Unprepared for Growth? It’s not too late…

While the downturn had some people believing “security fears” had done away with competition for talent, the skills market hadn’t actually improved. “It’s just that the mobility of the workforce had died down,” Sork says.

Now, as mobility increases, employers that have worked to retain talent will be in a position where “anyone they bring on board is actually growth-related”. Further, the employees that have been retained “are actually going to be fairly highly engaged and want to perform at a high level”.

Employers that need to replace existing talent will suffer a lag time, Sork says, as every person that leaves adds “an extension to the timeline for them to be business-ready”.

He suggests that HR managers who have not prepared for growth should go into damage control now, taking four important steps.

1. Look for the warning signs

Discretionary effort - or a lack of it - is the first warning sign to look out for, says Sork. By examining people’s behaviour patterns, employers can seek to discern whether workers are “demonstrating a willingness to apply themselves to the best of their ability and for the good of the company” or just achieving “minimum performance standards” until “something better comes up”.

Meanwhile, Sork suspects the biggest warning sign - resignations - is yet to be fully realised. “The interview process for existing employees will take a little while and then I think real mobility will start kicking in [during] February and March.” Only then will some businesses realise they are entering a “danger zone”, he says.

2. Prepare for what’s ahead by acknowledging what’s past

One of “the biggest issues” for organisations post-GFC is the way they focused on survival at the expense of engagement during the downturn, says Sork. In order to address this, employers should acknowledge their mistakes to employees and explain why their actions were necessary “from their perspective, at the time”, he says.

It is about acknowledging, not justifying, their actions, he says, “resetting the commitment to people and therefore, hopefully, resetting the commitment of people to the business”.

3. Compensate workers according their value

Even those organisations who were “doing the right thing” by their employees all along may have had to stop handing out bonuses or doing salary reviews during the downturn. “Knowing now that the business is potentially going to enter into a phase of growth and will capitalise on better performance, they do need to make sure there is at least a review of how they are going to acknowledge the commitment their people have given during tougher times,” he says. Whether that’s financial or otherwise, there is a need to demonstrate appreciation for employees’ commitment during difficult times.

Sork says managers should ask themselves: “Do I want to hang on to this person? What do they see as their perceived value? Am I compensating them according to their perceived value? Do I think I’m getting value out of them?”

“If all of those answers are ‘yes, I am,’ then you’re likely to have a secure employee,” he explains. “If the employee thinks they’re being undervalued at the moment then there’s a risk they’re going to seek out environments other than yours.”

4. Prepare managers to be good primary carers

A manager’s ability to create a welcoming environment can be the difference between avoiding the “revolving door” and attracting and retaining talent, says Sork. While all employees need to accept their role in welcoming a new member, the manager is the key.

“In our experience, the majority of managers are not good at attaching and onboarding, and so we’re likely to enter into a phase where there is a reasonable level of placement and fallout,” Sork says.

Sork suggests building awareness and readiness by helping managers to understand what attachment is, and the impact they will have during the critical attachment period (the first 120 days).

Their performance will affect the discretionary effort and performance of all new employees - and the overall risk of attrition - so it must be measured and managed well, he says. 

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The true cost of unplanned employee turnover

I don’t know the exact numbers for your organisation, so when I tell you that unplanned employee turnover is probably costing you between 3% and 5% of your annual revenue and up to 40% of your annual profit I’m basing that on statistics taken from averages across many industries and organisations.

Hopefully you do know your numbers.

For example, what percentage of your employees leave every year, what proportion of this is made up voluntary departures, what is the average cost of an unplanned loss, how does that affect your bottom line?

If you do know your own statistics you can plug them into the calculations at the end of this article to discover how just much unplanned employee turnover is costing you. When you do you’ll almost certainly find that those numbers are just plain frightening, assuming I’m even close to being right (and I’m pretty confident I can demonstrate that I am). Or they represent a huge opportunity, if you can do something about them

For the moment, let’s assume “regretted departures”, i.e. the loss of people you’d rather not lose, costs you 3% of your annual revenue. That’s money straight off the bottom line being poured down the drain. To put it another way, if your annual revenue is $100 million, unplanned turnover could be costing you $3 million, possibly more. If your EBITDA is 10% of revenue that’s the equivalent of $30 million in sales. (If you’re number oriented all the figures to back these assumptions are laid out for you below).

