Companies should invest more in building staff loyalty to reap benefits in improved profits

Companies are sitting back and watching profits walk out the door by not doing enough to hang onto good staff, according to management consultants, Hay Group. They argue that the pendulum has swung too far away from a contract of loyalty between employer and employee and that itís the companies which are suffering the most.

Employee turnover is now around 25% per annum, according to the latest statistics from the CBI (up from 22% last year), and the effect of this can be to reduce company profits by as much as a third. The answer, according to Hay Group, lies not in upping pay offers, but in finding ways to offer more diversity and challenge at work.

Recent research by Hay Group found that as many as one in three staff plan to move on within two years. Hay Group stresses that some turnover of staff is healthy as it brings with it fresh ideas and innovation but that things have now gone too far. A quarter of all the companies surveyed by the CBI admitted that they are dissatisfied with their current levels of staff turnover.

There is an appreciation among many firms that this situation is costing them money, but few companies have an accurate idea of the true price of losing personnel to other jobs. Hay Groupís research indicates that it costs roughly the equivalent of 18 months salary to replace a manager or professional employee (not counting the hidden costs of any disgruntled workers who feel under-appreciated but stay behind).

Kim Walker, consultant at Hay Group, said ìStaff retention issues went off the radar during the 1990s when employees were first encouraged to take individual responsibility for their own career progression. But, while we would argue that taking personal responsibility for your own career remains a good thing, smart companies are realising that there is a lot to be gained from helping employees in this regard.

ìRelatively low unemployment and portable benefits mean itís easier than ever to change jobs, and our research shows that people move on fairly readily if their companies are complacent enough to let them. Smart companies however, have woken up to the fact that itís cheaper in the long run to invest in their people to encourage them to stay. ì

Hay Group does extensive research in the field of staff loyalty and motivation. From this, they have identified seven key ways to reduce employee turnover.

All depend on the principle that people want to find meaning in their work, and to feel valued. This is much more important than money, with ëpayí coming in only seventh in a list of eight factors associated with employee satisfaction.

Hay Groupís advice to companies;

1.Show staff that you care. Company culture is closely linked with staff retention yet more than two thirds of employees in a typical firm feel that their managers do not go out of their way to help them develop their skills.

2.Be lean ñ but not mean. Many employees who find themselves trapped in narrow job functions will leave through boredom and lack of opportunity to stretch themselves. Managers need to put their peopleís needs higher up the agenda by finding projects and cross-functional moves which give employees space to develop new skills and grow.

3.Walk the talk. Even where companies have a clear picture of strategy and take time to communicate this to staff, the value is lost if company managers are not seen to be consistent. People work best if they know whatís expected of them and can be confident that these values are shared throughout the company.

4.Value soft skills. Itís hard to quantify or put a value on interpersonal skills but companies should try. Putting too much store on technical skills and financial results gives out the message that people skills donít matter. This is often interpreted as ípeople donít matterí.

5.Think of training as career development. Companies too often provide training which reinforces old skills instead of building new ones. By offering challenging assignments and training opportunities, companies greatly increase the chances of employees sticking around.

6.Beef up the management team. Good people see bosses as the ëwind beneath their wingsí and recognise that they will go nowhere with a weak boss who lacks influence within the organisation.

7.Eliminate weak performers. Companies want to hang on to good workers, - but not all workers. Tolerating poor performance over the long term drags down those trying harder who perceive the effort gap as íunfairí.

Kim Walker adds, ìYou can never stop people from assessing their career options, nor should you want to. But if people feel that they are valued and that their employers care about their careers, they repay that interest with loyalty.

ìLoyalty was pretty much of a devalued concept under the íGreed is goodí mentality of the 90s, but itís a different world now. Thereís no doubt that finding ways to strengthen employee loyalty makes sound business sense. ì


Issued on behalf of Hay Group by the BIG partnership. For further information, please contact;

Marjorie Calder the BIG partnership 0141 333 9585
Jillian Galloway the BIG partnership 0141 333 9585