Human Resources: Executive Summary:Retention

With quit rates the lowest they've been in decades, HR professionals might gain a false sense of confidence that retention programs are right on target. Experts warn, however, that employees' "loyalty" may be driven more by the economy than anything else. As the economic picture brightens, they say, watch for a spike in turnover.

Many HR professionals could be caught unaware. Only about a third of HR professionals are even tracking the cost of turnover, according to a study conducted by the Society for Human Resource Management and the Employment Management Association. Perhaps they lack a sense of urgency because employee tenure has changed little over the past two decades, falling to 4.7 years in 2002 from 5.0 years in 1983, according to the Employee Benefits Research Institute.

But companies pay a high price for unwanted turnover. There are, of course, the quantifiable costs such as those for separation and replacement. And those costs may be surpassed by the indirect costs of turnover, such as productivity loss, interruptions in team synergy, sales loss and customer loss.

Organizations seeking to avert an exodus of restless employees in search of better pay and better bosses may want to ensure that key players with high-demand skills are engaged and learning. A Towers Perrin study of 1,400 workers and managers revealed that excessive workloads, lack of challenge and insufficient recognition undermine job satisfaction.

Other studies suggest that how a company communicates with employees may matter more than pay and benefits in fostering employee commitment, satisfaction and retention. A 2004 survey by the Chartered Institute of Personnel and Development of employers in the UK and Ireland found that improved employee communication and involvement and improved induction processes were two of the most common measures taken by firms to address their retention problems.

Retention improves when companies choose employees who fit both the job requirements and the corporate culture. Knowing why employees leave is the first step in any retention strategy. Drake Beam Morin suggests that employers target retention initiatives to solve specific issues through tools such as exit interviews and attrition studies that are analyzed demographically.

Among the more common compensation-related retention programs are competitive salaries and regular salary reviews, but some companies are venturing beyond - in some cases, far beyond - such standard benefits to retain talented workers. Strategies include programs such as onsite fitness centers, dry-cleaning pickup and delivery, a car wash service, a cyber café and, in the case of Boulevard Brewing Company in Kansas City, free beer. Whether such strategies will pay off when the labor market tightens and workers feel more comfortable pursuing other opportunities remains to be seen.

Employers must also keep in mind that retention isn't the same as engagement or even loyalty. Traditionally, loyalty was measured in terms of long-term commitments to an employer, but consulting firm Spherion says "emergent" workers - expected to comprise over half the workforce by 2007 - measure loyalty and commitment by contribution rather than time on the job. Rather than being determined to retain such workers, employers may need to look for more ways to ensure they're always engaged and contributing their best work.

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The Institute for Corporate Productivity (i4cp, inc.) improves corporate productivity through a combination of research, community, tools and technology focused on the management of human capital. With more than 100 leading organizations as members, including many of the best-known companies in the world, i4cp draws upon one of the industry’s largest and most-experienced research teams and Executives-in-Residence to produce more than 10,000 pages annually of rapid, reliable and respected research and analysis surrounding all facets of the management of people in organizations. Additionally, i4cp identifies and analyzes the upcoming major issues and future trends that are expected to influence workforce productivity and provides member clients with tools and technology to execute leading-edge strategies and "next" practices on these issues and trends. i4cp is a for-profit company with offices in St. Petersburg, Florida.