Replacing members of staff is an expensive business. In industries like manufacturing where appropriate skills can be hard to come by, a high attrition rate could cost more than just cash. Mark Young explores the steps companies can take to hang on to their headcounts.
Nuts & bolts
In this article you can find out:
● A study from the Chartered Institute of Personnel and Development finds that one in four new employees leave within the first six months of beginning a new role; One in three within a year; and roughly half within two years
● Analysts IDC say the cost of a new recruit reaches 150% of the departing employee’s annual wages
● Recruitment company Hays has found that 85% of employees would be more likely to stay with an employer who offered flexible working
● Employees are increasingly looking to balance their own work/life schedules
● The Chartered Institute of Personnel and Development suggest keeping internal email addresses secret to ward off headhunters
Employee retention is a struggle almost all businesses face. A study from the Chartered Institute of Personnel and Development finds that one in four new employees leave within the first six months of beginning a new role; one in three within a year; and roughly half within two years.
Considering the cost of replacement – 150% of the departing employee’s annual wages, according to industry analysts IDC – this makes for bleak reading for company number crunchers.
Any firm that hasn’t given serious thought to the situation probably ought to just about now – after almost three years of fairly static workforce transition (where the worker has a say, that is) a study by retention consultancy and leaver surveyor and psychometric analysts Talent Drain suggests that 49 per cent of top performers are looking to move roles when the half-life of recession reaches a level where the economic world shows no threat of caving in upon itself once again.
Retaining talent is a challenge that’s all the more pertinent for those in manufacturing – an industry, as we are constantly told, which is suffering from a dearth of new available talent and faces an alarming skills shortage when a generation retires towards the end of this decade.
Some employee turnover is healthy for a business, though. It brings in fresh blood and, with it, new ideas and refreshed vigour for success. And if a senior member of staff leaves then there might be an opportunity to promote somebody within the business who is ready to make the step up. This might mean retaining talent within the business which could have otherwise left to seek the position they feel they deserve.
Gordon Barker, head of consultancy at retention specialist Talent Drain, points out: “If you’ve got an attrition rate of 20 per cent but it’s the bottom 20 per cent that are leaving, that’s a good thing.” The trick is hanging onto the right people, the best people ideally, or, at the very least, the ones you cannot afford to lose.
Case study – MANN & HUMMEL UK
Automotive supplier MANN+HUMMEL UK, employing 300 people, achieved a labour turnover rate of under one per cent last year. One of the key principles that has led to this feat has been a commitment to internal promotion which the company believes fortifies employee loyalty and focus. The entire management team, bar one, has held previous positions within the company.
In 2010 MHUK was awarded the ‘Investors in People’ Gold Standard, something achieved by only 2% of the companies who apply. This provides a benchmark of HR management strategies and practices for the company to follow. The company believes in employee empowerment and involved staff from all levels in a major new plant layout.
It also provided around 800 days of training for its employees last year and runs an Employee of the Quarter Programme.
Getting your house in order
Even where talent is available, there’s always competition for the very best. Barker likens the situation to buying a new house. “Two people decide they want the same one and they invariably go all out to gazump each other. Then someone ends up buying a house for half a million pounds which in reality is only worth £350,000.” Sometimes, you might just be better off with a new lick of paint and replacing the three-piece suite.
Ironically enough, Barker points out that retention begins with recruitment. In CIPD’s study, even those that left a role after the first year generally made the decision to do so quite soon after they started. Coupled with those costs of sourcing a new employee and readying them for work, it is important to ensure that the right candidate – one with staying power – is the one that’s recruited.
Therefore, CIPD recommends providing realistic job previews for prospective new employees so that they understand what sort of environment the company operates in and what will be expected of them.
CIPD says employees should feel that they are in a position to further their careers and where promotions are not feasible, sideway moves should be an option to maintain variability. Barker backs this sentiment. “Organisations need to have meaningful career conversations with talented employees,” he says. “And not so much short term, but longer ones – you need to know where your employees want to be in three, five, even eight years’ time. It might be in the next 12 or 18 months there’s not going to be a promotion but what you can be doing is developing skills and providing experiences which are aligned to where the employee wants to be longer term.
