Managing Employee Retention. A Strategic Accountability Approach

364 Pages·2004·6.239 MB·English

by  Jack J. Phillips, Ph.D., and Adele O. Connell, Ph.D. (Auth.)

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Library of Congress Cataloging-in-Publication Data
Phillips, Jack J., 1945-
Managing employee retention : a strategic account:lbility approach / Jack J. Phillips,
Adedle 0. Connell.
p. cm.-(Improving human performance series)
Includes bibliographical references and index.
ISBN-13: 978-0-7506-7484-3 ISBN-I 0: 0-7506-7484-9 (alk. paper)
1. Employee retention. 2. Labor turnover. I. Connell, Adele 0. 11. Title.
111. Series.
HFSS49.S.R58P45 2003
65 8.3'14-dc2 1
2003048168
ISBN-13: 978-0-7506-7484-3
ISBN-10: 0-7506-7484-9
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Preface
THEN EED
During the last decade, employee retention has become a serious
and perplexing problem for all types of organization. Managing
retention and keeping the turnover rate below target and industry
norms is one of the most challenging issues facing businesses. From
all indications, the issue will compound in the future, even as eco-
nomic conditions change. Employee retention will continue to be an
important issue for most job groups in the first decade of the 21st
century.
Employee turnover continues to be one of the most unappre-
ciated and undervalued issues facing business leaders. This stems
from several important assumptions and conclusions about
turnover:
1. All stakeholders involved in the issue, including Human
Resource managers, underestimate the true cost of employee
turnover.
2. The causes of turnover are not adequately identified in most
organizations.
3. The solutions to reduce turnover are sometimes mismatched
with the cause of turnover and do not generate the desired
results.
4. Many of the preventive measures for turnover are either
overkill or they often miss the mark altogether.
5. A process to measure the success of retention solutions and
place a monetary value on managing retention does not exist
in most organizations.
These assumptions and conclusions create the need for a book to
address these issues.
xi
xii PREFACE
FEATURES THISB OOK
OF
Based on proven strategies, this is a practical book to provide
direction to managers and specialists who are concerned about reten-
tion. First, it shows how to accurately cost turnover, providing exam-
ples and actual data from hundred of organizations. Second, it
presents effective ways to identify the causes of turnover so the prob-
lems can be quickly identified and rectified. Third, it shows how to
lower an excessive turnover rate by implementing carefully designed
and selected solutions to match the cause of turnover. Fourth, it
reveals how to keep the turnover in an acceptable range by imple-
menting a variety of preventive measures, tracking leading indica-
tors, and placing alerts along the way to signal when action is
needed. Finally, it demonstrates how to actually place monetary
value on the implementation of solutions to improve or maintain
retention. In summary, this is a practical, indispensable tool to show
how the retention issue can be carefully managed and monitored so
that appropriate levels of turnover can be controlled and appropri-
ate solutions can be implemented.
TARGEATU DIENCE
Several audiences will find this new publication appropriate. First
and foremost are the Human Resources managers and executives
who must address retention issues on a routine basis. This book pro-
vides practical and useful information to address the issue and
manage it in a realistic, practical way.
Second, the various specialists involved in different types of HR
practices such as recruiting and selection, learning and development,
career management, job design, communications, compensation,
reward systems, and employee relations will find this book helpful.
These specialists, who design solutions to help prevent or reduce
turnover, will discover extremely valuable information as they con-
front this critical issue in their organization.
Third, managers at all levels, who must live with the consequences
of turnover, will find this book useful in helping them fully under-
stand the key issues and problems and, more important, the cost of
the turnover. It will show them, in bottom-line terms, what turnover
is actually costing them and what they must do to improve it in the
future.
Finally, the fourth target audience group is professors who teach
Human Resource courses and consultants who assist HR managers
PREFACE xiii
with this issue. This book will offer proven strategies to deal with
what is perhaps the number one issue facing the human capital man-
agement field.
