Art in finding - and keeping - the right staff

As one frustrated manager recently observed: "Today's workforce are like frogs in a wheelbarrow: they can jump out at any time." Employers now expect to lose an average of one in five employees a year. Against a background of negligible unemployment and shortages of many key skills, highly competitive labour markets are the order of the day.

The high cost and difficulty in replacing those who leave has made the issue of staff retention a priority for many employers. According to Dr John Sullivan at the San Francisco State University, the cost of losing a single software engineer averages about £150,000, while the cost of losing a single product development team leader is around £29 million!

Britain's Income Data Services estimate that in some companies the cost of replacing key staff is about 150 per cent of annual salary. Other damaging consequences of high labour turnover include the loss of skills, knowledge and experience, disruption to operations and a damaging effect on staff morale. Furthermore, not alone will former staff take their talents and energies with them, but - as many employers have found to their cost - they may also take their best clients with them as well!

The new generation coming onto the jobs market are less loyal than their predecessors. They are especially restless in those workplaces lacking a sense of challenge, accomplishment and recognition. They also seek trust and the autonomy to go ahead and get results. A recent survey of human resource managers in Ireland revealed that more than one third of the respondent companies found that new staff were staying with their employers for less than 2 years. In an attempt to stem this flow nearly two-thirds of employers had raised salary levels, a third had introduced financial bonuses and a third reported the introduction of performance-related bonuses.

What's remarkable about this "band-aid" response to staff haemorrhaging is that if pay levels are already set at a competitive level, throwing money at the retention problem is unlikely to prove an effective solution in the long term. As long as employees perceive their salaries to be fair, money only tends to become an issue when there are other sources of dissatisfaction.

Mr Bevan agrees that massive bonus payments may not make much difference to whether an individual stays or leaves. That is, it's unlikely that retention bonuses by themselves will yield the expected return. He notes that many companies leap to the unwarranted conclusion that paying people more will stop them leaving. However, the evidence from a host of American surveys tells us that only 10 per cent of leavers cite pay as their reason for quitting. They are far more likely to leave because either the work doesn't make use of their talents, the management are poor or the promotion prospects are lousy.

It's true to say that with an increasingly diverse workforce, no single measure will reduce staff turnover at a stroke. A recent study of British organisations by the Income Data Services group contends that the most effective ways of reducing turnover rates are:

ensure that you're recruiting the right people in the first place;

pay more attention to the induction process, as the first few weeks in a new job are critical;

provide career paths, more interesting work and support for personal development;

offer more flexible work options and implement family-friendly policies, as work-life balance issues come to the fore;

assemble an attractive employee benefits package that supports a retention strategy.

Sensible though such prescriptions are, they leave one glaring gap. According to Mr Graeme Buckingham, a vice-president at the Gallup Organisation, "employees leave managers, not companies". Exit interviews support this view, though few employers have taken notice of the finding. Mr Buckingham insists that a key expectation that employees have of their managers is that they care about them as individuals. That is, there is clear evidence that good management and effective staff retention rests upon:

having a manager who shows care, interest and concern for staff;

staff knowing what is expected of them;

staff having a role that fits their abilities;

staff receiving positive feedback and recognition regularly for work well done.

Whilst the compilation of raw statistical data on your organisation's staff turnover level is valuable, it also helps to supplement this with more qualitative data. This can be obtained from exit interviews or questionnaires, or from regular employee attitude surveys. This approach will tell you not just how many people are leaving, but more importantly, why they are leaving. It will tell you whether there is a general retention problem or one affecting specific areas of the business or particular employee categories. The employer can then decide whether to apply a universal solution or to target measures at certain staff categories.

For example, in 1996 a large NHS Trust hospital in England decided to conduct a detailed survey of the huge number of nurses who had left the hospital over the previous two years. While a variety of reasons emerged from the survey, three stood out. These were: a poor working relationship with the supervisor; failure to secure promotion; and general dissatisfaction with aspects of the working environment. The survey concluded that some of the hospital's managerial staff were far more effective motivators than others, and that developing supervisory or people management skills would lead to an improved retention rate for nurses.

Little wonder then that Professor Anthony Clare warned at the last annual conference of the Chartered Institute of Personnel and Development that: "Countless studies of corporations have found that those who understand human frailty, human feelings, and who see people as an art form rather than a robot they are the ones that succeed."

Accordingly, the ability of an organisation's line management to treat people properly is now emerging as a central feature of successful staff retention. The bottom line is that this is, in effect, an integral part of the war for talent. This war is now being waged in the labour market. As in any war, there are winners and losers. Which is your organisation?

Dr Gerard McMahon is a lecturer at the Faculty of Business, Dublin Institute of Technology. E-Mail: ppl1@indigo.ie