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The True Cost of Getting it Wrong

Nobody ever sets out to make a poor decision, and yet it happens all the time. According to research, only one hire in five is a success in the eyes of both the employee and the company. And mistakes are costly, resulting in either an untimely exit – or worse, living with a bad decision.

We are finding more and more being written lately on the subject of retention; it seems to be showing up everywhere, from a well-researched and cited blog post by Barrett-Rose that details the staggering costs of what it refers to as the ‘Revolving Door Syndrome’, to the very thoughtful and comprehensive Rethinking Retention, authored by Richard P. Finnegan, which makes for a sensible and thought-provoking read.

The thing that is perhaps most remarkable about Finnegan’s treatise is that the basics are so simple. Anyone reading the book hoping for a silver bullet, that ‘one thing’ that would make the world of difference, is going to be disappointed.

Retaining top performers is a natural outcome, the result of nailing a few basic disciplines, and doing them over and over again in a very methodical way. Finnegan maps out three basic principles and seven key strategies:

The Three Basic Principles of Retention

1. Employees quit jobs because they can.
If they have a better option, they will take it. Make yourself the better option.

2. Employees stay for things they get uniquely from you.
Build your hiring and other processes around the things that are uniquely you.

3. Supervisors build unique relationships that will drive either retention… or turnover.
Some employees stay for supervisors, some leave because of them, and some just avoid them.

The Seven Strategies

1. Hold supervisors accountable for achieving retention goals
It only makes sense to hold them as accountable for the human assets you entrust to them as you do the other assets – and for the targets they are on the hook to deliver.

2. Develop supervisors to build trust with their teams
Trust is the outcome of communication, recognition, development…and genuine caring. It’s also a reciprocal relationship that needs to be initiated by your managers and nurtured over time.

3. Narrow the front door to close the back door
New hires must come in the door already fully aligned with Who you are – your culture, attitudes, standards. HiringSmart, HiringSmart, HiringSmart…

4. Script employees’ first 90 days
First impressions are lasting. Invest time, energy and resources to ensure you get off on the right foot. Give ‘em a reason to feel good about their decision to join you, and to stay.

5. Challenge policies to ensure they drive retention
Blow the dust off old thinking and make sure your rules make it easy for the right people to want to stay. Remove or modify anything that causes a gap in the relationship.

6. Calculate turnover’s cost to galvanize retention as a core business issue
Dollars speak louder than numbers and percents in building any business case. Use any of the calculators commonly available on the web.

7. Drive retention from the top
Retention is a strategic issue, not an HR initiative. The Executive team defines what is important for the organization to focus on and achieve; it’s not important unless they make it so.

Pretty basic stuff; it reads like Management 101. But is it really worth putting an organization-wide push behind getting it right?

When you consider that turnover’s hidden cost (remember, it doesn’t appear anywhere as a line item in the P&L) is between 12% and 40% of pretax income (Pricewaterhouse Coopers) and that it depresses stock price of US corporations by 38% in just four high-turnover industries, it should get your attention.

Interested in doing your own math? Try this free calculator.

Hiring Myth #2

chartMyth #2: A solid resume and a crisp, focused and well-written cover letter define the best candidate.

Turnover may be costing you more than you think!

magnifying classUnsure how to respond when clients asked us the question, we did a little research of our own to understand how leading researchers and industry associations estimate the impact of employee turnover o...

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