direction;" consequently, those are
        the three major indicators of attrition.
 
     -- Pay, usually considered the most emotional factor in the
        employer/employee relationship, only ranked as the seventh most
        significant driver of attrition.
 
     Said Ms. Sherman:  "Our research underscores that people want to find
 meaning in their work -- and it's derived from non-economic factors, such as
 being able to deploy one's skills in a challenging effort, to be useful and to
 serve on a team led by capable managers with a clear sense of direction."
 
     Roots of Attrition Vary By Job Level and Industry
     While issues of "career growth" and "leadership" are the major factors
 that drive attrition and promote retention, there are, according to the
 Working Paper, important nuances related to occupation level and industry.
 
     For instance:
 
     -- Among management-level employees, the key attrition drivers are such
        concerns as "opportunities for management," "ability of top
        management," "use of skills and abilities" and "work/family balance."
 
     -- For professional-level employees, the key attrition drivers are
        concerns about "coaching and counseling from one's supervisor,"
        "company having a clear sense of direction" and "chance to do
        interesting and challenging work."
 
     -- Among clerical employees, the key attrition drivers are such concerns
        such as "type of work," "use of skills and abilities" and "opportunity
        to learn new skills."
 
     -- For hourly employees, the key attrition drivers are concerns whether
        "supervisor treats me with respect," and about "ability of top
        management" and "chance to do interesting and challenging work."
 
     Insights from Employee Surveys Can Help Reverse Attrition
     Carefully designed and executed surveys of employees uncover if, when and,
 most important, why certain employees -- such as sales reps, engineers,
 programmers -- may consider leaving.  These insights provide management with
 the information they need to create and enact programs that address and
 reverse situations that feed attrition.
     Said Ms. Sherman, "Effective employee surveys yield objective,
 quantitative data and insights that empower companies to manage by fact, as
 opposed to by gut feeling, which isn't always correct.  Good surveys usually
 prove to be valuable investments, especially in light of the huge costs
 associated with attrition."
 
     Scientifically Proven Maxims for Retaining Valued Employees
     Hay Insight's data from years of employee surveys have yielded "truisms"
 for management regarding attitudes and approaches that are proven to fend off
 attrition and build employee loyalty and engagement.  The Working Paper
 details these imperatives.
 
     They include:
 
     -- Fostering a Culture of Management Concern - Companies today are too
        often sending a message to employees that "you are in charge of your
        own career; we will not go out of our way to help you develop."
        Management must show an interest in helping people develop to their
        fullest potential.
 
     -- Providing Relevant Training, And Early On - Companies should think of
        training as career development, and be sure it's relevant to an
        employee's job and offered early in a worker's career.
 
     -- Permitting Job Enlargement - Don't lock people into positions because
        they're "so good at it."  Managers must continually ask:  "What's the
        next step for this employee?"
 
     -- Walking the Talk - Having a strong strategic vision and communicating
        it to employees is not enough to guarantee high retention.  Behavior
        must be consistent with strategy.
 
     -- Rewarding Managers Also On People Skills - Many companies say they
        value people and train their management team to cope with people
        issues.  Yet these same managers are too often rewarded solely on their
        technical skills and financial results.
 
     -- Strengthening the Management Team - According to one expert:  "People
        don't leave jobs, they leave bosses."  Marginal performers in
        management must be weeded out.
 
     Hay Group works closely with companies around the globe to help them
 navigate and solve a range of important people issues, including compensation
 and benefits, management development, leadership transformation,
 organizational effectiveness, employee and customer surveys, human resources
 policy and information.  Founded in 1943, Hay Group has more than
 2000 consultants in 71 offices around the world.  For more information, please
 visit http://www.haygroup.com.
 
     TO RECEIVE A COPY OF "The Retention Dilemma: Why Productive Workers Leave
 - Seven Suggestions for Keeping Them," CONTACT DAWN SHERMAN, MANAGING DIRECTOR
 OF HAY INSIGHT. OR, TO SET UP AN INTERVIEW WITH MS. SHERMAN, PLEASE CALL
 ELIZABETH CASE AT SOMMERFIELD COMMUNICATIONS AT (212) 255-8386, OR EMAIL:
 mail@sommerfield.com.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X27736661
 
 SOURCE  Hay Group