A Crash Course for Building Employee Retention 1

A Crash Course
for Building
Employee
Retention

Building Employee
Retention in Your
Company
 A Crash Course for Building Employee Retention 2

Introduction The ARTICLES

3 // The Ridiculously High Cost
There is nothing more disappointing than finding the Of Employee Turnover
right talent for a position, hiring them, developing
Employee retention is a bottom-line
them, grooming them, loving their work, and then
ROI problem. Here’s a look at its
hearing the dreaded words: I’m giving my notice. financial impact on your organization.

In the face of a growing talent shortage, few companies can afford 6 // The Talent War Ceasefire Is
to ignore strategies for employee retention. But how can we create Over (and What That Means
a magnetic and sticky culture that not only attracts candidates to to You)
us, but helps us hang on to the great talent we already have? We
need answers. A look at the current state of
employee retention and how you can
This collection of some of our most popular blog posts will offer prepare for the looming talent war.
you some constructive advice and actionable pointers on how you
can reduce voluntary turnover and build a culture of retention. 9 // Why Managers Fail To
Recognize Employee
Contributions
Leigh Branham, author of 7 Hidden
Reasons Employees Leave shares
strategies for helping managers
to be more successful in keeping
employees happy.

12 // 12 Surefire Tips to Reduce

Employee Turnover
Tips for companies to help build
retention.
 A Crash Course for Building Employee Retention
The Ridiculously High Cost
of Employee Turnover
By Darcy Jacobsen
“Inconceivable!”
That’s one of my favorite lines from the classic
movie, The Princess Bride, and I have to admit it’s
been running through my mind a lot over the past
few weeks, as we’ve been trying to calculate the
astronomical cost of employee turnover.
Even exceedingly conservative per-person
costs resulted in a shocking expense
associated with high turnover. The totals
dwarfed the cost of even the most robust
recognition program.
The source of my astonishment was the
creation of an infographic for our new
paper that shows the incredible costs
of turnover. (It’s called 5 Reasons You
Need Strategic Recognition). One might
think that an infographic like this would
be simple, but it turns out, as anyone
knows who has really tried to do it… the
cost of turnover is not an easy number to
calculate. We spent literally hours talking
over the numbers and calculations to make
sure that the end result would reflect
reality for our customers.
3
Every way we sliced the numbers, even with
exceedingly conservative (i.e., ridiculously
low) per-person costs resulted in a shocking
expense associated with high turnover. The
totals dwarfed the cost of even the most
robust recognition program. Programs
that hit industry benchmarks and cost 2%
of payroll spend wouldn’t hold a candle to
how much employee turnover is costing
companies. And when you consider
that those programs can boost retention
up to 31%, the business case for
recognition is astounding.
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 A Crash Course for Building Employee Retention 4

Creating this graphic was a real education

for me. So much work went into it that I
thought I would take a few minutes here to
walk you through how we got the calculation
that we did.

3 4 5
Here’s the final product:
Average Annual Cost to Replace Annual Loss of Talent
Salaries (@75% of salary) (@11% turnover)
1 2
Company with
10,000 Employees
Entry 770
people $17.3MM
Level $30K $22.5K

70%
Mid-
mgmt $52.5K
220
people
$11.6MM
$70K
20%

10% Senior 110

people $12.4MM
mgmt $150K $112.5K

$41.3MM
in bottom line turnover costs
1 Company Size: Our customers tend to range in size from 1,000 to 350,000 employees, therefore we figured 10,000 employees was a reasonable number.

2 Breakdown: Since many companies seem to break down at a 70/20/10% level, in terms of manager/employee ratio, we thought this was a safe bet for our ACME Average Company.

3 A
 verage Salaries: We had a look at the Bureau of Labor Statistics numbers and did some averaging and generalizing and arrived
at a conservative estimate of a $30/70/150K breakdown for salaries.

4 C
 ost to Replace: Here’s where it starts to get more complex. In our paper we noted that SHRM has estimated the cost to replace an employee at $3,500, which was the lowest estimate of 17
organizations surveyed, but we agree with experts who suggest that the cost to replace really does vary by role. Still, the cost to replace even a minimum wage employee, when you factor in time lost,
training time, interviewing and advertising investment, etc. is significant. It goes up exponentially when an exhaustive talent search is needed. In the end the estimate we thought captured the most
nuance was a chart published by the Jack Phillips ROI Institute. To save over-complication we averaged the costs into a 75% of annual salary turnover cost.

