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I Said it was the Money; But I Lied UPDATED Oct 2007

Written by: Jennifer Loftus

Article Overview: Same topic as the original, with data and interpretations reflecting the results from 2007.

I Said it was the Money; But I Lied UPDATED Oct 2007

Recruitment and retention of employees in general, and key talent in particular, becomes more difficult with each passing year. Employees with desired skills, competencies, and talents are in the driver’s seat. The Bureau of Labor Statistics (B–LS) estimates that the labor supply will grow only 10 percent between 2004 and 2014. In addition, the 55 and over workforce will grow faster than any other age group, eventually comprising 21.2% of the workforce in 2014. The number of 25-to-54-year-old workers will decline to 65.2% of the workforce in 2014. These factors all point to a predicted worker shortage in the coming years. To further compound the situation, the BLS pegs the seasonally adjusted unemployment rate at 4.7 percent in September 2007, which mirrors unemployment levels seen throughout 2006 and 2007.

These demographic trends and current economic realities make effective retention techniques imperative for all organizations. A satisfied and motivated workforce enables an organization to succeed in difficult economic scenarios.

WHAT DO EMPLOYEES WANT?

To find out what employees want from their employer, simply ask them. Many employees, especially “star” or key employees, are willing to share their thoughts, concerns, and ideas with those who will listen. In addition to learning what employees desire from their employment relationship, listening to employees will enhance employee morale and commitment when workers sense the organization is taking an interest in them. Employers can discover both the positive and negative aspects of the organization by listening to employees. These discoveries can provide impetus for investigation and, if appropriate, positive change.

Companies can explore employees’ points of view via:

• Opinion surveys,
• Focus groups,
• Town hall meetings,
• Initial impressions (surveys of new employees 30 to 60 days into the employment relationship),
• Surveys of employees who have transferred between departments or divisions,
• Surveys of “non-hired recruits” (employees who were offered a position at an organization but declined it), and
• Exit interviews.

With the exception of exit interviews, these mechanisms for increased communication come with a caveat. If an organization cannot treat findings respectfully, seriously, and confidentially, and then demonstrable action, employees may construe the survey process as distrustful. Declining employee morale can result. Employees need to receive some feedback, even if it is management saying that although they hear employees, they cannot take action now because of fiscal, legal, economic, or other constraints.

SHOULD WE WAIT?

Undoubtedly everyone has heard that retaining an employee is less costly than finding a new one. Addressing the retention question should not start when an employees tenders his / her resignation. Rather, active employee retention should begin on day 1. Engaging orientation programs, family involvement in organizational events throughout the employee’s career, and constant communication and positive feedback are all essential to keeping all employees as excited as when they first came for an interview.

Formally surveying your new employees 30 to 60 days into the employment relationship allows you to discover how the organization appears to new employees, identify areas for organizational improvement, and ensure a good fit between the employee and the job. If the employee and the job don’t fit together as well as was hoped for during the recruitment process, the organization still has the opportunity to find a better suited position for the employee and prevent undesired turnover. Talent remains in the organization, turnover costs drop, and the employee feels appreciated.

HOW CAN EXIT INTERVIEWS HELP?

Employee turnover often ranges from 10 percent to 150 percent, impacted by factors including the organization’s industry and unique culture. Because employees leave organizations, it makes sense to capture as much information as possible from them before they depart. They may be less hesitant than current employees to speak the truth on organizational issues. Their exposure to other organizations may provide them with additional insights that could be valuable to the organization they are leaving.

Exit interviews help organizations to continuously improve their systems and processes. Conducting them over a period of time facilitates trend analyses. If change is made to an organization’s systems, and corresponding feedback on the systems becomes positive, exit interview data then becomes a valuable tool in demonstrating the program’s value and return on investment (ROI).

Just what is the cost of turnover? Conservative estimates from the Society for Human Resource Management (SHRM) place the cost of turnover at 50% of an employee’s annual salary. This figure can easily skyrocket to 100, or even 300 percent, of an employee’s annual salary when considering the four cost components of employee turnover:

• Cost to terminate,
• Cost per replacement hire,
• Vacancy cost, and
• Learning curve loss.

Surely every organization would rather invest these funds in the organization and its employees, rather than have the dollars hit the bottom line as a subtle but large cost with little, if any, positive return.

Exit interviews encompass a number of logistical issues:

• Who should do the interview? Human resources, the employee’s manager, a neutral third party, or a combination approach?
• When should it be done? On the employee’s last day, during his/her last week, within a month of termination, or a combination approach?
• How should data be captured? Rating scales, forced rankings, open-ended questions, or a combination approach?

