The economy is heating up across many sectors. While economic improvement provides many opportunities, companies are facing the increasing challenge of hiring and retaining employees.
“People are the driving force behind the success of every business,” says Scott Anderson, a senior audit manager at Sensiba San Filippo, LLP. “Business owners who understand the immense value of their people and take action to protect and motivate their employees can see tremendous effects on their bottom line.”
Smart Business spoke with Anderson about the difficulties employers face motivating their work force and how to gain a competitive edge in retaining the best employees.
Why is employee retention important to leading businesses?
People are the foundation of successful businesses, and most business owners, especially those who have lost top talent, would agree. While it may be difficult to put a price tag on the value of each employee, every employee’s impact shows up — for better or for worse — in the bottom line. Economists have estimated the cost of replacing an employee at $17,000 to $31,000. For employees making more than $60,000, the cost is $38,000 or more.
The effects of employee retention and loss will only become clearer as we move out of the recession. According to the U.S. Bureau of Labor Statistics, more employees are quitting jobs to take new positions. People generally hunkered down during the recession and put career goals on hold, but now some industries are showing significant movement already.
How does employee retention relate to risk?
Costs associated with hiring and training are just one impact of employee loss. An employee may have had access to how much customers were paying for services, or insight into trade secrets or key intellectual property. That information loss could cause significant damage if it goes to a competitor regardless of whether patents or nondisclosure agreements are in place. There is also reputational risk, as departed employees won’t censor themselves. Negative comments can spread fast regardless of whether they are true or not.
What are successful companies doing to motivate and retain employees?
Companies are finding new ways to keep top talent. Successful companies find a ‘recipe’ of benefits that makes employees feel the company can help them achieve their personal goals. For some, traditional motivators such as time off, health care benefits and flexibility of scheduling aren’t enough.
Small investments can have disproportionate effects on employees. Don’t underestimate the value of recognition. Creating a leadership award and nominating employees for outside business achievement awards improve morale. Wellness programs and community involvement opportunities also differentiate a work environment and build camaraderie.
For others, motivating factors include taking on new work or having increased responsibility. Presenting opportunities for professional advancement and intellectual expansion are overlooked factors to employee retention. An employee should have little difficulty understanding his or her career achievement path. Beyond just talking about it, the path should be written down and communicated. If employees can see how their career will proceed in the next 10 years, their vision for the future will involve a long-term relationship.
Mentoring programs can also improve career development opportunities. Allow employees to select their own mentors who are not far above the employee’s current level. Having a mentor the employee connects with, who is two to three years further in their career track, makes it more likely that candid, meaningful conversations will take place.
How can a business cultivate a culture that leads to happy, motivated employees?
One of the most important factors in forging loyalty is eliminating uncertainty, as it is a driving force that makes people look elsewhere. Unable to visualize a long-term relationship with the company, employees grow insecure.
Communication is also critical. Business owners and company leaders can dispel fears with proactive communication about the company and employees’ roles. Many successful businesses share successes of the organization, emphasizing the connection between employee success and the company’s success.
For smaller businesses, simple face-to-face interaction goes a long way toward showing employees their effort is valued.
Are employees still motivated by performance-based compensation incentives?
Yes. However, there are some common pitfalls that can derail a well-intentioned incentive program. One of the common misperceptions is that an innovative plan is a complex plan. It is actually quite the opposite. The simpler the compensation plan the more likely that it will be effective. The rule of thumb is it takes a beer to discuss the plan and the details can be written down on a bar napkin.
The value of a performance-based compensation plan is directly related to its success. At least 20 percent of the compensation plan should be incentive based and should fit into a picture of the overall health of the business that the employee clearly understands. The progress toward receiving compensation must be communicated frequently. It should be automated, predictable and not dependent on complex spreadsheet calculations.
How can businesses evaluate their employee retention efforts?
Business owners should research how their compensation and other benefits stack up to the competition. If they are lacking, find a good partner who knows the ins and outs of employee motivation, incentives and retention. On the other hand, if business owners find that their plan is superior to the competition, don’t hesitate to tell employees about the benefits of working for your company. Show your employees that you’ve done your homework and highlight the opportunities and benefits provided by your organization.
Scott Anderson is a senior audit manager at Sensiba San Filippo, LLP. Reach him at (408) 286-7780 or email@example.com.