5 Annual Turnover %: While the US Labor Bureau reports average turnover costs at 38%, we thought that was a little excessive for our example. In their recent study of workplace psychology,
the American Psychology Association estimated turnover at the very best companies to be 11%. We thought that most companies would find the high cost at even a low 11% to be illuminating, co n ti n u e d >
so we chose that number.
 A Crash Course for Building Employee Retention
Then it was all over but the calculating. We
determined that if you had 10K employees
@ those given annual salaries, with a
cost to replace at 75% of salary, at an 11%
turnover rate, your annual loss would equal
$X, and in this case $X is a whopping
$41.3 million.
If that number seems impossibly high, and
your company has new recruits beating
down the doors so you spend little on re-
cruitment, note that even if everyone in the
company made entry level wages and cost
only $3,500 to replace, the turnover would
still run you $3 million annually. You can
see why I was blown away.
We determined that if you had 10K
employees @ those given annual salaries,
with a cost to replace at 75% of salary, at an
11% turnover rate, your annual loss would
equal $X, and in this case $X is a whopping
$41.3 million.
5
When you do the numbers this way—
substituting real metrics for our
estimates—for your company, even in
the most conservative manner possible, I
think you’ll be really surprised what talent
loss is costing you, even before you factor
in the intangibles. When you consider
that strategic recognition can boost
those retention numbers dramatically,
it’s amazing there are any companies out
there without programs. Yet according
to the latest Mood Tracker survey, 46%
of employees don’t feel they are being
recognized effectively.
I think somebody needs to send those
companies our infographic!
 A Crash Course for Building Employee Retention 6

The Talent War

Ceasefire is Over
By Darcy Jacobsen

The economy is recovering. That’s good news, right?

Um… right?? Well, yes! But most Human Resources
pros view rising employment data with very mixed
emotion, because as unemployment slowly ticks
down, recruitment can get more competitive, and
voluntary turnover rates begin to inch up. Employees
worry less for their job security, and top talent begins
to poke out of the foxhole and look around
for opportunities.

Employees worry less for their job security,
and top talent begins to poke out of the
foxhole and look around for opportunities.
And that is just what we are seeing. In other
words, if the economic recession offered
an armistice in the War for Talent— that
ceasefire is rapidly coming to an end.
Of course, employment numbers are
only a small part of the story. The War for
Talent is exactly that: a competition among
employers for the most skilled talent
available. There’s a reason it isn’t called
the War for Employees. That’s because
there is a growing shortage of highly-
skilled workers, which is independent of
unemployment among less skilled workers.
According to a 2012 report by the McKinsey
Global Institute, employers will face a 13%
shortage of highly skilled workers by 2020
–that is 38-40 million fewer skilled workers
than needed. In developing economies,
the shortage of educated workers could
be nearly 45 million workers. Conversely,
we will see an 11% oversupply of unskilled
workers around the globe. And according to
World at Work, at least 72% of companies
worldwide have already admitted that
finding skilled workers is a major problem.

