Infor HCM

Why employees leave – and how to keep them

Replacing an employee costs a lot.

A study by the Society for Human Resource Management suggests that recruiting and training new employees costs the equivalent of six to nine months’ salary. So when an employee earning $60,000 leaves, that’s a bill of $30,000 to $45,000 plus the usual delay of unproductive time before their fully-skilled replacement comes online. Meanwhile, according to the Center for America Progress, the cost of losing an employee ranges from 16% of pay for hourly, unsalaried employees, to 213% for highly-trained positions. A departing executive salaried at $150,000 a year will cost her or his employer over $300,000.

The math is clear: voluntary turnover is a cost worth avoiding.

Dealing with departures

Nobody knows exactly what prompts an employee to consider moving on. According to the CEB, the likelihood of employees seeking a change increases at moments when they re-evaluate their lives: job hunting jumps 12% before birthdays and 16% after reunions.

Many organizations try to encourage individuals to stay with activities such as team days out or with superficial changes to the working environment like adding table-tennis or other social games in recreation areas. Jacob Morgan calls these approaches “adrenalin shots” that supply an initial thrill which rapidly wears off.

Reducing the odds of employee departures demands more than these ad hoc measures. It requires a systematic approach that focuses on employees’ real motivators for staying, rather than the hygiene factors which individuals expect to prevent them leaving.

One of the great questions of employee engagement is the role of money. Is it a motivator or a hygiene factor? Put more simply, is a bigger paycheck enough to motivate employees to stay longer in their current job?

Infor’s own research suggests it is not. As part of our ongoing research into employee motivation, we recently surveyed over 3,000 US workers, exploring why they chose to remain in their jobs.

Of these 3,000, only 3.6% completely agreed that money was their main motivator. In contrast, 76.7% indicated that they would sacrifice compensation for schedule flexibility. And these figures were consistent across generations. Millennials and non-millennials were alike in placing money far down the list of their motivators.

If a paycheck is not a prime motivator, what other systematic support can keep employees enthusiastic about staying in their job?

The answer, according to reputation-assessment company Glassdoor, may be as simple as a good cultural fit and a sense of direction. For every 10 months that an employee spends in the same job, their likelihood of moving on increases by 1% above the norm.

A good cultural match and a sense of direction do not come with a quick fix. They can, however, be established via a coherent, systemic approach in four different areas:

Four steps

The process begins with recruiting for a good fit to the job. Using a process that recruits against a candidate’s behaviors – rather than relying on an interviewer’s gut reaction – reduces turnover considerably. In three separate studies across a range of sectors, Infor’s behavioral DNA approach to selection boosted retention among Millennials by 24% (n=217,776), cut turnover among Generation X employees by 23% (n=57,066) and reduced Baby Boomer turnover by 27% (n=18,398).

The second area is to provide the right guidance along the way. We have blogged previously about the failings of the annual review. The alternative is small amounts of frequent feedback, helping employees improve over the course of their work rather than at the end of a 12-month period. This requires more integrated data and systems, as well as managers committed to providing ongoing feedback to employees, but the benefits in terms of both retention and engagement make this approach worthwhile.

The third part of this process is using an optimized learning approach, empowering employees to become self-directed learners who use a suite of company resources to invest in their own skills and knowledge. Few things give individuals a sense of direction like learning something they have chosen for themselves. The good news: it’s often more effective and leads to more rapid performance gains than the standard process of assigning courses to individuals.

Finally, employers can reduce staff turnover by recruiting internally. This requires the right systems, maintaining and using initial recruitment assessment data across the talent process, so that the organization knows which employees would suit newly vacant roles, even when the employee may be unaware of their likely fit or even of the roles themselves.

When an employee chooses to leave, not only do they create a vacuum requiring time and money to replace, but they also take cultural capital and tacit knowledge with them as they walk out the door. Keeping them on board must be a priority for today’s enterprises.

Jon Kirchhoff, Director of Human Capital Management, Behavioral Analytics

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