Companies spend Millions of Dollars in hiring and training employees in order to enable them to add to the productivity and profitability of the organization. And yet, most companies are not able to retain these employees, causing a massive dent in their overall profitability!
As per the latest statistics provided by major Recruitment Firms (Michael Page) in Singapore:
1. 67% of surveyed professionals are likely to leave their current role in 12 months
2. 73% of employees have attended job interviews with another company in the past 12 months!
Does it matter?
The cost of replacing an employee depends on many variables, like the job's complexity, skillsets required, position, etc. For ease of calculation and generalization, here is a quote from a report by Singapore Human Resources Institute (SHRI):
1. As per The U.S. Department of Labor, It costs about 33 per cent of a recruit’s salary to replace a lost employee
2. Private industry estimates for highly skilled jobs peg turnover for highly skilled positions, the cost of replacing the employee can go up to 150% of the Annual Salary!
3. For high-level or highly specialized employees, the cost of replacement can be as high as 400% of their annual salary (Forbes)!
1. For replacing an entrée level employee earning $3000/ month would be $12,000 approximately.
2. The average pay for a Senior Marketing Manager is around S$8,000 per month (source: payscale.com). Thus the cost of replacing a person in such a position would be approximately S$150,000!
3. For a high-level employee earning, say, $25,000/ month, the cost of replacement would be $1.2 Million!
The cost of high employee turnover is not merely Dollars. It also leads to Low Workplace Morale! When an employee leaves, other employees have to bear the brunt of increased workloads and take up extra responsibilities due to a lack of an active or trained workforce. New employees, too, may suffer from low morale as they struggle to learn new job duties and procedures. Continuation of this type of work environment can make the company more difficult to attract and keep high-quality talent.
Yet, some organizations work like training grounds, people join and leave, and the Management pretends as if nothing big happened! Either they are blissfully ignorant of the damage, or perhaps it is simply convenient to move ahead with the OSTRICH APPROACH, or their EMPLOYEE RETENTION APPROACH HAS NOT BEEN WORKING!
What do surveys indicate?
More than half (51%) of the participants think that financial incentives are used significantly in their organizations to combat turnover (SHRI)
52% of the employees think that financial incentives are used effectively in their organizations to combat turnover (SHRI)
Only about 38% think that non-financial incentives are used effectively in their organization to combat turnover (SHRI)
What does it mean?
Pellets, pellets and merely pellets …it does not work! It takes more than money to retain employees, and there is a limit to how many organizations can pay to their employees!
The survey results indicate that Financial Rewards are the most popular retention tool used by most companies! Also, people think that the strategy is being used efficiently. However, it is loud and clear from above that non-financial incentives are not being used competently. To elaborate on this point, let's explore further.
What do people think & say?
PsychTests did an interesting ‘Turnover Probability Test’ recently. Researchers focused on people who intend to leave their position in the immediate future and are proactively searching for jobs. When asked what role management played in their decision to leave, the study revealed interesting results:
24% of soon-to-be quitters report that they don't have a good relationship with their manager.
31% constantly feel like they need to "walk on eggshells" around their manager in order to avoid conflict.
45% affirm that helping employees succeed is not one of management's priorities.
53% claim management fails to acknowledge or recognize challenging work/achievements.
53% indicate that any concerns or issues brought to management tend to fall on deaf ears and go unresolved.
56% of soon-to-be quitters explain that their manager does not provide employees with sufficient opportunities to develop their skills.
24% indicate that their manager does not respect employees.
These are eye-opening statistics that suggest that people don’t leave organizations for a ‘few more dollars’. Other reasons are either not paid attention to or are simply ignored for lack of ability to resolve such issues. It is easier to calculate the carrot points earned in terms of dollars to reward an employee. Still, it takes ‘Great leadership skills’ to tune in to their thought process, communicate a compelling vision that resonates with their own goals, develop them as individuals and team members, train and coach them, and be with them as constant support, not a nagging boss. It is essential to use EMOTIONAL INTELLIGENCE to understand what employees are driven by, as people with high emotional intelligence and good communication skills are better at reading their environment, are intuitive and are able to sense what is going on around them. Individuals with high emotional intelligence and good communication skills also know how to "manage" relationships and apply influence when and where needed. Needless to say that people enjoy working with them as they are inspiring and know how to motivate others to succeed.
This is indeed a wake-up call! An alarm to develop Emotionally Intelligent Managers: To become a Great Manager, you need to be a Good Leader to Develop a Corporate Culture that can drive itself in autopilot mode!
- Preeti Dubey
Masters in Psychology, MBA, Bachelors Biological Sciences
ACTA Certified Trainer, Certified EQ-i 2.0 & 360 Professional
Member of American Psychological Association