People, Planning, Process – SUCCESS |
The following article was first published on Whittlesey’s Insights page. It is reposted here with permission.
Companies in all industries struggle to retain key people and attract new ones.
The big quit is the number one problem facing business leaders today.
A recent study by McKinsey revealed that 40% of employees will leave their current job within the next six to twelve months.
This observation represents both a cost and an opportunity.
The cost is that you risk losing people critical to your operation. The opportunity lies in attracting the types of employees you have chosen from this huge pool of people.
Why are attraction and retention so important?
Labor turnover is around 25% to 30% in some industries.
These turnover levels affect your company’s ability to produce enough of your product or service to meet current and new business demand.
These lost employees typically cost three times their annual salary to replace them, and a significant time investment significantly weakens a business.
The loss of employees puts a huge burden on the employees who are left behind and drastically decreases morale, leading to increased employee turnover.
The loss of employees negatively impacts your ability to produce goods and services and is one of the biggest barriers to growing your business.
Less production equals less revenue from existing customers and the inability to serve new customers.
Less production, usually at reduced service levels, infinitely increases the risk of losing more customers and more revenue.
By combining these two factors, the business will not remain as profitable as it always has been, resulting in a loss of business.
Business owners need people, so they are more reluctant to fire poor and below-average employees.
The success of a company depends heavily on the quality of its staff.
Strong people build great, flawless products to satisfy their customers and provide the level of service that potentially gives the company a competitive edge.
Strong people are effective and can help a company achieve industry-leading profitability.
Ending up with the mediocre and below average performers creates the opposite effect.
Inferior products or service quality significantly weaken profits.
Financial rewards aren’t a particularly powerful way to retain people.
Your competitors on the street also suffer from a lack of attraction and retention.
Your competitors will outbid you for your employees, or you will keep them at a cost draining profit.
That’s not to say competitive compensation isn’t a key part of a strong attraction and retention policy.
This means that it cannot be the only element of a strong attraction and retention policy.
To be a desirable place to work, you must offer more than the highest salary to attract less experienced people in the market.
The cost of poor attraction and retention strategies is borne by those who stay with the company.
Stress levels for those left are rising dramatically as they try to produce more with fewer resources.
Those who remain suffer from serious morale problems and begin to question their desire to work for the company.
The grass may not always be greener on the other side.
However, from the perspective of the overworked and underfunded employees being left behind, it is a reality that will cast doubt in their minds on their desire to stay.
What are the benefits of attracting and retaining correctly?
Increased capacity allows you to produce more of your goods and services, which translates to more sales and better bottom lines.
Your capacity is increased because you have retained people with their collective institutional knowledge and attracted new people with the skills you need to serve your clients or clients.
This increased capacity allows you to have more productive, efficient and well-trained employees in your system.
The combination of increased capacity leads to increased profits.
Currently, attraction and retention are probably the number one issues affecting your ability to compete in the marketplace.
Identify key employees
The risk of losing customers is significantly lower if you attract and retain the right people.
Poor or below average people make many mistakes when designing your product or delivering services.
They are also generally less efficient with their time. Thus, things take much longer to complete.
Mistakes and longer delays force customers to re-examine their relationship with you and start switching to other vendors.
Succession planning is a much smoother process if you retain your key people.
As a business leader, you must constantly prepare the future management team that will run the business.
You cannot build a management team of poor and below average employees to effectively run a business.
This factor ultimately leads to a forced sale at a reduced valuation.
Attraction, retention and how you treat your employees can help you become a destination employer.
A destination employer doesn’t have to seek out so many new and talented people because new and talented workers are looking for them.
If you attract and retain the right people, you will maximize the value of your business for sale or transition to the next generation.
The ability to attract and retain key people is fundamental to business.
If you succeed in attracting and retaining customers, you run your business with more capacity and profit.
If you get attraction and retention wrong, your business operates with less capacity and less profit.
Attraction and retention are key to maximizing the sale or succession of your business. It must therefore be at the top of your plan to increase the value of your business.
Whittlesey Director of Human Resources Kathie McCarthy and Brian KerriganWhittlesey partner, hosts on site, half day workshops that provide business leaders with powerful problem-solving tools and methodologies to identify strategies to strengthen a company’s ability to attract and retain high-quality team members.