Scary isn’t it?

So, what, if anything, can you do about it?

Obviously you can’t eliminate it totally. People will always leave for their own reasons; moving away, getting married, retiring, dying, etc.

But if you could reduce it by even 1% you could make a significant contribution to your bottom line – perhaps 4% or more, equivalent to selling another $4 million for a $100 million revenue company.

And you can, for less than the cost of a cup of coffee per employee per week.

The first step is to understand the scale of the problem. If you can’t measure it you can’t fix it.

The second step is to implement a program of human capital risk management. To understand which of your employees are most at risk of leaving, the impact on the business if they do leave, their level of performance, their future potential and what plans you can put in place in case they do leave.

The third step, at least for those with a moderate to high flight risk and moderate to high business impact, is to do something about it. That doesn’t necessarily mean spend more money, it could be as simple as giving increased recognition, offering more flexible hours, providing better training, maybe just a quiet conversation. What you do in step three depends on many things. To be honest we probably can’t do much to help you there – but your own team certainly can once they know where to focus.

And that’s where Acelero can help you. By giving you the tools to measure the scale of the problem, identify which employees are at greatest risk of leaving, identify which employees have the highest impact on your business and put plans in place to minimise the risk of their leaving and what to do if they do leave.

Acelero specialises in on-line performance management and human capital risk management systems and provide the technology that makes it easy for you to recognise the problem, quantify it and take steps to fix it.

The rewards are potentially huge. Even if you only reduce unplanned turnover by 1% you’ll break even in a few weeks and your potential Return on Investment could be anything from 400% upwards. And that isn’t even counting the additional benefits from improved performance, better succession planning, more effective talent management and so on. It’s just looking at one thing, reducing unplanned employee turnover.

Now, I promised you some facts and figures so here they are, along with references to show where they came from. If you substitute my assumptions with your own figures you’ll come up with the true cost of unplanned turnover in your organisation.

Assumptions

Average cost of an employee per year                                               $82,250

(Based on ABS average salary of $62,500 plus 30% for additional costs)

Average cost of a “regretted loss”                                         $41,125

(Based on 50% of average salary. According to many estimates the cost of a “regretted loss” varies from 30% to 250% of annual salary. The Saratoga Institute – part of PWC – estimates the cost at between 25% and 150% with the % increasing as the salary and seniority increase. It costs a lot more when a highly skilled or senior person leaves.  I’ve taken a very conservative 50% as my figure. See below for how this figure is calculated).

Average turnover                                                                    15%

Average unplanned turnover                                                  10%

Number of employees                                                             1000

Revenue                                                                                  $100,000,000

Profit as % of revenue                                                                        10%

Profit                                                                                        $10,000,000

Calculations

Unplanned losses @ 10%                                                        100 employees

Cost of unplanned turnover 100 employees @ $41,125         $4,112,500

Cost of unplanned turnover as % of profit                             41%

Amount of sales needed to generate $4,112,500 @ 10%      $41,125,000

Potential savings - reduce unplanned turnover by 1%

Unplanned losses @ 9%                                                          90 employees

Saving in retained employees                                                 10 employees

Saving @ $41,125 per employee                                             $411,250

Saving as % of profit                                                               4.1%

Equivalent in additional sales                                                   $4,112,500

Steve Hall is Principal of Acenet and has 30 years of senior management experience in professional services, sales, marketing and global account management and has worked with customers ranging from small private companies, through ASX 100 organisations and government departments to multi-billion dollar multinationals.