Insights Accounting is brought to you by Sensiba San Filippo
Who is Joe Walsh? The question came from the 20-something colleague of Aimee Houde, director of Recruiting Services at Sequent.
She was astonished that the colleague didn’t know “Life in the Fast Lane.” She was curious how most people would answer the question and realized that the answer depends on your age, or, more specifically, what generation you belong to.
“It brings to mind that the workplace has become a mix of many generations – with the newest bunch being millennials, those roughly between the ages of 18 and 34,” says Houde.
Why should you care about millennials? Because you can’t afford not to. Millennials will make up 36 percent of the workforce by 2014 and 46 percent by 2020. Employers who “get” where newer generations are coming from are winning the war on talent, while employers who regard hiring millennials as a necessary evil are missing the boat. The good news is that if you haven’t already adjusted your recruiting strategy, there is still time.
Smart Business spoke with Houde about how to hire and retain millennials.
Where should employers begin?
Get social. Many hiring managers resist using social media to locate and learn about potential hires. These managers got their first jobs through traditional methods, and they see no reason to adjust their approach. However, social media isn’t just for marketing your business. It’s essential to marketing your brand to potential candidates, establishing your company as a great place to work. Linkedin is an obvious choice for recruiting, with 95 percent of organizations using it in 2011. If you create Facebook, Twitter and Google+ company profiles, you open the door to potential employees by giving them an opportunity to easily get to know your company, its people and services. You can also connect with candidates through off-the-cuff conversations, boosting your responsive and engaging quotient. Putting a name and face behind corporate social media accounts works wonders, too.
How can employers find millennials?
Reach out. Don’t expect millennials to come to you. They won’t respond to boring posts on your website or your friendless Facebook page. Figure out where they live and go get them. Go to social groups and engage them. Post content that helps them find a job or that positions you as the trusted expert in your industry. Use your website to provide information that is important to millennials — balance, benefits, purpose, support. Videos are a great tool for highlighting employees who love your organization.
How can an employer get noticed by millennials?
Be visible. The web is the first place millennials go. So show up, early, often and consistently. You also need to represent your brand on social media, industry blogs and other outlets. Millennials will check you out to see whether they know your brand or are interested in learning more. Consider hosting a blog, or commenting frequently to interest groups. It establishes your expertise and positions you as a top-of-the-food-chain employer.
What information should an employer share?
Tell your story. Millennials reveal lots of information about themselves online and expect the same of you. They are tech savvy and expect instant gratification. If you don’t provide enough self-serve information on a 24/7 basis, millennials will move on to an employer who does. Create an online atmosphere where everything is at a potential employee’s disposal. Go beyond highlighting what your company does and include information about your values, profiles of employees, insights into the corporate culture and why it might be a good place for them to work.
How important is interaction?
Be responsive. If you want bad news to go viral, share it with a millennial. Provide feedback to job candidates early and often, even if it’s not the news they want to hear. If that person isn’t a fit, he or she may know someone who is. Besides, interviewees are potential customers, and you’ll be influencing their opinion of your company. Everyone is connected and things happen fast. You need to be careful how you interact, but you have to interact.
How do you know what to look for?
Find entrepreneurs. Nearly one-third of employers look for candidates with an entrepreneurial spirit. For millennials with little experience, this translates to those who are doing interesting things. Entrepreneurial young people are extremely active online. They have their own websites and side projects they discuss on social networks. Engage with these people, and you’ll find self-starters who’ll infuse your organization with change and innovation.
How do you avoid popular myths about millennials?
Ditch the stereotypes. Millennials are impatient kids looking for a quick buck, know-it-alls who don’t need the advice of experienced supervisors, right? Wrong. Millennials are confident, raised on a steady stream of validation. When it comes to careers, they seek advice more often than prior generations. And, they crave coaching. Contrary to popular myth, they do not rank salary as the highest factor when seeking a job. Good benefits concern them most — especially health care and retirement plans. They want a career, but they also want a life. They like flexible work environments with remote and mobile options. They are socially conscious and want to give back. They want the same things as prior generations. They just prioritize differently and are more vocal about what they want.
Millennials are not just our present, they are our future. They are confident, connected and open to change. If you respond to how they are wired, you will not only attract the best talent, you will reap the benefits of their gifts and be investing in the people who may ultimately become the leaders of your organization.
