Now That I'Ve Got Them, How Do I Keep Them?

by Don Phin

Employee retention is an issue that affects every company. A host of factors have played a role in retention in recent years: historically low unemployment rates, the dot-com revolution, increased worker mobility, the expansion of the home-based business market, and increased emphasis on personal growth and self-awareness. It should come as no surprise that the strategies a company must use to attract and retain quality employees are the same strategies necessary for creating a productive workforce with lowered risk management exposures.

Let's deal with the bottom line first. Most employees are looking for a fair day's pay for a fair day's work. Based on numerous surveys and first-hand experience, once you pay more than the 50^th percentile in salary, the issue of a low wage falls by the wayside. Today's savvy employer asks, 'How much can I afford to pay?' rather than 'How little can I get away with paying?' To attract high-quality engineers, for example, a company may have to pay as much as the 90^th percentile for that position.

Similarly, but at the opposite end of the spectrum, many traditionally minimum-wage employers are realizing that by paying above the norm, they attract as well as retain, quality employees. For example, In-N-Out Burgers, a very successful privately owned chain in Southern California, pays $1.50 an hour above the norm. This automatically defines its employees as being special. The company can pick and choose among an enormous candidate pool, in large part because of its willingness to pay more. It also keeps its employees far longer than its competitors. In my experience, companies that focus on how little they can pay people end up getting employees who work as little as they can to keep from getting fired.

While we're on the subject of money, do you know the real cost of employee turnover? Have you ever benchmarked it? Again, according to both surveys and personal experience, the cost of replacing an employee is anywhere from one-half their annual salary to as much as two or three times their annual salary at the executive level. Figure in the cost of lost productivity, the potential loss of customers and customer relationships, the loss of knowledge, the cost of spending time and money recruiting new employee, the cost of orientation and training - the list goes on. Do your best to get a grasp on how turnover is affecting your profits. Once you have a benchmark, you can then determine whether or not your strategies are producing the desired results.

Do you remember Abraham Maslow's hierarchy of needs from your high school or college introductory psychology classes? Maslow's theory states that depending on a person's socioeconomic status, they have different motivational drives. In ascending order these drives are: survival, acceptance, growth, and self-actualization. For example, the low-wage earner is focused on economic survival, while the high-earning executive is focused on self-actualization. While there are motivating factors that resonate throughout the different socioeconomic levels, a one-strategy-fits-all approach probably won't work.

I asked one particularly insightful CEO how he deals with his minimum-wage employees. He said, 'The best thing my managers and I can do is to acknowledge them.' This is a brilliant insight. Acknowledgement fulfills peoples' need for acceptance and is the least expensive retention strategy in any arsenal. Individuals will continue to work for your company as long doing so makes them feel good about themselves.

Employers often ask me, 'What should I do for my workers?' I always suggest they ask their employees the same question. For example, the last thing you want to do is increase everybody's salary if what they really want is a reduction in work hours. Don't assume you know what people want. Ask them!

Today's employee isn't loyal to your company; they're loyal to their career, their project, and/or their team. No matter how great your employees may be, they aren't going to enjoy working for your company unless they're surrounded by others who share their desire to excel.

Do your employees have the skills and character to be trustworthy? Are their career goals in alignment with corporate ones? Are they able to communicate through dialogue and break past fear? Are they committed to working at their full potential while maintaining a sense of personal balance?

Today's employee doesn't think of their career in static terms. They know they'll constantly have to change and grow. To what degree are you helping their career prospects?

Who are your real competitors? Legal and CPA firms compete with dot-coms and other corporations. Carpet-cleaning entities compete with pesticide companies, restaurants compete with fast-food chains, and so on. Look outside your immediate circle of influence for ideas and strategies when it comes to employee retention.

To what degree are you helping your employees manage change? To what degree are you helping them to become better learners? To what degree are you instilling them with a sense of leadership?

According to Spencer Johnson's book 'Who Moved My Cheese?,' today's workers fear change more than anything else. How do you embrace the notion of change and celebrate it as it occurs? Are your workers getting the training they need to produce for you, as well as to increase their value in the marketplace? In today's learning economy, you should consider spending as much as 5% of your overhead on training, particularly in the area of new technology. We also have to train people in high-touch skills - how to build relationships.

The notion of leadership has changed. Today's business owner/executive has to be less concerned with creating followers and more interested in building a team of leaders. Yesterday's notion of control in the workplace has met its demise. You can't control people into staying; you must empower them to do so.

Some positions have a high rate of turnover no matter what - for example, low-paying jobs such as messenger or janitor. Rather than putting these people on your payroll, chances are you'd be better served by simply outsourcing the function.

On the other hand, many critical job functions also have a high turnover. Computer programmers and network administrators come to mind. These workers are in such high demand they seem capable of hopping from job to job, with a raise and a promotion at each step of the way. One company president complained that as soon as his engineers became certified in the SAP process, which occurred at his company's expense, they were immediately recruited by a new employer. Many others simply open up their own consulting practices.

If your employees are acting as if they're independent contractors, then you should embrace that reality and build flexibility into your relationships. Work with a professional employer organization, employee leasing firm, or some other entity that will allow these workers to be consultants to your firm, but with the added flexibility of performing services for other companies, too. The cost of this flexibility may be much less than losing your entire investment in the employee's learning and training curve. Just make sure that any employee you treat as an independent contractor has their own business location, license, business cards, and other clients, or that you're hiring them through an existing entity.

Employee retention is becoming ever more crucial to the success of any organization. Only your focused effort will make a difference. Begin by understanding the costs surrounding retention and turnover, and then try to implement no more than three programs at one time to turn things around. Launch these programs only after getting employees' input, and make sure to get feedback on program effectiveness.