Retention Vs. Recruitment: The Revolving Employment Door Dilemma:
Over the past few years while working with various clients and having casual conversations with industry friends, the topic that always surfaces to the top of the anxiety and frustration index is the employment dilemma of our current times. The conversation quickly reveals the clear organizational strain between HR and operations as to who is responsible for the latest employment debacle and what each division could/should be doing. For the purposes of this article I will limit the employment arena to the unskilled/semi-skilled labor market typically employed within the manufacturing and service industries as well as the hospitality and restaurant business sectors.
It is with some degree of amusement that I frequently hear our politicians in Washington, D.C. or from various State Houses’ say that we need to create more jobs. Yet talk to those living in the above-mentioned industries and you will hear they can’t find people who want to work. Drive through virtually any community and there are more “help wanted” signs including “open interviews today” signs than political signs in November. There is a litany of reasons behind this, but bottom line is that everyone is hiring. So it then goes without saying it is very challenging to hire good quality candidates with strong stay ability likelihood. In fact it has reached the point that it is all too common to hear operations as well as some HR people simply say, “Just hire me a warm body”. I find this statement to be one of the most derogatory and demeaning statements any organizational leader could make. Yet offensive or not it is a sign of our time. This statement is repeated many times daily throughout the industries that depend on unskilled/semi-skilled employees to get the required work completed. Unfortunately when the employment process gravitates to this level “warm bodies” are exactly what organizations get. Employment standards are lowered and the self-fulfilling prophecy takes precedence which says; Employees will quit anyways and so until proven otherwise we will invest only the minimum resources in them. This ultimately leads to many of them leaving, and the downward cycle continues. If any of this sounds familiar you are not alone, and in fact you are in the vast majority. But recruiting woes are only part of the equation. Depending on the business sector, each industry has a typical turnover or attrition norm. It is also common that many organizations judge their attrition rate against this norm, which in itself begs a serious self-reflection. When looking at attrition over the past few years most organizations, and especially those in the lower quartiles of pay, have seen the attrition numbers hit all time highs. For some the numbers are staggering, creating a multitude of organizational challenges ranging from safety and increased cost, to the quality and delivery of services or products. The much more difficult to remedy decrease in morale among employees, is frequently a missed yet highly impactful challenge as well. The turnover rates, including those within the staffing industry, have created a virtual vortex within organizations where everyone is running ragged and systems, policies, and programs are being aborted simply for the sake of getting the necessary work completed. Communication is eroded and the feeling of being valued, appreciated and cared about is almost nonexistent. All of which are symptoms of the current employment dilemma where the employees become the victims. Again, if this sounds familiar you are not alone. Yet rarely do I ever hear organizations discuss retention, as an equal culprit to poor recruiting.
Hiring Good Quality Candidates
So I ask the question, do you have a hard time hiring good quality candidates? The answer is always an exasperated “yes”. I then ask are you having an increase in turnover that is creating serious organizational issues? The answer, as you have already guessed, is always “yes”. Finally I ask, “What are you doing today that you were not doing three (3) years ago to retain your good employees”. Their facial expressions say it all. This unwillingness or unawareness to do things differently is exactly why they have a heightened turnover issue. It is true that some organizations and HR divisions have implemented some practices or activities to stem the turnover tide, but these are generally proving ineffective. My analogy is that the actual day-to-day work environment is the cake and the newly implemented activities to promote retention represent the icing. Too many organizations are trying to put icing on an unknown or nonexistent cake. The icing is great and I am fully supportive of policies and programs that reward retention, provided the day-to-day work environment promotes retention first. It is this insensitive and disconnected approach to the day-to-day life of employees, like the phrase “Let Them Eat Cake”, that is manifested in the failure to correct the true issues and concerns of employees. This sends mixed and confusing messages to employees ultimately causing them to look elsewhere for employment when plausible. It is the vortex of daily operations, that has become a “category 5” for many organizations. It is this employment dilemma that literally sucks everything and everybody in, leaving most to say, “I don’t know what to do.”
While there are exceptions to every rule, I have found most people do not leave a job solely for better pay – especially if the increase is minimal. So if money is not the sole motivator for most people to jump ship then why do they leave? If you have not asked this question then it is likely time to ask. As the old adage goes, “you cannot countermeasure that which you do not know”.