Aimee Houde is director of Recruiting Services at Sequent. Reach her at (888) 456-3627 or by emailing firstname.lastname@example.org.
Insights HR Outsourcing is brought to you by Sequent
In the service industry, employee-related expenses account for 50 to 70 percent of total expenses, which makes it critical to bring in the right people and ensure your investment is a good one.
“The cost to hire people is significant, from advertising to interviewing to the onboarding process,” says John Harabedian, Managing Director of the Retirement Plan Services division at Tegrit Group. “If you are only retaining 50 percent of the people you recruit, that’s a huge cost to the company that needs to be reduced.”
The benefits of recruiting and retention strategies aren’t just cost-related.
“If you’re growing and you’ve got a strong culture, you’ll be known as a good place to work, which enhances the company’s reputation and image in the community,” he says.
Smart Business spoke with Harabedian about recruiting and retention practices.
Why does a business need recruiting and retention strategies?
Not having a recruiting strategy often leads to reactive hiring. If someone terminates employment, a manager who hasn’t thought about a replacement strategy might make a quick decision to hire someone who seems qualified but isn’t.
You always want to look for loyalty in your employees, that is the key to customer retention as well as cost savings. Customers value continuity; if you have the same person on the account for a long time he or she will know the client well and the chances of the client having a great experience are significantly enhanced.
What are some best practices for recruiting?
Your human resources department should have an active ongoing recruiting process for key positions, even if those positions aren’t open. You interview people as resumes come in, for future position openings. Then if you have to replace someone you already have two or three people in mind — you know what their situation is, if they need to move and their salary requirements for example. This makes positions easier to fill, especially for specialized, technical jobs, and ensures your company does a better job of finding the right people.
You need to define your corporate culture and find people who fit into it. A strong work culture engages employees and provides them with opportunities, which is crucial to keeping them satisfied.
In addition, good employees typically surround themselves with similar-type people, so employee recommendations can be a critical source for hires with the same work ethic and values. You can incentivize your staff with a cash bonus for recommending someone who gets hired.
An internship program is another excellent recruiting tool where both the intern and employer can evaluate each other before making a long-term commitment. You can start an internship program using younger employees who recently graduated with connections to local universities. Then in the second year, once you hire interns permanently, you can use them as spokespeople for the next graduating class. However, a successful internship program is predicated on interns having real work to do. You need to make interns feel like full-time employees by letting them have one-on-one time with managers, attend meetings and do client-based work.
Once you’ve recruited the right employees, what can you do to ensure they stay?
The defection of good employees is all tied to the culture. You need to put people where they have a passion. You don’t want to leave people in jobs they may have entered into if that is not what they want to do long-term. If you can get a person excited about what they do — if they can contribute and have some creativity in their role — they are much more likely to stay with the company.
A growing organization has to recognize you are always looking five to ten years down the road. Not only who are my managers today, but also which employees can become directors or fill other senior level positions? Internal mentorship programs identify key performers with significant potential. And you don’t have to be shy about who is in a mentoring program and who isn’t as it might motivate others.
Keep in mind what influences employees today. Younger employees put an emphasis on family and outside activities that you wouldn’t have found 20 years ago. You may need to be more creative in allowing staff to work remotely or have flexible schedules. You also might have to help older managers adjust to the mindset and values of younger staff.
How do you evaluate your recruiting and retention strategies?
Your HR department should always be looking for feedback from staff as well as evaluating the job application website you use to see if they are the most appropriate.
You can also rate your employees to find out how your retention strategies are working. For example, you can rate staff as (1) key performer, don’t lose; (2) good performer; and (3) average or acceptable, and any employee who is rated below three you would want to actively manage out. Then evaluate which employees are leaving — how many were ones, twos and threes?
Although the recession has created a double-effect that works for the employer — the talent pool is deeper with more people out of work and with fewer jobs more people are staying put — this kind of situation is only short-term. You need to invest in your employees and ensure the company has a wonderful culture in which they can grow and eventually take on more responsibility.
John Harabedian is the Managing Director of the Retirement Plan Services division, for Tegrit Group. Reach him at 330.983.0520 or email@example.com.
Insights Retirement Plan Services is brought to you by Tegrit Group
If you think your business may need to use a staffing firm at some point in the future, you should start doing something about it now.