How THISB OOK Is DIFFERENT
Several books are available to address employee retention. Most
books on this issue focus on retention solutions without showing
how to match solutions to need. Some of them attempt to show the
impact of turnover although they sometimes fall short of addressing
the fully-loaded costs. Other books show how to retain employees
by focusing on human relations programs and practices to increase
job satisfaction. Still others focus on how to recruit the best employ-
ees in an effort to minimize future turnover. While these are all
important issues, there is no book that focuses on the turnover issue
from all vantage points beginning with the impact, working toward
solutions, and showing the actual value of those solutions as they
are implemented. For the first time in a major book-in one
volume-an indispensable tool is developed to deal with this night-
mare issue.
STRUCTURE FLOW
AND
The book presents a logical process of managing retention.
Chapter 1, Why Retention is a Serious Problem. . . Still, explains
why retention continues to be a serious problem, even in times of
economic ups and downs. It explores the negative impact of reten-
tion on both organizations and on individuals, including what’s
driving the persistent retention issue. This chapter also dispels some
of the myths of turnover and explains why this should be tackled
immediately as a strategic issue in organizations.
Chapter 2, A Strategic Accountability Approach to Managing
Retention, presents the overall approach for the book. In eight dis-
tinct steps, this chapter summarizes the recommended approach to
retention, beginning with measuring and monitoring turnover and
cycling through all the issues of determining causes, matching needs
to solutions, forecasting solutions, measuring the success, and con-
tinuing to make adjustments. This process is offered as a more sys-
tematic, methodical approach to the retention issue.
Chapter 3, Measure and Monitor Turnover and Retention Data,
is the first step of the strategic accountability approach. It outlines
what types of retention and turnover data should be collected, when
xiv PREFACE
data should be collected, and how data should be reported to the
senior team. Additional data beyond the overall turnover rates are
described.
Chapter 4, Develop Fully Loaded Costs of Turnover, discusses
how to calculate the total impact of turnover, including both direct
and indirect costs. In most cases, the indirect costs exceed the direct
costs and the techniques for efficiently capturing these are described.
This chapter provides the appropriate data to show the executive
team if turnover is having a dramatic and sometimes devastating
impact on the organization.
Chapter 5, Diagnose Causes of Turnover, is one of the critical
chapters that explore how to pinpoint the causes of turnover in the
organization. It shows how to use questionnaires, surveys, inter-
views, focus groups, exit interview data, as well as other techniques
to identify the actual causes of turnover. This is an often-overlooked
step as organizations sometimes review general research data about
employee needs and attempt to develop solutions without uncover-
ing the specific causes within the organization.
Chapters 6, 7, 8, and 9 are a major part of this book. They show
a variety of typical solutions that are implemented. Each chapter
begins with a discussion around a cluster of typical needs uncovered
in organizations and outlines specific solutions that have been imple-
mented to meet those needs.
Chapter 6, Solution Set: Recruiting New Employees, focuses on
the initial processes that bring employees to an organization. Focus-
ing on needs and solutions, the chapter examines what attracts
employees to an organization and weaves through the recruitment,
selection, orientation, indoctrination, and job assignment issues to
ensure that the employee fits into the organization and the job.
Chapter 7, Solution Set: Establishing an Appropriate Work Envi-
ronment, presents the essentials necessary for an acceptable work
environment in today’s climate. It explores such issues as job satis-
faction, culture, climate, diversity, work life balance, and many other
critical issues that employers take for granted. These are the basics
and a variety of solutions are presented to provide them.
Chapter 8, Solution Set: Creating Equitable Pay and Performance
Processes, deals with the economic and reward issues. This critical
chapter identifies what employees seek in terms of pay and benefits
and their need for adequate rewards and recognition on the job. It
explores a variety of solutions economically matched to these
needs. The need for non-economic rewards is also covered in this
chapter.
