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Employee Retention – The Red Headed Stepchild

5,016 Comments / Business / By

Full disclosure, I should start by saying that I do actually have a red-headed stepchild, but that’s by the way.

Agencies, human resources, line managers; we all tend to ignore employee retention as a cost of doing business until the issue is on fire somewhere.

And yet I can guarantee 110% that with such high costs involved in recruiting staff, the cheapest way to recruit is to retain. Think about it, retain your staff and incur a cost of zero.

Nada.

Zilch.

Squat.

Bupkus.

Diddly over.

And yet, we wait until the issue is on fire.

A few examples to get you thinking.

Example 1 – agency offers a 6 month candidate placement warranty. Candidate goes away at 5 months and 15 days, agency needs to find a replacement. On fire.

Example 2 – 2 people resign to the same manager on the same day. No biggie. 2 more the following day. On fire for the line manager.

Example 3 – See above. Add one day, it’s now an issue for Human Resources. On fire for HR.

Example 4 – Ongoing resignations from the same department. This one tends to be an issue to HR as they keep filling the same job over and over and over again.

So What Are The Costs?

In an earlier article I investigated these costs in more detail (https://www.gateway-staffing.com/2018/05/the-hidden-costs-of-recruiting/) but if we go to a study done by the Research and Employment Confederation in the UK in 2017 we not only see the staggering costs, but also how completely oblivious many HR Professionals are on the issue.

The issue is twofold.

One, WHAT are retention rates, particularly up to and beyond 12 and 24 months?

Two, what are costs associated with replacing.

Many companies proudly note a 24 month retention rate of 75%. This, however, represents a 25% failure rate. Alarmingly, the same REC report says that 85% of HR Managers admit to making a bad hire (http://www.hrmagazine.co.uk/hr-most-influential/profile/firms-failing-to-make-the-right-hire-for-two-out-of-five-roles) and that the cost of replacing an employee is up to 3X the salary. 39% think that interviewing and assessment processes need to be improved.

Josh Bersin is an industry leader in HR practises and this article (https://www.linkedin.com/pulse/20130816200159-131079-employee-retention-now-a-big-issue-why-the-tide-has-turned/) by him suggests that you should allow for 1.5-2X the cost of salary.

Without going into too much detail, besides the agency costs you’re looking at internal time to prepare the job spec, post wherever, review resumes, interview. Then of course for more senior roles, if Bob walks in the door and establishes a strategy but then leaves 15 months later, Sally is not going to take the job to execute his strategy, she has her own ideas. There’s a massive loss of productivity and contribution at any level. This article in the Huffington Post really expounds on those losses in contribution (https://www.huffingtonpost.com/julie-kantor/high-turnover-costs-way-more-than-you-think_b_9197238.html)

What’s The Solution?

People and companies leave each other for all kinds of reasons. But let’s start with one universal requirement. That requirement is that the employer recognizes their obligation to their employees to provide an environment that they want to be in every day and where the company facilitates their contribution.

Now that that is out of the way, we should also assume that there are no bad candidates. There are only bad “fits”.

Excellent. This last bit is easy.

Hire the right people.

Make the “fit”.

If you’re not hiring the right people then you’re one of the 39% in that earlier noted REC study who recognize the need to improve hiring practices. And if you’re one of those 39% then you should consider talking to a consultant who can help you improve those hiring practices and provide a guarantee of their work.

Remember, example 1 of the on fire issues at the top of the article? Here at Gateway we don’t wait for it to be on fire, we deal with it proactively and we guarantee placements for what the industry standard would call ridiculous.

If you want to find out more about our guarantee and about our interview practices and why we’re so confident in them, drop me a note. This is not some hokey “we interview them twice” type of thing, we offer metrics and transparency on the full selection process.

And finding out more will cost you, yep, you guessed it.

Zero.

Nada.

Zilch.

Squat.

Bupkus.

Diddly over.

Drop a comment in if you have some thoughts to add. I truly believe that employee retention is a massively overlooked issue in the recruitment equation.

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