When designing an exit interview system, there is no single best model to follow. The organization’s culture, the skills of the workforce being surveyed, and any potential language barriers by non-fluent English-speaking employees drive the best system for the organization. In general, a combination approach to all three logistical issues listed above tends to work best. Capturing consistent, reliable data from former employees still is the primary consideration. Multiple data sources achieve this goal.

When using exit interviews, there are several concerns that should be addressed, including respondent honesty, financial and temporal costs, and management response.

Face-to-face exit interview effectiveness hinges on the relationship between the employee and interviewer. While an employee’s manager is best positioned to understand operational concerns, an employee may hesitate to provide truthful information for fear of harming future employment opportunities. A neutral third party, such as an HR professional, may encourage employee candor. Outsourcing the entire process, and truly keeping individual data confidential, provides the greatest opportunity for employees to speak freely. Using a combination of these methods, and then correlating findings, highlights which approach generates information with the highest ROI.

Exit interviews generate dollar and time costs. Financial costs include printing and distributing questionnaires, website development fees, or the fees of an outsourced vendor. Conducting the process in-house takes time from both parties’ days. If the information generated is not perceived as adding value, the hours spent with each terminated employee may be better spent on activities with a higher ROI.

Another cost to consider is that of not discovering and addressing critical organizational issues. While not every issue has an easy fix, time and money spent addressing perceived problems may, after a cost/benefit analysis, be less than the cost of continued turnover.

Management response to exit interview findings is another concern. If management chooses not to address discoveries unearthed during exit interviews, lower employee morale may result. Employees and former employees often keep in touch. Word can spread about the impact of employee comments on organizational change. Without some management action, time, money, and effort spent in gathering data may cause a negative reaction from current employees. It may be better not to solicit feedback than to pay lip service to the process.

WHAT DRIVES TURNOVER?

Astron Solutions has tracked exit interview data for a number of organizations since 1999. As of September 1, 2007, the exit interview normative database contains responses from approximately 8,300 employees in all position levels nationwide. A variety of industries are represented, although the majority of data represent healthcare and non-profit organizations. The normative database is updated quarterly with newly received data.

The data collected from each organization’s former employees is analyzed using unique demographic data. While some use analysis factors such as age and termination status, most find job title, department, supervisor, and, for multi-facility organizations, work location to be most valuable. These factors are not universally transferable between organizations. Statistically speaking, breaking the overall database down by age, years of service, or other universal factor is not sound, given the relatively small sample size of each.

Future analyses may address the distinctions in findings, if any, between top, average, and poor performers. Currently, this data is not tracked due to two factors:

• Administrative/time constraints on gathering this information, and
• Organizations’ lack of confidence in their performance management tools to make accurate, viable distinctions between performance levels.

The first question asked of former employees is what their primary reason is for leaving the organization. Employees’ primary reasons for leaving are:

• Miscellaneous, or “life happens,”
• Change of career objectives,
• Dissatisfaction with supervisor,
• Relocation,
• Work hours, and
• Higher salary.

Other reasons, including retirement, lack of advancement, returning to school, and co-workers, make up considerably smaller portions of the total.

The term “miscellaneous” appears deceptively easy to disregard. This factor, more appropriately referred to as “life happens,” captures a whole host reasons heavily weighted toward work/life balance issues. Respondents in this category often cite reasons such as the birth of a first, second, third, or even fourth child, the desire to be a stay-at-home mom, the need to be a stay-at-home caretaker for an elderly parent or parents, physical illness, lack of babysitters, and lack of transportation to or from work. While these issues are outside the scope of an organization’s day-to-day business activities, family-friendly benefits, flexible scheduling, work/life balance initiatives, and certain voluntary benefits programs may help to stem this source of turnover.

Managers may think that if a certain employee isn’t given a 10 percent or 20 percent increase in base pay, he / she will surely be lost to the competition. Why then, is higher pay cited by only 7.4 percent of employees as their primary reason for leaving? Generally, employees will be neutral about their pay and benefits, at best. Pay may drive someone to leave an organization, but it will not retain someone for very long in the presence of other factors. Pay also serves as an excellent scapegoat for leaving a job. Pay takes the human element out of the equation. Pay doesn’t reflect poorly on the employee’s manager. Pay doesn’t burn bridges. Few individuals would not enjoy the prospect of making more each week.