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 A Crash Course for Building Employee Retention
This begs the question: “This begs the
question: How can you ensure that you are
able to hire and then retain all the skilled
and qualified workers you need, in the
face of fierce competition? Well, it helps
to consider what skilled employees are
looking for:”
• Competitive Base Salary
• Job Security
• Career Advancement & Growth
• A Convenient Work Location
• Learning & Development
Opportunities
• Flexibility
• Great Company Culture
• Robust Benefits
In light of that, here are some tactics you
might employ in 2013 to differentiate your
company and attract the talent you need.
Neglect your HR brand
at your peril.
1. Build Your HR Brand
Your company may have a great brand, but
do you have a great HR brand? Are people
attracted to your culture and dying to be
part of it? Maintaining an HR brand is more
than simply tacking recruitment ads onto
your corporate brand. It is about projecting
a positive reputation and communicating
that image of your company to current
employees and the prospective employee
pool. People have always been willing to eat
at McDonalds, and employee satisfaction
has always been high. But not many
people wanted to work at a place where
the term “McJob” was coined. When the
company started to manage its HR brand,
it jumped to #8 on the list of the Best
Multinational Companies to Work For. And
in 2011, when McDonald’s sought to hire
62,000 new workers, more than 1 million
people applied. Neglect your HR brand at
your peril.
7
2. Hire for the Right Fit
Just because the market is tough doesn’t
mean you should be desperate or lower
your standards. Hiring people who fit
your culture means they’ll be both more
productive and more likely to stick around.
3. Magnetize and
Manage Your Culture
The single best thing you can do to retain
top employees is to create a culture that
they don’t want to leave. The top 100 Best
companies to work for see 3% or fewer
of their employees leave voluntarily. Find
ways to create a great culture that reflects
values that your employees can relate to.
Then find ways to measure and manage
that culture.
co n ti n u e d >
 A Crash Course for Building Employee Retention
4. Think Outside the
Zip Code
Telecommuting and non-traditional work
groups have made the job market a global
one. According to a survey by KPMG, 71%
of companies believe that working across
borders has increased over the past 3 years
and 60% of companies have increased use
of virtual workspaces. Consider broadening
your search for the right candidates to
other geographic regions.
5. Train the Skills
you Need
Hiring for growth potential and developing
existing staff is becoming a tactic for
many companies. This segues nicely
with employees’ desire for career growth
and empowerment and can be a huge
statement of confidence in your employees
that will boost your culture.
The Talent War ceasefire is over. So now
that we’re back in the trenches, how do you
plan to fight the good fight?
8
6. Increase
Salaries
It may not always be an option, but
according to Manpower’s Talent Shortage
Survey, the “pay more” approach is
being implemented most often in China
and the U.S. Make sure that at the least,
compensation is at or just above the
averages for your area and industry.
7. Master the
Technology
Being on the cutting edge of technology is
critical to success when the competition
gets cutthroat. Use technology to source
and connect with prospective hires, and
then use it to manage your talent, recognize
and reward employees and measure your
culture. Getting a handle on big data is
necessary for everyone, but mastering it
and making it work for you can give you a
huge competitive advantage.
 A Crash Course for Building Employee Retention 9

Why Managers Fail to Recognize

Employee Contributions
By Leigh Branham, Guest Blogger

One of the most profound drivers of employee retention

is the relationship between employee and manager. Yet,
inexplicably, many managers still cannot seem to engage
in the behavior that has been proven to keep employees
happy and on board. Leigh Branham, author of “The 7
Hidden Reasons Employees Leave,” shares some wisdom
on why this might be, and how you can encourage
managers to help minimize voluntary turnover in
their departments.

