Now more than ever it is important to understand what keeps people working and doing their best for the organization. While the current economic situation has created tough times for businesses, it has also created one of the highest unemployment rates in decades. However, there is a misnomer related to today's high unemployment rates, and that is that people will not leave their organization because it is too difficult to find a job.
The fact is that talented people can find a job anywhere. One of the ways to lose talented workers is through passive recruiting. This is a process where companies who are hiring (and there are still plenty of them) are vigorously recruiting talent who are not looking for another job. For all intents and purposes, these employees are happy with their current company and satisfied to have a good job. The recruiting company approaches these people offering more money, better working conditions, more benefits, higher status, etc.
One of the most important tasks ahead of you is to keep the existing workforce engaged and productive. To accomplish this when people are anxious about the future of the organization or the prospect of being the next to go, it is a matter of showing your employees that you value them and their loyalty and that they are not just a commodity.
You not only want to keep them, but you also want to motivate and inspire them to perform exceptionally for the organization. Pat Galagan, editor-at-large for the American Society for Training and Development (ASTD), had this to say in the March issue of Economy Watch: "People are critical to the success of every organization. The leaders and organizations that adopt the smartest strategies for attracting and retaining their key talent will survive this economic crisis and be in a prime position to come out of it poised to move ahead of their competition."
Employee turnover is a serious matter. It is not only costly to the organization, but it also creates low morale and serious talent gaps. You should be measuring your turnover rate. Anything above 5 percent should be of great concern. You can also calculate your retention rate. However, the retention rate alone can be misleading. For example, if you hire 100 people at the beginning of the month and 10 people leave at the end of the month, your retention rate is 90 percent. The formula for calculating retention is:
In this example, the retention rate looks excellent. It appears that you have lost only 10 employees. But what if you hired 50 employees after the first day of the month and 40 of them left before the end of the month? You will get a truer picture of employee attrition if you measure turnover. The formula for calculating turnover is:
In this example, even though your retention rate is 90 percent, your turnover rate is 50 percent.
However, measuring the retention and the turnover rate still does not tell the whole story. Consider examining the voluntary vs. the involuntary turnover. In order to reduce turnover, you must have a strong understanding of how many people are leaving voluntarily. Only then can you take action to reduce the turnover rate. In the above example, of the 50 employees who left the company, 39 left as a result of permanent layoffs and one was fired for violation of company policy. The remaining 10 were recruited away by the competition. Below is the formula for calculating voluntary turnover.
Calculating your turnover rate and understanding why employees leave is critical to retaining your top talent. The following are steps that you can take to create an organizational culture that contributes to talent retention:
What does your company do to try to retain right-fit talent? What does your company do to reduce voluntary turnover? Or, what doesn't your company do?