THE RATING GAME

Former employees are presented questions on HR programs, the work environment, the employee’s department, and his / her supervisor. A 1 to 3 rating scale is used, with 1 meaning the item “does not meet my expectations,” 2 means the item “meets my expectations,” and 3 equates with “exceeds my expectations.”

Since 1999, respondents consistently rank a number of items highly. The flexibility of employees’ work schedules, managers’ provision of accurate position information during the interview process, and managers being qualified for their positions are all rated 2.4, the highest rating of all survey questions. The organization’s overall concern with customer service also is rated 2.4. Other high ranking items include the supplies and equipment provided to do the job, and the degree of teamwork and cooperation among co-workers, both rated a 2.3.

Conversely, former employees consistently rate a number of survey elements lower. Advancement opportunities are rated 1.9, the lowest of all survey elements. Average ratings of 1.9 also are given to growth and development opportunities provided, departmental communications, top management’s responsiveness to issues raised as concerns by employees, the supervisor’s ability to coach employees to improvement, and regular employee/supervisor meetings.

ETHICAL QUESTIONS

Former employees are asked another series of questions focusing on the prevalence of illegal and/or unethical activities occurring in the organization:

• 4.4 percent of respondents say they were personally asked to do something illegal at work.
• 9.7 percent report seeing others being asked to do something illegal at work.
• 15.8 percent report being aware of any employee violating the organization’s Code of Ethics or Code of Conduct.

The details provided by respondents cover a wide variety of activities, including taking illegal drugs while at work, enduring sexual harassment, falsifying medical records, and consuming food and beverages directly from production facilities.

It is difficult for an organization to accept that these types of activities may be occurring. Confidential exit interview data provides a starting point for investigating potential issues and, if appropriate, implementing corrective action and new procedures. Current employees will undoubtedly be thankful for positive change.

WHERE ARE EMPLOYEES GOING?

Survey respondents are asked if their new position is with a competitor organization. Some 72.1 percent of respondents are, in fact, moving to organizations that are considered non-competitors of their former employer. This should not be surprising, given that the largest group of employees leave their organization primarily because of changing career objectives.

SHORTER JOB HUNTS

When survey respondents were asked how long their job search took, 50.8 percent said that it took them one to three months to find a new position. Another 21.3 percent said it took four to six months. Only 12.6 percent took more than one year to find a new position.

Over time, this trend of short job searches has been increasing. With less time to react to employees’ dissatisfaction with their current work relationship, it is imperative for organizations to implement proactive, positive changes toward becoming an employer and workplace of choice.

THE EMPLOYEE WORK EXPERIENCE

When asked whether employees found their overall work experience to be positive, negative, or neutral, 59.9 percent report positive. Another 23.6 percent found it to be neutral.

Respondents were asked whether they would return to work at the organization in the future, and 53.8 percent report they would do so. Another 28.0 percent indicate they would return under certain circumstances. These conditions typically focus on having a different supervisor, working in a different department, or working a different shift.

WHAT TO DO

Ask any HR professional what the best method for retaining employees is, and you will receive a plethora of responses. High base compensation, competitive benefits packages, and trendy benefits such as telecommuting, casual dress, and concierge services often float to the top of the list. Certainly a well-structured and clearly communicated total remuneration package should be in place. Without it, becoming an employer of choice is an uphill task.

In reading respondents’ answers to open-ended narrative questions, it’s clear that employees:
• Want to be part of active organizational communication,
• Need their ideas, concerns, and observations to be heard and responded to in some manner,
• Want to know what’s happening in the organization,
• Desire continual performance feedback, and
• Want to see their managers on a regular basis.





Personal growth, development, and career advancement within an organization are also important elements of employee retention. A full-day orientation, rather than a 10-minute introduction, goes a long way toward retaining employees. Corning Glass found that 69 percent of employees are likely to still work there three years after experiencing a positive orientation. Devices such as internal organizational certification programs, dual-career progression ladders, and career/competency matrices address growth and development and advancement needs simultaneously.

Identify your organization’s key employees. Ask them about their views on their employment relationship. Investigate some or all of the retention issues and solutions presented here to determine if there is an appropriate fit for your organization. Positive action now helps prevent or reduce undesired turnover and retains those employees critical to your organization’s success.

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Article Tags: bls, bureau of labor, bureau of labor statistics, demographic trends, discoveries, economic realities, economic scenarios, employee morale, employment relationship, focus groups, impetus, initial impressions, negative aspects, opinion surveys, recruitment and retention, skills competencies, town hall meetings, unemployment levels, unemployment rate, worker shortage



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