PREFACE xv
Chapter 9, Solution Set: Building Motivation and Commitment,
is perhaps the most important set of solutions. In addition to explor-
ing the issues that cause employees to remain with the organization,
this chapter explores solutions aimed at building commitment and
growth. Organizational commitment, motivation systems, building
trust, ethics, job growth, career advancement, and other key
issues employees are demanding in the organization today are
described.
Chapter 10, Match Solutions to Needs, shows how the solutions
should be selected to focus directly on the specific needs of the
employee within the organization. Given that there are many possi-
ble solutions, this chapter outlines practical ways to ensure that
appropriate matches are made between the need and solution with
care taken to ensure that mismatches and multiple solutions are
avoided and that the solutions can be developed quickly.
Chapter 11, Forecast the Value of Retention Solutions, is proba-
bly the most innovative approach to managing retention. In this
unique chapter, special techniques are offered to show how the value
of a potential solution can be forecasted to determine the potential
ROI before it is actually implemented. This approach provides exec-
utives with a profile of potential payoffs from several solutions, thus
helping to ensure that the funds are not misallocated or wasted on
low payoff opportunities or mismatched solutions.
Chapter 12, Calculate the Return on Investment of Retention
Solutions, shows how the payoff of retention solutions can be
developed. Using the ROI methodology, this chapter shows how six
types of data can be collected from any type of retention solution
(reaction, learning, application, impact, ROI, and intangible data).
The ROI methodology provides the management team with the
information necessary to determine the overall success of the
solution.
Chapter 13, Make Adjustments and Continue, focuses on the
heart of the retention process by showing how data from successful
retention solutions can be utilized to ensure that the processes are
working properly. It shows how results are communicated and
actions are taken to continue to bring turnover down or keep
turnover at an acceptable rate. This is the last step of the strategic
accountability approach, and the cycle continues in a routine process
from measuring turnover to making adjustments.
Finally, Chapter 14 presents a case study illustrating the processes
described in the book. Taken from an actual setting, the study shows
how a banking organization tackled an excessive turnover problem,
xv1 PREFACE
using the step-by-step approaches in the book. More specifically, the
case study shows how the causes of turnover were clearly pinpointed
and how the impact of the solution was developed, including meas-
uring ROI.
Jack J. Phillips
Adele 0. Connell
A c k no wl edgment s
FROM JACKP HILLIPS
No book is the work of the authors alone; many other individu-
als provided input and support to make this effort a reality. I am
particularly grateful for the clients I have had the opportunity to
work with in my years of consulting. 1 have learned from every
assignment involving a retention issue and have translated that
knowledge into this book. To all of my clients, I owe much appre-
ciation for their willingness to engage our services and experiment
with our approach.
I appreciate the efforts of Franklin Covey to support this publi-
cation. Franklin Covey is a leading global solutions firm with a
variety of solutions that directly tackle the retention issue. I particu-
larly appreciate the support of Val Christensen and Stephen M.R.
Covey for this publishing effort.
Several other individuals were very helpful in developing this
manuscript. Many thanks go to Francine Hawkins for typing, proof-
reading, and editing much of this manuscript. She assumed this task
on top of a very busy schedule and performed admirably with this
huge challenge. I would also like to thank Joyce Alff for her metic-
ulous review, editing, and coordination. Joyce is a superb organizer,
manager, and editor and was extremely valuable in making this book
a reality.
I would like to acknowledge the continued support and assistance
from my spouse and partner, Patti Phillips, who always inspires me
to do my best and supports me in all my work.
FROM ADELE CONNELL
Who we are and what we accomplish are not just the result of our
own efforts, but also a result of the efforts of the people who impact
our lives. Without others, personal achievement is not possible
because of our need for encouragement, support, kindness, generos-
xvii
xviii ACKNOWLEDGMENTS
ity, and faith. With this in mind, I wish to thank the people who
have made a difference in my life. First and foremost, I want to thank
Stephen M. R. Covey and Dr. Jack Phillips for their faith in me.