Get HR Analytics On It
HR analytics is finally now becoming a topic of interest; unfortunately in most organizations it is woefully weak and only minimally useful. Analytics related to the human side of every organization should be on par with the data gathering effort related to the analysis of quality, cost, productivity, etc. When I have looked at attrition data (rarely with any analysis included), it is extremely difficult to understand why employees are leaving. The data too often simply describes how someone left (quit, walked-off-the-job, no-show, etc.) and not why he or she left. If the data does include the why (another job, pay, treatment, etc.) it virtually never includes a “why-why” analysis to derive the actual root cause. If an organization does not have meaningful data backed up by in-depth analysis, how can any effective countermeasure to improve retention be implemented? Again, “you cannot countermeasure that which you do not know”. If we cannot countermeasure quality, safety, or cost issues without data and analysis, how can we expect to countermeasure turnover without the necessary data and analysis? Organizational leadership and HR will say they know why employees are leaving, but I have yet to find one who can specifically link the actual number of exits to an identifiable root cause. Without specifics it is far too easy to make excuses, deflect criticism or pass the blame – all of which retards the development of effective countermeasures. This in turn allows the vicious cycle of employee turnover to worsen. Equally troublesome is not clearly knowing why employees stay. What makes some stay while others leave? If an organization does not collect retention data and performs detailed analysis of the data it is very difficult to replicate the actions, programs, culture, etc. that are the reasons employees stay. Yet there is danger in this data analysis if not performed with a high degree of reliability. A company should not be making wholesale changes to policies and programs based on data that is less than credible. One final point is that like any discipline within an organization (finance, quality, safety, etc.) data related to the human side of the organization must be converted into meaningful information. Finance data may make sense to an accountant but not to someone else. Likewise HR related data must be converted to information that is “user-friendly” in order for the organization to grasp a clear understanding of the actual situation. The data must be meaningful to the people who are expected to act on it.
Recently, in looking at turnover data at a manufacturing organization attrition had significantly increased and a sizeable percentage of the workforce were working 7 days consistently. Unfortunately, not an uncommon scenario. Yet in looking at the data over 80% of the employees who left had less than one (1) year of service. Again not uncommon. Why were new employees leaving while longer service employees were staying even though they were exposed to the same work environment factors (overtime, plant conditions, treatment, etc.)? How many employees left because of the overtime, required due in part to the high turnover? No one knew these answers or the answers to a number of other pertinent questions, contributing to the worsening turnover. In case you may be wondering, one data point I did find was the most frequent age of those new employees leaving were not millennials, as you may have thought, but in the 30 to 40 year age range. This fact of course then led to why were they in this job market to begin with? I had my guesses but without data, they were only that – guesses. The point of data collection and analysis is to separate fact from fiction and myth from reality.
To dig deeper I explored why new employees were leaving at a significantly higher rate than longer-term employees at the above-mentioned organization. Pay was mentioned as one of the primary reasons but unfortunately, without any data to back up the statement it could not be accepted as a contributing factor. Further, if an employee joins an organization knowing the pay level, then why would they leave shortly thereafter because of pay? After all, the wage they were offered (and agreed to) was the wage they were paid. It was not as if they were promised a higher wage and then the company reneged with a lower wage come payday. They wouldn’t unless! This is where you must redefine the meaning of pay. It is not the quantitative side of pay, but the qualitative side that is at issue. Employment between employee and employer is a transaction that is subject to the value equation like any other business transaction. New employees were not leaving because of how much pay they received, they were leaving because the pay was not adequate to offset the work environment factors to which they were being exposed. The company’s offering (wages, benefits, work environment, etc.) was not a balanced transaction for the new employees’ currency (time, best effort, commitment). The new hires could afford to quit and start over somewhere else because they were not vested in the organization, whereas the longer service employees had attained a pay rate that would require them to take a sizeable pay reduction to go elsewhere and start over. If pay was blindly accepted as the reason for new employees leaving then the true root cause may not have been identified. Conversely to deduce from this that longer-term employees were staying because of pay, would not itself be entirely accurate – they were staying because they could not afford to quit and start over somewhere else. While the work environment factors were equally concerning the difference between the starting pay elsewhere, versus their current pay was the incentive to stay – which rapidly erodes long-term loyalty from an employee base. Unfortunately, here and across many organizations, employees actually mentally quit but stay on out of necessity. The focus on retention and turnover in this case should be one in the same. It is the contributing work environment factors that were causing employees to either want to leave but couldn’t or who did physically leave because they could. We could effectively “kill two birds with one stone” in this case.
Why Do Employees Really Leave?
Despite what some may think, organizations cannot buy themselves out of the employment dilemma. But they can do what almost no one else is doing. They can identify specifically why employees are leaving as well as why employees are staying and then leverage the positive and countermeasure the negative. Through proper analysis, countermeasures, and execution companies can begin to create and enhance a competitive advantage. If it is very difficult to hire good candidates then shouldn’t the focus be on retention? Why continue to fill a bucket that has a massive hole in the bottom? If you subscribe to this logic then the way to getting ahead begins with knowing the actual unfiltered situation even though the truth may hurt. Once the actual situation is known it will unleash the ability to know what to do and improvement will begin to take form. No longer will organizational leadership say: “I don’t know what to do”. Central to that improvement undertaking is ensuring the value equation is well understood, embraced and embodied within the organization.
