KEY POINTS:
High levels of staff turnover being experienced by employers up and down the country could come down to hiring the wrong people in the first place, says one seasoned industry figure.
Martin Price, director of Online Executive Search, says there are plenty of companies where high staff turnover
has got on top of them and that the "tail is wagging the dog".
His firm has just completed a survey of 1473 organisations with 65 staff or more. From the responses of 319 firms, things don't look good for hard-pressed employers struggling to attract and retain staff.
Price says the results of his company's survey shows that just as many people are leaving their jobs within the delicate first year as from year two onwards.
"Companies who are experiencing high turnover need to look hard at how they recruit people and induct them into the company," says Price.
"If companies are losing as many staff in the first 12 months as in subsequent years then it is a real challenge for the company and costly."
He says with staff turnover running at 21 per cent among those companies who took part in the survey and staff churn costing 50 per cent to 300 per cent of base salary per person leaving (depending on the job), staff turnover has become a significant financial and productivity issue for employers.
"Many employers are burning cash as a result of high staff turnover in the first year of employment, as staff are leaving before they have become productive and before the costs of recruitment and training have seen a return on this investment," says Price.
"The majority of this cost is lost productivity while new employees take time to get up to speed. Then there are the recruitment, training and induction costs of hiring new employees.
"For employers, there are tremendous financial opportunities in reducing and controlling staff turnover."
Price says that for medium to large employers, it is common to see a return on investment of 50 per cent to 400 per cent a year.
"Investments that return at this level are huge in comparison to most other investment choices open to organisations," says Price.
"The business case and accounting for the investment is no different in methodology or robustness to that carried out by the marketing manager to justify the cost of launching a new product or the IT manager to justify the cost of installing a new system.
"A medium to large size company has a sales team of 50 people. They know that new or poor sales reps generate $700,000 gross margin a year, satisfactory reps generate $1 million and excellent reps generate $1.3 million.
"Companies know that, on average, it takes new reps 18 months to begin making the 'satisfactory' $1 million gross margin level and that on average it takes three years' employment for reps to reach the 'excellent' level.
"Suppose the company is doing a great job with its recruitment and retention and has only 10 per cent staff turnover among its reps in the first 18 months.
"Its productivity loss is only $1.5 million gross margin. However, suppose the company is struggling a bit with turnover among its sales team and 30 per cent of the sales force leave within 18 months. Its productivity loss associated with this turnover is $4.5 million gross margin."
That is why investments in better recruitment and retention can make such a significant financial difference.
"They are low-cost, low-risk investments for a big return," says Price.
He recommends companies develop a 12-month plan on how they are going to recruit and, more importantly, retain those people.
"You don't have to do a five-year plan or a 10-year plan," says Price.
"Companies need a robust 12-month plan in how they are going to recruit and retain. Just like they would do in any other part of their business, such as their financial forecasts.
"So when people leave they know where they are going to find the candidates they need. They should have things in place to encourage people to enjoy their job and stay, and then the dog begins to wag the tail again.
"Because if you don't do anything you then end up being a fire fighter - reacting all the time, saying, 'Oh heck, another one has left - what am I going to do now?"'
To find out what is going on within a firm, Price recommends that staff have an exit interview so managers can find out why a person is leaving. An employee culture and commitment survey is also worth doing.
"It helps managers understand what their team's hot buttons are," says Price. "And then you can compare that with your exit survey - then you look for where the gaps are and see what you can do to close the gap."
He says it is important that staff understand how they fit into the company. Among the ways to deal with that is to have regular communications with staff, using feedback systems, weekly reviews and frequent team meetings.
"An annual performance review is not frequent enough," says Price. "It needs to be woven into your weekly and informal meetings with your staff.#"Not a bossy and instructional meeting - but a meeting where the managers and staff all know what is going on. To communicate what is happening in the market, with the company and so on."
The real opportunity for employers is that the range of turnover within most industry sectors is "huge".
"In retail, it's 12 per cent to 114 per cent and, in banking and finance, it's 6 per cent to 55 per cent.#"In other words, companies can beat their competitors with better recruitment and retention."
Investing in high-quality recruitment, induction and culture development programmes will significantly reduce turnover in the employees' first year and increase the productivity-per-employee - given that most employees are more productive in their second and subsequent years of work for their existing employer.
Price's survey also quashes a few myths widely held by employers. Namely that the information technology sector - long considered a hotspot for high rates of turnover, is directly comparable with other professional support functions, such as accounting and human resources.
"Equally surprising is that rates of turnover among the legal profession is the third highest in the survey, just ahead of the customer service jobs," says Price. "Law firms and corporate law departments have a challenge on their hands.
"Against common wisdom, the rate of turnover in sales jobs is relatively low at 14 per cent.
"Trades and technicians and engineering jobs have the lowest rates of turnover, reinforcing a long-held perception that technical professionals prefer to further their expertise in their current environment.
"Perhaps, compared to others, this group of employees are more focused on enjoying the challenge of technology and are less concerned about the work environment."
Ultimately, says Price, when good staff leave it makes the people left behind wonder what is going on.