Without their faith and support, this work would never have been
possible. I would also like to acknowledge the support and kindness
of Alan Bentley, Ike Nicoll, and Mike Willis, PhD, who have encour-
aged my professional development and study of retention.
Within my military capacity, I have been fortunate to work with
three individuals from the 96th Regional Readiness Command who
have modeled superior leadership: Major General James P. Collins
(Commanding General), Brigadier General Peter S. Cooke (Deputy
Commanding General), and Command Sergeant Major Roger
S. Fadel. Thank you, Sirs, for your mentorship and outstanding
examples.
Next, I acknowledge the association and leadership of my DBM
colleagues, Ana Hanna, Barbara Opoka, Greg Simpson, David High-
tower, and Kathy Flora. Special thanks also goes to Alan Rex
Mitchell for his suggestions, input, and help in editing.
On a more personal note, the friendship and kindness of good
friends has been a real strength and joy. Thank you, Shawna Farmer,
Nancy Sullivan, Mary Shumway, Haley Mackay, Jolene Reddish, and
Rosie O’Connell. I have also been blessed with my own family
version of the “Ya-Ya Sisterhood,” aunts, Roxie Dobson, Joann
Fleenor, (the late) Barbara Andersen, and (the late) Luana Williams.
My “Ya-Ya Sisterhood” are models of strength, courage, faith, grace
under pressure and beauty.
To my siblings, Jed, Mark, Paulette, Blake, and Charlene, I thank
you. In particular, my sisters, Paulette Connell Baucom and Char-
lene Connell Dalto, have been my best friends. Your support is the
very definition of love, kindness, support, and understanding. Next,
I acknowledge the great support and love of my parents, Edward J.
(Bud) and Faye J. Connell, who have always encouraged me and
given me the confidence and desire to achieve my goals.
Most importantly, I must thank my four children for patiently
waiting for mom to finish just one more sentence, one more para-
graph, one more chapter, and one more re-write. My children will
always be my greatest joy and greatest asset. You have each made
completion of this whole effort possible: Melanie Faye Hall, Rachel
Michelle Hall, Adam Joseph Herman, and Emily Mae Herman.
Thanks, kids! It is my blessing to be your mother.
Above all, I thank and acknowledge my God for his blessings in
helping me write and complete this work.
CHAPTER 1
Wby Retention
Is a Serious
. . ‘’
Problem. Still
“Employee turnover (leaving an organization) is a major organi-
zational phenomenon. Employee turnover is important to organiza-
tions, individuals, and society. From the organizational perspective,
employee turnover can represent a significant cost in terms of recruit-
ing, training, socialization, and disruption, as well as a variety of
indirect costs. Given the significance of turnover, it is important for
the manager and prospective manager to be able to analyze, under-
stand, and effectively manage employee turnover” (Mobley, 1982).
The significance of this comment is that Mobley made it in 1982 in
his classic book on employee turnover.
Employee turnover is not a new issue. It is relevant today and its
importance will be even greater in the future. Many analysts believe
that there may be 20 million jobs unfilled by the end of 2008. This
is approximately twice the number of unfilled positions today. Some
analysts are projecting a shortfall of up to 30 million employees
(Galbreath, 2001). Those individuals who believe that this issue may
fade with slight economic downturns might consider the following
scenario. A blue-chip manufacturer announces 53,000 layoffs world-
wide, a leading financial institution plans to shed 8,000 jobs, and a
Big-Three automobile maker cuts 1,200 positions in a single plant.
Given this situation, it appears that turnover might not be a problem.
Digging a little deeper underscores the issue; the manufacturer in
question was Boeing, the bank was CitiGroup, and the automobile
”Much of this first chapter is taken from a companion book of case studies,
Retaining Your Best Employees. Patricia P. Phillips, ed. Alexandria, Va.: American
Society for Training and Development, 2002.