Employee turnover is becoming an increasingly critical issue for companies across the globe since 2010. One of the biggest contributors to this is the economic recovery, according to an article by Josh Bersin, Principal and Founder of Bersin by Deloitte, following the onslaught of the subprime crisis starting 2008.
What does this really mean for businesses? How does the impact differ across organizations? What can be done to shield a company from losing talent? These are some of the questions that most organizational leaders, HR heads and industry researchers are trying to find answers to.
The impact of employee turnover
Studies indicate that the average company loses between 20% and 50% of its employee base every year, according to a blog by Wharton, University of Pennsylvania.
Businesses that fall in the Manufacturing category are dependent on automation, assembly line, machines and processes. Although human resources are critical, the issue is far less severe than what companies in the Services sector face. This is because the real assets of companies in the Services sector (like banking, cloud computing, IT, etc) are the people, how well they imbibe the culture and their commitment to achieving the business goals.
Within the Services sector, certain businesses are plagued with higher turnover. For instance, customer facing businesses (like supermarket chains) experience higher departures than technology based companies. Within a company, certain verticals have traditionally experienced higher turnover. For instance, it is not surprising to experience up to 40% per annum turnover rates in the sales departments and customer service verticals.
The cost of employee turnover
The total cost of losing an employee can range from tens of thousands of dollars to about double the annual salary of the employee. The cost includes the expenses incurred to hire a new person, costs associated with training the new person, low productivity till the time the new person becomes efficient, cost of errors made by the new employee, adverse impact of a departure on the motivation level of other employees and impact on the company culture.
Employee loyalty: a critical factor
While there are sectors, industries and business verticals that are more prone to a high turnover and the state of the economy plays a key role, one critical factor impacting the rate at which people leave a company is employee loyalty. With this, employees stay committed to the success of the company and do not actively seek employment elsewhere.
Commitment of all employees is based on rewards and recognition, Andrew & Kent stated in the International Journal of Coaching Science. Thus, employee recognition programs play a key role in ensuring that the people act in the larger interest of the organization.
Employee recognition programs
Recognition programs have moved beyond just a nice thing for companies to do, according to an article in Morgan Brown. Today, companies need to think about recognition strategically. This can help align employee behavior with business goals. “During my decades in management I was involved in many employee surveys…The one issue that recurred in literally every survey I was involved with was employee recognition,” says Victor Lipman in an article in Forbes.
A well strategized employee recognition program: case study
SES, a leading satellite operator, wanted to have an employee reward and recognition program to motivate employees whose role is critical during new satellite launches. SES wanted something new and fun. SES worked with experts to look outside the box and provide a strong solution, while remaining within the budget.
SES has a network that spans the globe, from South America to North Kazakhstan, and a one-size-fits-all approach was certain to fail. Based on the findings from the review of each of the territories, survival kits with branded merchandize were conceptualized. These kits contained necessary items, according to the needs of the particular location.
Here is a look at the survival kits that were created for employee reward and recognition program
Since companies need to actively prevent human resource turnover, employee recognition needs to be planned and implemented with the highest degree of strategic thinking. The management needs to crystallize the behaviors that they wish to encourage and then align their employee reward and recognition program to foster these.
