ASQ - Team and Workplace Excellence Forum

Online Edition - June 2001


Issue Highlight — A Sad and Grateful Remembrance
- Peter Block reflects on the life of friend and colleague, Joel Henning. Read about his lifelong contributions and what we can learn from his vision for a brighter future.

 In This Issue...
A Lesson In Leadership
Holding On
Microfiching For A Solution
Solving The Presentation Puzzle
Reopening "The Diary Of A Shutdown"

Peter Block Column
Views for a Change

Brief Cases

Return to NFC Index

Holding On
During Uncertain Times, Tried
Retention Tactics
Still Hold True

The thriving economy of the late 90s brought a strong sense of security and confidence back into the workplace. Organizations persuaded top talent with extravagant perks while employers found themselves dealing with higher standards from their employees who demanded better compensation and benefits. Competition ran high between companies who wanted to recruit the best and brightest in every field. The threat of losing valuable employees to companies offering more appealing incentives forced managers to take a deeper look at retention issues and create new methods of maintaining their hardest workers.

  Nowadays readers can’t open the daily newspaper without the bombardment of reports of mass layoffs all over the country. What happens when employees do not receive what they were promised due to budget cuts and constraints? How do you convince an employee to stay in an organization that can’t live up to its word?

  Retention is not something that comes and goes depending on the current economic situation. It should be important whether the economy is stable or in the depths of despair. The bottom line is that retention saves money. The cost of rehiring and training a person to fill a position is much higher than retaining a current employee with more attractive incentives. In fact, the expense of replacing an employee is between 100 and 150 percent of his or her salary. So, have retention tactics taken a backseat to budget cutbacks and employee layoffs?

  It depends on the industry. Don Sanders, a consultant with Sagent Consulting in Houston, believes it remains one of the top three concerns among management in that area of the country. “Right now the awareness and the importance of employee retention and the cost of losing a good employee is growing,” he says. “I see some companies where, yes, they’re definitely looking at budget constraints and other companies that are doing extremely well looking at the cost of turnover and how to reduce the cost of turnover.”

  Some organizations have yet to confront the cost of turnover and retention. John Cavanaugh, employee development specialist for the Minnesota Department of Transportation in Duluth, has not yet been affected by the economic scare. In fact, as a government agency, they’re having trouble getting employees. “We’re still recruiting like crazy to get the type of employees we need,” Cavanaugh says.

Tried and True
As part of a government agency, Cavanaugh has noticed growing competition from the private sector. Their main concern is keeping employees from moving on to larger companies with more incentives. For example, the tech industry has been able to keep up with the changes in the economy and therefore offer larger salaries and attractive perks. Since income incentives are more difficult to offer through the government, Cavanaugh has had to be more creative about retention tactics.
   “One of the things we’re doing is moving to team-based type management in our maintenance forces. That’s been a big part of my job—allowing employees to have more say in their jobs,” he says. He has also been working on a new recognition package, making sure supervisors say thank you. “We’re working on quality issues and other traditional things. There are some things we just can’t do because we’re doing more with less and it’s stressful.”

  Cindi K. Hendricks, SPHR, director of human resources for Specialty Products and Insulation Co., East Petersburg, Pa., is also sticking to the tried and true methods of retention. They are still using incentive stock option grants as employee perks, though she admits they may not have the same claim towards retention as they had two years ago.

  Though Hendricks feels the importance placed on retention tactics has lessened recently due to the economy, she feels her workforce, particularly among management, has been exceedingly stable. “Even after the dynamics of the past couple of years, when other companies were experiencing a lot more problems than we are at this time, we counted our blessings and thought, ‘Well, we must be doing something right.’”

  That “something right” is focusing on all the players in an organization. “I go after the people who you would call the soldiers. Those are the people that are making it happen on a day-to-day basis, because they come to work every day and because they do an incredible job by virtue of their own commitment to the work. Some of that is transparent in terms of what the company does or doesn’t do,” Hendricks says.

   Sanders builds on this concept, but also sees it as an opportunity to let certain slacking employees go. “If you have to go through layoffs, you should use it as a time to strengthen your workforce.” He continues, “It might sound strange, but we all know that there are people who work harder than others. You keep your best people and reward your best people and therefore strengthen your staff.”

Managing Relationships
Recognition and retention tactics continue to remain an essential aspect of every manager’s job. According to Sanders, 78 percent of retention is related to the relationship between the supervisor and the employee.

   Hendricks agrees and stresses the importance of this relationship to her managers. “There are a couple of basics that always make the difference. One is to communicate by behavior as well as by word that, ‘I know you’re there, I care about what you’re doing, I give a darn about you as a human being and I care about your output.’” She adds that challenging and meaningful work will make employees feel like they are part of a team and an asset to the organization.

   Employees want company commitment to employees. “Employees know the economy is tightening and layoffs may have to come, but they want to see the company really committed to them. I see companies that build pride in the individual company so that the employees feel part of something greater than themselves,” Sanders adds.

   Cavanaugh maintains that this holds true in his industry as well. “In the public sector we always try to remind our employees of the importance of the job they’re doing. If our snowplow drivers didn’t go to work for one day during a snowstorm, the economic impact would be in the billions of dollars. It’s a very important job and they tend to lose sight of that sometimes.”

Money Talks
The economic impact on the organization should be a large motivating factor for increasing a decent retention program. “Retention is important because training new employees is expensive,” says Cavanaugh. “Not only is it expensive in terms of training dollars, but also in terms of customer service. When you get less experienced employees dealing with customers, oftentimes the customer becomes frustrated because the employees are in training mode and don’t have all the answers right away.”

   “It’s not unusual to have $2-3 million that you lose annually due to turnover, and it comes out of the bottom line,” says Sanders. “I think in a tight economy, you reach people by talking dollars. Turnover is a real cost, often unmeasured.”

   However, as important as retention is to the bottom line, it is necessary to remember the importance of earning the trust and hard work of employees. A great retention tool is recognizing the importance of work/life balance. If you let employees know they are important in their work family, chances are you’ll gain the mutual respect that is crucial to any successful organization.

   “As much as I can counsel and advise supervisors, it’s important not to forget those basics. Hendricks says, “When times do get tough, they make a huge difference. Perhaps disproportionately vs. the good times, but nevertheless, those basics are always the keys as far as I’m concerned.”


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