75% of organisations have no strategy or budget for employee retention, claims survey

UK organisations are struggling to retain their employees, claims a new survey which finds that three out of four have no explicit strategy or budget for employee retention and they donít understand the real reasons why employees leave.

The Employee Retention Survey 2008 - by TalentDrain, an employee engagement and retention consultancy - examines the impact of staff turnover on organisational performance, HR attitudes towards retention, the interventions and approaches adopted and the use of exit interviews.

Developed from a survey of HR practitioners in 316 organisations, it finds that 93% have implemented retention initiatives over the past year, yet nearly half (47%) still admit that they have a problem retaining staff and two-thirds (65%) say they want to reduce their employee turnover.

The research authors - Ron Eldridge and Anthony Miles - fear that organisations have become complacent about retention. They argue that HR practitioners must take retention as seriously as they take recruitment and integrate it into their overall HR strategy.

The majority of organisations say they want to reduce employee turnover but three quarters have no real strategy or budget in place to achieve this, said the authors. HR practitioners pay lip service to retention but they still regard recruitment as more important. Unless more organisations monitor staff turnover, understand who is leaving, and why, and implement targeted interventions, then employee retention will continue to slip through the cracks.

According to the survey, 44% of organisations have a staff turnover rate higher than 15% per year, with one in ten exceeding 30% per year. In organisations with over 500 employees, more than a third
(36%) have a turnover rate exceeding 20%. 81% of organisations believe staff turnover has a detrimental impact on their effectiveness.

Not all staff turnover is negative, said the authors. However it becomes a problem for organisations if employees with key skills or potential are leaving. Lowering staff turnover can reduce unnecessary recruitment costs and improve the morale, motivation and performance of existing employees.

One of the most striking findings is that the received wisdom of HR practitioners clashes with reality when it comes to understanding why employees leave.

HR practitioners presume that people leave because of ëlack of promotion opportunitiesí (61%), ëinadequate payí (49%) and ëpoor relationship with managerí (26%). But anonymous exit data, collected from 5,000 leavers, across different industry sectors, paints a different picture. Although ëpromotion prospectsí and ëpayí are indeed drivers for leavers, they are not as important as HR practitioners perceive. Employees say other factors that drive them out - which are less appreciated by HR practitioners - are ëuninteresting work and boredomí (25%), ëlack of training and development opportunitiesí (25%), ëlack of teamwork and cooperationí (19%) and ëpromises not kept by managementí (17%).

HR practitioners regard ëpoor line managementí as the third highest contributor to employee turnover but only 13% of leavers actually cite this as a reason for going, said the authors. Our data shows that ërelationships with colleaguesí is a more important factor. How can HR put in place effective retention initiatives if it doesnít understand the real reasons why employees are leaving?

The retention initiatives implemented over the past year include ëimproving employee communication and involvementí (66%), ëimproving the induction processí (56%) and ëincreasing learning and development opportunitiesí (47%).

Organisations that provide challenging work and opportunities for training and development are more likely to experience a lower rate of staff turnover, said the authors. Surprisingly, only 7% of organisations attempt to redesign jobs to make them more satisfying. Particularly with monotonous or inflexible jobs, this can have a big impact on employee retention and well-being.

The survey suggests that a lack of honest and reliable exit data prevents HR practitioners from gaining a true picture of why employees leave.

For the most part, approaches towards collecting exit data are haphazard and non-strategic, said the authors. HR practitioners tend to rely on hearsay or opinion, rather than a systematic analysis of reliable data. Thereís no reason why exit procedures should not have the same level of standardisation, objectivity and analysis as the selection process.

57% of organisations use traditional face-to-face exit interviews as their main source of data to find out why people leave but only half of them aggregate the data, to reveal exit patterns. Only 4% collect anonymous exit data.

The exit interview is treated as more of a check-box process than a strategic opportunity, said the authors. It is questionable whether traditional exit interviews provide honest information, as a leaving employee may choose to avoid confrontation to maintain a good reference.

The report highlights the financial case for retention, given that the average cost to replace an employee is between 7,750-11,000, with additional ëcostsí such as lost opportunity time.

Itís difficult to quantify the impact of an indifferent employee on performance, staff morale or customer satisfaction, said the authors. Even a one per cent reduction in staff turnover would cut recruitment costs significantly, as well as increasing overall organisational effectiveness.

An executive summary of ëThe Employee Retention Survey 2008í
can be downloaded free from TalentDrainís website:
http://www.talentdrain.com. For more information, please call TalentDrain on 0870 760 6598 or e-mail info@talentdrain.com.