Are we really willing to face the real reasons for turnover?

July 11, 2018

 

One of the challenges I hear from CEOs, entrepreneurs, Human Capital Directors is retaining greatpeople. “Great” people here means they are a good fit for their position and are also aligned with values and culture of the organization. They tend to have the highest performance. They care about what they do and how they do it. They outperform since they use their strengths. As Gallup studies always find out, people using and improving our strengths are six times more likely to be engaged at work. 

 

Many leaders I meet have major concerns about attracting, retaining, and replacing good talent. This is true everywhere. I had many trips to different countries where the common theme among executives is around low engagement and high turnover rates. Some leaders have good clues to the reasons why, some do not seem to have any answers to reverse the situation.

 

Even though many leaders are concerned by turnover, they are not aware of the real cost of it.  You will be surprised to see the numbers but it is the truth: 

 

According to Bersin by Deloitte Research, the average turnover rate is 13%. Thus, if an organization has 30,000 employees and an average voluntary turnover rate of 13 percent, the potential cost to the organization is a staggering $427.7 million in one year.  The problem is many managers look at the average direct cost only (which is $3,976 in average) that does not include interim cost of labor, training, orientation, indirect costs, lost productivity, and other factors that cause loss that totals up to $109K per person. 

Think of a very high ticket item that is in millions of dollars (or six figures in smaller organizations) every year and it never even becomes part of any financial statement. You cannot solve any issue anything that is out of sight.  Can you?

 

The second problem is not willing to understand the root cause of the turnover.  According to research, the number one reason people leave is their immediate supervisor and their management style. 

 

Gallup CEO Jim Clifton said:

 

“The single biggest decision you make in your job--bigger than all the rest--is who you name manager. When you name the wrong person manager, nothing fixes that bad decision. Not compensation, not benefits--nothing.”

 

This is a huge issue that can be resolved but most leaders are not willing to accept this yet. Many make assumptions on reasons behind the turnover rates.  Most still believe it is money. They still want to believe command-control works - or any of the old industrial mindset principles that ruled offices for more than 150+ years. We all saw the benefits of Industrial Age but the negative aspects of this hierarchical structure on people’s productivity and health was ignored. Now it is a big concern. Because we have many studies and research. It is never easy to give up control and power for some managers. Until we look in the eye of the real issues we are facing, increase our awareness of what is actually happening; we cannot solve any of our turnover issues. 

 

It is no coincidence that there are millions of articles that talk about engagement, culture, productivity, purpose, passion at work now more than ever. Because the era of believing people need to be told 

 

  • what to do at work,

  • when to come and leave the office,  

  • if and when they can leave for personal reasons

 

is gone. Some companies are holding tight to these old principles but it is no wonder they can neither attract nor retain their people.  The new workforce mostly consists of Millennials and they will be 75% by 2025. They care about flexibility, be there for their children or people they love when needed, value experience over possession, want purpose beyond money, and also very conscious of where and how to spend their money.  

 

People want autonomy, respect, and purpose at work. We always wanted them but now is the time that brought these very intrinsic needs of people into day light.  After a lot of stress that led to physical problems in epidemic levels at work as the book Dying for a Paycheck by Jeffrey Pfeiffer explains in detail, the suffering of people has to come to an end.

 

Now is the time to scrutinize what we mean by “leadership” versus “management”.  This is the key ingredient that will make a change in the workplace. Because from micro to macro level, we know how much of an impact leaders have in their environments. I see parents as leaders at home, teachers in classrooms, CEOs at companies, presidents in countries. We all know how the people at the top affect others in their ecosystems. We have to look at leading from a very different perspective that does not stroke the ego of those in important roles but rather gives every stakeholder a participative role. It is not only about those at the top or shareholders only.  We have to lead our people more from a place of respect, trust, and contribution. It is proven again and again that people willingly follow leaders with these values instead of feeling obligated to do so because of their big titles. 

 

It takes courage, self-awareness, and behind the scenes look to figure out the real challenges people face who work for us.  And think about the difference we can make having happy and healthy people working for us. I wish this was the main reason to make the changes but even if some care about the bottom line more, there is huge savings too. 

It is worth looking into reasons behind turnover. (From the example given above, if this organization can decrease its voluntary turnover by just 1 percent, it can save $32.9 million in one year!)

 

There are many old practices that need to change in all phases of the people engagement to attract great talent and retain them. This will be in my next article.

 

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