After 20 years of researching the drivers of
employee engagement, I have concluded
that the mother lode of motivation come
from what I call the C-A-R Cycle
• Giving employees a Challenge
• Having them Achieve
• Making sure they are
promptly Recognized
Yet, sadly, about four out of every five
employee contributions go unrecognized,
according to at least one study. These
management errors of omission are
costly missed opportunities to pump
up engagement levels. So, it seems only
logical to try and understand why so many
managers fail to recognize. After reading
more than 100,000 verbatim comments
from surveys submitted in Best-Places-
to-Work competitions, I’ve identified 13
reasons managers fall short when it comes
to recognizing their people—each of which
is understandable, but unacceptable:
• They believe they are too busy to
take the time. This is usually a failure of
the culture that has either overloaded their
managers as doers rather than delegators
or, has somehow communicated to
managers that recognizing employees is
not an essential part of their job.
• They actually have the time, but
are not paying enough attention to the
employee’s performance to notice the
contribution. Many managers are simply
more task-focused than people-focused,
and have their heads down looking at
their to-do lists.
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A Crash Course for Building Employee Retention
• They believe “if you don’t hear from
me, it means you’re doing a good job.” I’ve
personally heard this one from more than
one manager. It’s an abdication of manager
responsibility in the guise of giving the
employee autonomy. And managers
should bear in mind what the renowned
psychologist William James once said:
“The deepest principal in human nature is
the craving to be appreciated.”
• They believe “employees shouldn’t
expect me to pat them on the back
all the time for just doing their jobs …
their paycheck should be enough.”
This perspective is quite common and
reveals a basic misunderstanding of
human psychology. On the contrary, the
pats on the back should be reserved for
acknowledging extra effort, not “for just
doing their jobs.”
• They are unsure about how best to
recognize, so they do nothing. This is easy
enough to understand; people tend not to
do things when they’re not exactly sure on
how to do them. But this one is also the
easiest to correct—by training managers
in the basic principles and how-to’s of
effective recognition.
• They never received much praise
or recognition themselves, so they
aren’t inclined to give it to others. Again,
understandable but not excusable. In fact,
many managers who practice recognition
most effectively do so because they know
what it’s like not to be recognized.
• They believe employees will think
they are phony and insincere if they
suddenly start praising them. It’s OK for a
manager to tell their direct reports they’ve
decided to start doling out praise when it’s
merited. The key is to notice and praise a
specific above-and-beyond contribution
and describe how much it meant to the
business, not just go around patting
people on the back and saying “you’re
doing a great job.”
10
• They are concerned that if they give
special recognition to some, others will
feel unfairly overlooked. Employees usually
know who deserves to be recognized and
who doesn’t. The mistake some managers
make is praising the team as a whole when
it was really one individual that carried the
ball, or singling out one person when it
was a team accomplishment.
• They harbor a fundamental
disrespect for some types of work or
workers. I once heard a manager say
“A monkey could do that job.” I’ve also
noticed a tendency to devalue employees
in support departments in companies that
are otherwise sales-or expertise-driven.
This is clearly a massive mistake; all jobs
and contributions are worthy of respect.
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 A Crash Course for Building Employee Retention
• They believe employees know they’re
replaceable and shouldn’t expect to receive
special treatment. This one is endemic to
the current economy. Too many leaders are
counting on a poor job market to motivate
employee loyalty. Are we really motivated
by “You should feel lucky to have a job”?
• They don’t believe they should
have to pay employees above market for
sustained high performance or provide
bonuses for special achievements. The fact
is only about a third of employees believe
their pay is linked to their performance.
The best employers pay a premium for
high performance.
• They believe the employees they
recognize will respond by asking for a raise.
Some employees will indeed ask for raises,
but that is a question that every manager
should expect and be prepared to discuss.
When I ask audiences of all ages “How
many of you get too much recognition?,”
not a hand goes up–ever.
• They don’t know enough about the
employees’ jobs to distinguish between
average and superior performance.
I’ve heard this one many times from
employees in describing their managers,
often in technical organizations. Managers
who can’t make distinctions between
average and superior performance
among their direct reports should not be
managing them.
There you have it—a baker’s dozen
reasons. Having presented and discussed
these at length with hundreds of
managers, I realize that many will remain
firm in their resistance to “giving too much
recognition” to employees whom they see
as “already too entitled,” or part of the
“trophy generation who got trophies for
just participating and expect more of the
same at work.” Yet, when I ask audiences
of all ages “How many of you get too much
recognition?,” not a hand goes up–ever.
11
I do not advocate giving more recognition
than people deserve. Those whose
expectation of recognition exceeds the
value they bring should receive the strong
dose of reality they need—in the form of
direct, fact-based feedback.
Questions to consider: Which of the
above reasons, if any, do you believe
are justifiable? Which do you believe
present the biggest obstacles to employee
engagement? What should companies
do to address the beliefs inherent in
these reasons?
Leigh Branham is Founder and Principal
of Keeping the People, Inc., which helps
companies analyze the root causes of
employee disengagement and turnover, then
