Chapter 8
Retaining Highly Motivated Employees
Collectively, your employees help to define your corporate culture. Once you have hired the best employee and understand how you maintain the highest levels of motivation, a major workforce revolution is underway. Predicted by the landmark Workforce 2000 study, this revolution has redefined the value of America’s corporation. No longer should you be looking exclusively at balance sheets, PE ratios, or P&L statements to predict the success or failure of a company. Especially if you are in the service sector, human capital assets are now just as important, if not more important, than your land, your buildings, and your machines.
The Cost of Turnover
Research has found that turnover is now a primary expense to any corporation and can cost a company an average of 1.5 times the salary of the departing employee, dependent upon the nature of the job and the organization. Nonexempt employee turnover costs average .75 times annual salary while that figure jumps significantly to 2.0 for professionals.
One particular Florida company had one hundred personnel in their call center, each earning thirty thousand dollars per year. With an annual turnover rate of 20 percent, turnover costs averaged nearly one million dollars every year.
An earlier attempt to quantify some of the tangible costs associated with turnover was offered by Wayne Cascio, H. L. Smith, and W. E. Watkins in the 1978 article. Some areas to consider are:
| Exit interviews | Administrative expenses |
| Interviewer’s time | Additional temporary help |
| Terminating employees | Additional overtime |
| Administrative expenses | Increase in unemployment tax |
| Separation pay | Attracting applicants |
| Entrance interviews | Employment testing |
| Travel and moving | Post-employment expenses |
| Medical exams | Training new employee |
The process of calculating your company’s expenses relating to turnover can be quite complex, especially when considering the intangible costs associated with its impact upon your unique culture/climate and the emotional impact upon the employee who is terminated. Employees who add another line to their résumé discover that the difficulty in finding a new job opportunity is compounded. To determine the true health of your organization, you’ll need to understand the true causes of your turnover. But how does a leader learn what is necessary without having to go back to business school?
The first step is to understand that there are two types of turnover: voluntary and involuntary. Voluntary turnover is when your employees leave on their own (“I quit!”) while involuntary turnover is when you pink slip your employee (“You’re fired!”) It is most important that you collect accurate data each time an employee is terminated and break down your turnover data into these two categories.
Voluntary Turnover. If your employees voluntarily quit their job and leave without provocation, the reason for your high turnover is most likely found in your inability to satisfy either the deficit or being needs discussed in chapter 3. You may not be satisfying their basic needs for job security, fair pay, satisfying work conditions, or belonging. On the other ...
