Retention: Payoff or No Payoff
by Miki SaxonA post I read this morning by Alice Snell in Taleo’s Talent Management blog pointed me to PricewaterhouseCoopers’ “Trendsetter Barometer” survey. I really appreciated it since it’s always great to start the day with a good laugh and the CEO survey gave me just that.
Do take a moment to read the whole study (it’s not that long), but in the mean time, here’s a sampling of levity-producing findings:
- “…nearly half the CEOs surveyed (49 percent) are concerned that a shortage of qualified workers could limit the growth of their company in the year ahead.”
- “…only 60 percent of surveyed CEOs include the costs of retention and turnover in their company’s estimate of workforce expense.”
- “…43 percent [of “Trendsetter” CEOs] believe it [retention of key employees] would have very little or no impact.”
- “Sharply improved retention of key employees was judged to improve company profits by a median of only five percent among the 52 percent of CEOs who believe it would be beneficial.”
Enough, you get the idea. In short, it goes like this: There’s a shortage of qualified workers that could limit our growth, but keeping the people we have yields no real benefits and retention has no real payoff, plus, the cost of turnover has nothing to do with our workforce expense.
So, how far off base are these CEOs and all the others who think the same way?
- According to Frederick Reichheld, who has been researching and studying the loyalty (AKA retention) of investors, customers and employees for over a decade, in Loyalty Rules! (2001), a 5% improvement in employee retention translates to a 25%-100% gain in earnings.
- “David A. Brandon, CEO of Domino’s Pizza says, ’You can’t overcome a bad culture by paying people a few bucks more.’ He believes the way to attack turnover is by focusing on store managers—hiring more selectively, coaching them on how to create better workplaces and motivating them with the promise of stock options and promotions.” (Wall Street Journal, 2.17.05)
- “The SAS culture keeps employees content and keeps them from leaving. On average, software companies turn over more than 20% of their employees each year. AT SAS, it’s around 3%. And according to Stanford University business Professor Jeffrey Pfeffer, that 17% difference conservatively saves SAS 70-80 million dollars in recruiting and training costs each year.” (60 Minutes, 10.13.02)
It’s almost impossible today to read/watch anything business-related—magazine, newspaper, blog, TV program—and not hear about the importance of retention, but, obviously, that information certainly isn’t having the desired effect.
You bet I found it funny—and very, very sad.