develop strategies for becoming better places
to work. He is the author of The 7 Hidden
Reasons Employees Leave and Re-Engage:
How America’s Best Places to Work Inspire
Extra Effort in Extraordinary Times.
 A Crash Course for Building Employee Retention
12 Surefire Tips to Reduce
Employee Turnover
By Darcy Jacobsen
How would you feel about a higher retention rate
in your organization? I don’t know about you, but I
can’t think of a single HR exec I know who would turn
that down. In fact, employee retention is without a
doubt one of the most intense challenges facing most
human resources departments.
Sadly, with the improving economy and
the coming talent crunches due to retiring
boomers, retention rates promise only to
get worse. Already, turnover rates for all
industries hover around 13%–and those
rates are far higher in the service sector,
where the average is 30%, according
to SHRM. The retention crisis will
undoubtedly intensify as the talent war
rages and Millennials (who are notorious
for job hopping) become a bigger part of
the workforce.
1. Hire the right people
2. Fire people who
With that in mind, here are a dozen tips on
how you can slow down the revolving door
at your company. Some may be familiar,
some may be new to you, but all should
help you inspire long-term loyalty from
your best employees.
12
The best way to ensure employees don’t
leave you is to make sure you are hiring the
right employees to begin with. Define the
role clearly—both to yourself and to the
candidates. And then be absolutely sure
the candidate is a fit not only for it, but for
your company culture.
don’t fit
As the old saying goes, “a stitch in time,
saves nine.” The same goes for cutting
employees loose when necessary.
Sometimes even when you follow the
advice above, you get an employee who—
no matter what you try to do—just doesn’t
fit. And, no matter how effective they might
be at their actual work, an employee who is
a bad fit is bad for your culture, and that
creates “culture debt.” They will do more
damage than good by poisoning the well of
your company. Cut them loose.
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A Crash Course for Building Employee Retention
3. Keep compensation 5. Recognize and
and benefits current reward employees
Be sure that you are paying employees the
fair going wage for their work (or better)
and offer them competitive benefits, or—
really—who can blame them for ditching
you? This might seem like a no brainer but
you’d be surprised how few companies
offer raises that keep up with an employee’s
development and actual rising worth.
6. Offer
4. Encourage
generosity and
gratitude
Encourage pro-social behavior in your
employees. When they are given the
opportunity to connect with one another
through acts of generosity and the
expression of gratitude, employees will
be healthier, happier, and less likely to
fly the coop. And by encouraging them
to be on the lookout for good behaviors
to commend, you give people a sense of
ownership of the company.
Show your employees they are valued and
appreciated by offering them real-time
recognition that celebrates their successes
and their efforts. Make it specific, social
and supported by tangible reward, and you,
too, will be rewarded—with their loyalty.
flexibility
Today’s employees crave a flexible life/work
balance. That impacts retention directly. In
fact, a Boston College Center for Work &
Family study found that 76% of managers
and 80% of employees indicated that
flexible work arrangements had positive
effects on retention. And more and more
companies know it. That means, if you’re
not offering employees flexibility around
work hours and locations, they might easily
leave you for someone who will.
13
7. Pay attention to
engagement
This one sounds obvious, but for too many
leaders interest in engagement is limited
to the results of engagement surveys. It’s
not enough simply to run an engagement
survey once a year. You need save most of
your energy to take action based on the
results and you need to work to build a
culture of engagement in your company all
year long.
8. Prioritize employee
happiness
Happiness may sound a bit soft and
squishy to many execs, but the numbers
behind it are anything but. Employee
happiness is a key indicator of job
satisfaction, absenteeism and alignment
with values–just for starters. Investing in
the happiness of your employees will pay
dividends in engagement, productivity and
yes, retention.
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A Crash Course for Building Employee Retention
9. Make opportunities
for development
and growth
Employees place HUGE value on
opportunities for growth. In fact, a
recent Cornerstone survey drew a direct
connection between lack of development
opportunity and high turnover intentions.
If you aren’t developing your employees
then you aren’t investing in them. And if
you aren’t investing in them, why should
they stay with you?
10. Clean up
performance
reviews
Our most recent Workforce Mood Tracker
survey painted a frankly dismal picture of
how employees feel about performance
reviews. Only 49 percent of them find
reviews to be accurate, and only 47 percent
find them to be motivating. Performance
reviews offer a prime opportunity for a
big win to increase trust and fortify your
relationship with employees. Improve
performance management by overhauling
reviews, and watch employee trust and
satisfaction grow.
14
11. Provide an
inclusive vision
One key factor in employee engagement
and happiness, according to experts, is to
provide them with a sense of purpose and
meaning in their work. Offer employees
a strong vision and goals for their work
and increase their sense of belonging and
loyalty to your organization.
12. Demonstrate and
cultivate respect
Finally, don’t discount respect when it
comes to creating a magnetic culture.
In fact, in one 2012 study, respect in the
workplace was revealed to be a key factor
in voluntary turnover. Find ways to cultivate
and nurture respect in your workplace and
it will pay off in higher retention.
Use these tips to help build a culture in your
organization that will keep your turnover
rates low, and your best employees on
board and productive for years to come.
 A Crash Course for Building Employee Retention 15

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