The value equation is not about lowering accountability by expecting less of people or being more tolerant of poor performance – a sad reality for those organizations living in the employment dilemma vortex. It is actually about raising expectations and driving highly competitive performance. It is not about the work one does; it is about the actual employment environment in which one works – it is about the organization’s culture. The employees that are aligned with this thinking will embrace the high expectations and often exceed them.
Regardless of title, job or pay, I have always found people want to simply know three (3) things: Do you value me? – Do you appreciate what I do? – Do you care about me or only the end result of what I do? Getting the answers to these questions right does not need to cost any additional money, but all of which will drive world-class performance and significantly improve retention. If organizations’ would seek out the truth to these questions and then create plans to satisfy these emotional feelings, the majority of organizational challenges would vaporize and job candidates would be coming to seek employment. Leadership in organizations’ that are in business sectors where pay is in the lower quartiles or who utilize a high percentage of part-time employees may disagree. While it is true such organizations historically experience a higher turnover rate, this rate can be significantly improved in today’s employment environment by focusing on retention. An employee in a service industry, for example, moving to a significantly higher (15%+) paying employment opportunity, should be celebrated. The organization should take some credit for being a stepping-stone in the employee’s positive career trajectory. This outlook should promote others to do the same and serve as an example for wanting what is best for the employee. When an employee leaves to escape the organizational culture, within any workplace, it should drive organizational self-reflection and improvement. The qualitative side of pay says there is a non-financial value to working within an organization – how someone is treated, the degree of job security, opportunity for growth, sense of responsibility, the feeling of self-esteem, etc. Somewhere there is a shortfall in the value equation. While no one can put an exact price tag on the qualitative side of pay, as each person is different, it is possible to estimate with a good degree of accuracy. Assume for an example an employee is making $10.00 per hour, and nearby another organization is paying $10.50 per hour. If the employee feels their current qualitative pay value is worth $1.50 per hour there is a good chance they will not leave. However, if the perceived value is $0.25 per hour they may make the decision to leave. The overall worth of the value equation is largely dependent on the culture, environment, and policies of the organization. Pay is only part of the value equation but is most often the focus because it is the simplest part to understand and in the short term the easiest fix.
On a final note related to retention, it is far too common for organizations to lament over the turnover of new employees – especially those who last less than 30 days. There are always excuses why this problem cannot be confronted. “Excuse management” rules many organizations, allowing the self-fulfilling prophecy to be alive and thrive. Yet if new employee retention is a serious issue doesn’t it deserve serious attention? The successful organization will look the problem in the eye, understand it, and begin to countermeasure it.
The Onboarding Function
One area of the employment process that is often underappreciated and undervalued is the onboarding function. The relationship between a new employee and the organization is quite similar to most relationships in life. It is not deep or solid in the beginning. In fact, any small problem or disagreement could stop it before it ever gets a chance to mature. It is extremely important to get off on the “right foot” making sure that both company and employee feel a sense of mutual respect and commitment and be on the same page regarding expectations. Both must understand their part in the value equation. This is where onboarding becomes critical. Most onboarding programs I see essentially address the mechanics of transitioning a new hire into the organization. They are transactional based focusing largely on crossing the “T’s” and dotting the “I’s”. The programs consist of filling out paperwork, explaining rules and procedures, a cursory safety and quality orientation, and maybe a benefits explanation – an overwhelming and highly ineffective download. This is not exactly a, “we’re glad you’re here and we are going to have a great relationship for many years” kind of effort. A strong onboarding plan should start at the pre-employment phase and last at least 4 weeks post-employment followed by structured touch-points throughout the 1st year of employment. The onboarding program should be less policy focused and more employee-valued focused. It is that one (1) opportunity every organization has to introduce new employees into their organization in a way that drives commitment from the start.
The revolving door of recruitment vs. retention has a virtual strangle hold on many organizations, driving increasing cost and lower overall performance. While there is no single solution, doing nothing to strengthen retention has yet to prove to be an effective strategy. The challenge is not developing and implementing plans based on reliable data analysis. The real challenge is getting organizational leadership to truly buy-in and embrace a strategic approach to improved employee retention. If this was not the true challenge, leadership would not answer, “NOTHING” when asked what they are doing differently now versus 3 years ago to address turnover.