“You have to show that there is a long term value attached to staying with your organisation rather than just a quick win by moving to another firm for an immediate promotion.” Employees should also be able to have confidence in the security of their job. If they can’t, they will naturally be keeping at least one eye open for a move. Here, communication to pick up morale is the key. Barker maintains that very few people do research into the balance books of their organisation and fewer still would properly understand it if they did. That means the image of security that workers have about their organisation is primarily belief rather than evidence based. “That doesn’t mean companies should be dishonest in rocky times but it’s about communicating where you are doing well,” he says. “You have to make sure people are aware of successes and are talking about them and can see where that fits into the grand ambition.” CIPD also advises making line managers responsible for the retention rates within their own teams and included this as a metric within the managers’ appraisal process; providing employees with platforms to raise grievances to give them another option than leaving; and, in matters of dispute or where disciplinary action has to be taken, companies should always take care to ensure the individual concerned is being treated fairly and is seen to be too – this helps to avoid an ‘us against them’ mentality among the blue collar workers towards their white collared compatriots which can lead to discord and defectors.
On a rather more austere level, the organisation says companies should consider actively guarding against head-hunters by keeping internal email addresses secret and recommends refusing to work with agencies that have previously poached staff and making pacts with other companies to not upset one another’s respective applecarts.
Case study – Carl Zeiss UK
Cambridge based microscopy specialists Carl Zeiss has very high staff retention rates – the average employee service across the company is 25+ years and the average age is 50. Operations manager Daren Sheward puts this down to the company’s focus on retraining and re-educating staff and moving them across to different employees where it can.
“I’ve got an ageing workforce, but on the plus side I’ve got lots of experience,” he says. “We are very good at realising employee potential, and we rarely lose any employees, except to natural attrition.”
Case study – Constellation Europe
Wine bottling company Constellation Europe uses the seasonal nature of its business to its employees’ advantage by offering them a massive 12 weeks holiday each year, provided they are taken outside of key periods.
“The key objective is that the site capacity is matched to the demand placed on it; the secondary objective is to get the best work/life balance for our staff,” says manufacturing manager Richard Lloyd.
“It’s a pretty easy sales pitch, and we have excellent staff retention.”
Power to the people
In a recent survey by time management technology provider Amano, 68% of workers cited flexitime as a HR policy they would welcome within their organisation. Furthermore, research by recruitment company Hays has found that 85% of employees would be more likely to stay with an employer who offered flexible working.
Amano UK product and marketing director Matt Wheeler says the balance of power has shifted somewhat over the last decade from the employer towards the employee in terms of time management.
Workers are increasingly looking to take control of their own work and home life balances and empowerment to make one’s own decisions, Wheeler says, can be one of the best tools a company can offer in maintaining a happy workforce.
“These days, people are making more demands upon an employer to offer flexible working patterns to maintain different lifestyles,” he says. “In order to remain attractive to both existing and new employees, a company has to keep up with its peers and look to accommodate more family friendly policies. By enabling remote and flexible working schedules, businesses are able to tap into a larger geographic pool of talent and employees can be liberated from the tight restraints of nine-to-five schedules.” However, businesses should not have to be held to ransom – the number one priority is still to deliver the productivity needs of the business and that includes having the right people doing the right jobs at the right time. Amano thinks it can help satisfy both sides of the coin with its range of time management solutions which allows workers to ‘clock-in’ remotely and independently through various different means, including internet sites, mobile phone applications, landlines and software-as-a-service programmes. Managers can also set up automatic data reporting, which they can also dial-in remotely to access, to check on current staffing levels and whereabouts and can receive alarm notifications when levels go beyond a certain point. Employees are also able to manage all of their own holiday rotas autonomously, within the parameters of the business need and other employees’ requests.
“If you provide that empowerment but you maintain the control you enable people to make their own decisions while the job still gets done.”
Case study – KK Fine Foods
Leyla Edwards, founder and managing director of KK Fine Foods in Deeside, North Wales says the company’s average annual staff turnover of just two per cent is down to good communication, conveying progress and company direction clearly and regularly.
A recently initiated profit share scheme for the workers and a share option scheme for all employees who have been with the company for five years and over probably helps.
“We are all in it together; it’s a very democratic company,” says Leyla. “A happy workforce is essential to productivity.”