What percentage of your workforce quits each year? If you are in the service business (like a quick service restaurant) a 60-70 percent turnover rate would not be unheard of. For most businesses, a turnover rate of 5-10 percent per year is probably more the norm.
What does this cost? Estimates, of course, vary but if you factor in recruiting fees, recruitment ads, pre-employment physicals, background checks, time spent on interviewing (exit and new hire), HR exit processing, new employee training, on-boarding and the lesser productivity while new workers are getting up to speed, HR professionals would guess the cost is in the range of 35-60 percent of one year’s base pay.
If your company had 1,000 employees, then you would be discharging, recruiting, hiring and training about 70 people per year. At an average base wage cost of, say $70,000, that means you could bring an extra quarter-million dollars of net income to your bottom line – if you could just hold on to your employees. (Most of my HR colleagues think this estimate is on the low side.)
The retention of good people is an item of financial and strategic importance. The cost analysis does not take into account the knowledge that leaves with the people who depart your organization, including information you might consider proprietary.
So what do you think the main reason is why people leave? Consider first of all, that if you outright ask people, you are not always likely to get an honest answer. People often lie about this if they fear a confrontation or an attempt to persuade them to stay on, especially after they have already made the emotional commitment to their decision to leave. The easiest thing is to say is that they left for a higher rate of pay, or to have a lower commuting time or because another opportunity was just too good to turn down.
However, according to a Gallup poll of more than a million people, the main reason people leave has nothing to do with these things. The number one reason (by far) they leave their current position is because of a bad boss. That’s right, poor management costs big time.
We all know the list of bad-boss behaviors, don’t we?
- They are over-controlling
- Their people don’t trust or respect them (based on inconsistencies in what they do vs. what they say)
- They don’t seem to trust, respect or appreciate their employees
- They don’t seem to care about them or their personal growth and development
- They are just not competent
For all the money the corporate world spends on 360 surveys, or employee attitude surveys, the real question is why don’t we as executives have the courage to make the changes we should? Sure, some people can improve with some training, coaching and mentoring. But what about the others?
I am thinking of one manager of mine who was a great person – intelligent, technically skilled and loyal, but lacked key management capability. He was a controlling, autocratic micro-manager. We did the 360s, hired an executive coach, mentored him (and put him through immense stress, I think) for a year. At the end, if you asked his employees did they see some improvement in his leadership, they would have mostly said yes – because they appreciated he had at least made an effort. However, if you asked was he still a controlling, autocratic micro-manager? They would have answered that in the affirmative as well. For all his good traits, this manager was never cut out to be a good leader (at least not the type we were looking for). The sooner he and I recognized this, and put him into a different role (without cutting his pay), the sooner the organization would improve.
Here are some ideas to consider:
Be willing to face the truth. Not everyone is boss material. When you made a bad hiring or promotion decision, be open to the possibility you got it wrong. And, when you do, confront it! Faster is better, and your team is counting on you to fix your mistakes.
Be fair with the person you misplaced. If he or she isn’t performing well as boss, he or she probably already knows it. This can be hard to admit if you are then seen as a failure. You lose face. So be careful how you make a reassignment. Think twice before cutting their pay, and do what you can to demonstrate to the individuals you DO really care about and appreciate them. In the case of the manager I mentioned above, we gave him a special, newly created staff assignment where he could use his great experience and technical ability. He saved us a ton of money, and told me later that he was having much more fun solving technical problems rather than managing people. It was a win-win scenario. Isn’t this a better solution than subjecting them to a year-long “Performance Improvement Plan”?
Stop teaching management skills. Some of us want to believe great leaders are made, not born. We hope that if we provide the right level of training on management skills (how to run a meeting, how to do a performance appraisal, etc.) then we can turn them all into effective leaders. While these skills are useful can be learned, they don’t always transform people into über-bosses. Instead, we need to work harder to screen boss candidates for intuitive leadership ability. Smart people can learn skills, but we can’t train inspiration, integrity or courage. Who are your best leaders? We all know them when we see them. And, if we are paying attention, we can see it in people even before we promote them to a supervisory or managerial role.
Increase flexibility. Work harder to design jobs around people rather than the other way around. Build off of their strengths. Sometimes a boss has a personality style not well suited to an existing team culture. Respect the culture, especially when the team was performing well in the past.
Provide attractive non-managerial tracks. Sometimes people are reticent to turn down a supervisory position because in many organizations, that is the way for pay and benefits advancement. Why not offer career paths that lead to higher pay for people who are good at what they do and love? We should value people who bring other attributes to work – creativity, experience, creative problem solving and high technical competence. These should be worth paying for. Also, recognize and congratulate your non-managers publicly – so that your employees see that you value them as much as your good managers. Finally, think about non-cash rewards. Send your people to a conference, give them time to work on one of their own pet projects, or develop a patent application. There are many ways to recognize people besides money, a larger office or a premium parking space.