Waiting until you actually need those services could prove to be a huge mistake, says George Thomas, senior vice president at EverStaff.
“Obviously, it’s always best to think about it before you need it,” says Thomas. “Often, by the time you have a need, it’s already too late. Planning ahead by establishing a relationship with a staffing agency can ensure that you have a partner that will be properly prepared to fulfill your staffing and placement needs when they arise.”
Smart Business spoke with Thomas about how to develop a relationship with a staffing firm so it can stay ahead of your needs.
Where should a business owner start when considering a partnership with a staffing firm?
Before you begin, recognize that there could very well be a disconnect between your operations, human resources and finance departments. In many cases, the finance department is going to look at staffing (as they should) based on a cost savings proposition focusing on liability, overall exposure of work force and the staffing company markup. The HR and operations departments will also be looking at cost and exposure, but will be more focused on the quality/reliability of candidates and the impact on production. As the CEO, you want to align all three departments and ensure that you are taking into account the full impact of what the service offers, focusing on the total value proposition. This means getting HR, finance and operations all in one room together to figure out what your company expects to gain from the use of a contingent labor work force. Second, it is key to determine a healthy percentage of contingent work force to permanent work force. Once you have determined this, you are now prepared to consult with a contingent staffing service to best determine how you will move forward.
How do you determine the right firm for your needs?
If your company has any chance of using a staffing firm, your HR employees probably hear from staffing services several times a week so there is no need to look in a phone book. Start by asking them what they know about the local services, as they should know who is out there and have an opinion.
An important consideration when choosing a firm is determining whether the company is merely happy to be a subordinate vendor and order taker to you, or if it wants to be a trusted partner. It’s not a question you can ask directly, but you can ask about relationships and the expectation of those relationships during fact-finding meetings. Also, listen to the questions the recruiter asks. If the staffing firm wants to be a trusted partner with you, the recruiter is going to try to learn about your business and get into your operating reality. He or she will use effective questioning to get to the root of your needs and learn everything he or she can about your facility and specific operating style. Then the recruiter will use that information to form a proposal about how the staffing firm can improve your operations with contingent staff.
It’s a matching process, not just order filling, and a staffing firm can’t make a proper match unless it can get into your operating reality and understand your company’s culture. It is very easy to find candidates with the proper hard skills, but much more challenging to find someone who is going to fit in with your company culture and be a long-term match. The difference between a good and great staffing company is that the great ones can make the match.
If a prospect staffing company simply walks in with a pricing sheet without first doing a proper analysis and says, ‘Whoever you’re doing business with, I can do it cheaper,’ that’s a good indication that that company has no interest in being a partner and is happy to be a vendor. That relationship never lasts long.
How can developing a partnership benefit a business?
Too many CEOs look at the staffing industry as a necessary evil, because they can’t carry all of the liability that comes with hiring and their HR departments are normally too small to recruit all positions internally. Because of that, they see staffing firms as disposable, something they can replace tomorrow if need be. As a result, they often throw out a job to several firms, and the first one to find a worker wins.
You can do that, but it’s not doing you any good because you’re not developing a key partner relationship. You need to think of your staffing firm as the third arm of your HR department, as an external recruiting department. Have them at your meetings so they understand your business from an operational standpoint. Keep them engaged to keep them out in front of your needs.
How can partnering with a staffing firm help with retention?
Statistics show approximately 60 to 70 percent of turnover occurs in the first two to three weeks at a new manufacturing job. People are experiencing many different things and moving in ways they’re not used to, so they may be sore, or not used to specific odors, environment, etc. If there is someone coaching them through those weeks and letting them know that it’s going to get better, there is a higher likelihood that they will stay and your retention will improve.
Proper orientation is a key to retention in contingent staffing and you need to ensure that you work with your staffing partner on orientation. Improper orientation always leads to misunderstandings. In the staffing industry, much of our turnover is based on misunderstanding. For example, if someone shows up on day one and doesn’t know where to go, doesn’t have a proper orientation, or took a break in the wrong space and is disciplined, then they are likely to not return the next day. By partnering with a trusted staffing firm, you get more than just warm bodies on the job. You get the correct candidate and the right match, which is critical to your company’s operating success.
George Thomas is senior vice president at EverStaff. Reach him at (216) 369-2599 or firstname.lastname@example.org.
Insights Recruiting & Staffing is brought to you by EverStaff