The much anticipated Essential Services Commission (ESC) determination on the 2016-17 Higher Cap applications is now out.
|Our recent study of our extensive Exit Survey database, the 2012 Retention Review, found the majority of people leave their jobs because of the job itself – either they didn’t suit their role or the role didn’t suit them.|
Even if they are paid fairly or enjoy good relationships with peers and managers, people will leave if the job isn’t fulfilling or doesn’t offer career and professional development opportunities.
Reducing turnover and retaining capable and experienced employees for longer makes a notable difference to internal efficiencies, customer relationships and profitability. One strategy for reducing turnover is to develop a retention roadmap by analysing the factors that drive turnover, setting realistic turnover targets and positioning the organisation as an employer of choice. A retention roadmap can direct an employer’s retention investment to the most profitable areas and help shape a compelling and unique employee value proposition (EVP).
1. Analyse the internal and external factors that drive turnover
Some turnover is expected, even necessary. However, when high performing employees are the ones leaving, employers must be on top of understanding the unique causes of turnover in their organisation and industry. Emotions can run high when people leave and anecdotal evidence can be given too much weight. This is not to suggest that it should be ignored, rather that it should be placed in the proper context. To interpret and make sense of the causes of staff turnover, employers need a robust conceptual framework to organise the information they receive and then to use efficient and effective methods for gathering and analysing the data. That’s why many of our clients use our Exit Interview tool.
2. Set staff turnover targets for the organisation as a whole and for high priority areas
The retention roadmap will be driven by the staff turnover levels the organisation decides to target. These must be realistic within the organisation and industry context. Turnover targets will be influenced by:
- the cost of replacing a person, including the cost of recruitment, selection, induction, training and lost productivity whilst getting up to speed
- the difficulty of replacing the person – it is more important that people with a pivotal role and unique skills and knowledge are retained than those with general competencies readily available in the market
- the probability of a person leaving the organisation, based on market demand for the employee’s skills, salary trends or family situation
An average staff turnover rate of 18% costs organisations with 100 employees around $1 million every year. Employers can save around $280,000 per year for every 100 staff they employ by reducing their turnover by just 5% (for example from 18% to 13%). This assumes an average annual salary of $75,000 and a conservative turnover cost per employee of 75% of annual salary.
Many organisations like to target staff turnover in the range of 10 to 18% per annum as this gives a good balance between retaining organisational knowledge on one hand and bringing in fresh ideas on the other. Turnover in this range implies that staff will stay for an average of 5.5 to 10 years which is good for retention of knowledge, experience with operating practices, productivity and continuity in client relationships.
3. Position the organisation as an employer of choice
Maintaining staff turnover within the targeted band depends on positioning the organisation as an employer of choice – being the type of organisation that people don’t want to leave and attracting great talent. This relates to creating a strong and compelling EVP. Consider the following questions:
- Do you have a clearly defined EVP that resonates with your employees?
- What meaningful work do you offer and how is it aligned to your organisation’s vision and mission?
- How do you effectively enable and reward your high performing people and recognise the right behaviours and values of your organisation?
- What initiatives do you have in place to support employees to balance their individual work and life challenges?
In short, you should be taking the same care in putting together an attractive EVP for your target employees as you do for your target customers.