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Ten principles every great leader should know

1. Walk the Talk.  As a leader, how you act and what you do, communicates more clearly than the words coming out of your mouth.
2. Do unto others. Communicate with your employees the way you would like to be communicated with—openly, with respect and trust. You set the standard for how they will treat your customers.
3. Have an opinion. It’s much easier to have consistent communication when you take a stand and believe in your employee value proposition, or core values—whatever you want to call it. Just be sure it is clear, easy to remember, makes sense, has an element of inspiration, differentiates you as an employer, will hold up for at least ten years, and is everyone’s job to live it!
4. Short loop feedback. Communication is a two-way process. Have a number of upward channels and do something with what you hear—and tell people about it!
5. One size does not fit all. Understand your audience and communicate in the best way to reach it. Take a lesson from the marketers—know the demographics and psychographics of your various audiences and tailor communication messages, content, style, and channels to them.
6. They both end in “tion” but there’s a big difference between “information” and “communication.” Communication influences thoughts, feelings, and actions. Information simply informs. When it comes to pushing it out to your employees, the 80/20 rule applies—80% communication and 20% information.
7. Communicate courageously. If you communicate openly and honestly, you will make some mistakes and there will be times when you don’t have the answer. Admit it. Your employees will understand and will respect your courage. Occasionally, you can’t communicate because of regulations or laws. Explain why you can’t communicate now and when you expect the situation to change.
8. Remember the competition. Every employee receives hundreds of messages every day. Your message competes with all of them. Each person selects what to pay attention to and what to ignore. Why should employees pay attention to messages from your organization? From you? How can you help employees focus on what’s important?
9. If it looks important, it must be important. How you package the communication about programs has a big impact on perceptions of the program itself. Match the packaging to the level of importance.
10. Good communication is a good investment. In the absence of good communication, the grapevine thrives. And the grapevine will leech the resources from your business—productivity, commitment, and reputation. 

And if you do just one thing, do this: Choose front line managers for their communication skills. Front line managers have the greatest influence over an employee’s engagement. Managers who are good communicators get more from their direct reports than managers whose strong skills lie elsewhere. Managers who are good communicators are the insurance policy for keeping the best workers happy.

Emma Magnusson has successfully led large teams in several private and public companies throughout her career including international experience gained in Europe / Scandinavia / UK and USA with companies such as Qantas Airways, American Express and Key Data Services (KDS France). She passionately believes Acelero’s performance management solutions enable great leadership by creating clear communication channels and aligning employee’s daily tasks with the objectives of the whole organisation.  

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Why are HR professionals sometimes like English tourists in France?

Not so long ago I read an article entitled “Why we Hate HR” on FastCompany.com.  I was ashamed to say that, despite being an HR professional for the past 20 plus years, I found it hard to disagree with anything that was being said.  The writer was a business person and the article outlined his many frustrations with the HR function.

This is sad really, as there are many highly competent, dedicated HR professionals out there who deserve more recognition for their efforts.  So why is it that we have such a bad name?  My theory is that we often fail to speak the same language as the business.

Like English tourists in France, we seem to think that if we speak louder and more slowly, our CEOs will immediately understand and accept what we’re saying.  Like the French, however, instead the business becomes alienated and irritated, deciding we’re ignorant idiots. 

 So how to overcome this problem?  Obviously, we need to learn to speak that other language.

We must engage our CEOs on their own terms, with structured business cases supported by evidential data that are free of jargon.  We must take on the tough job of developing a thorough understanding of all aspects of the business so we can talk credibly about how we, as a function, can help our CEOs deliver their objectives through people.  And we must develop presence – so many of us seem apologetic for our existence.  Stand up straight, have confidence and for goodness sakes learn to deliver a competent presentation.  If you want to be an equal to those at your top table, you must step up to the mark.

There were many HR professionals to whom I spoke who were incensed by the FastCompany.com article. There were also many, who, like me, found it hard to disagree with anything that was said.  Interestingly, it was those who most needed to step up to the plate who were most incensed.  What does that tell us I wonder?

Emma Marshall has 20 years’ experience working across the full range of human resources activities in Europe, Asia and Australia and is now Director of Callidus. She will be speaking at Acelero’s breakfast seminar entitled ‘CEOs are from Mercury, HR are from Jupiter: bridging the gap’ in Melbourne and Sydney in March. Click here to register for this free interactive seminar: http://www.acelero.com.au/connect/event-registration/

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Unprepared employers face three “recruit and replace” phases

The economic recovery will hit employers “like a tsunami”, says human capital consultant Anthony Sork. Employers acting too late to stop the exodus of their workers must focus on attaching and on-boarding their replacement recruits.

It might not be politically correct to talk in terms of earth quakes and tsunamis in a context other than natural disasters, he notes, but at the risk of offending some people he uses a tsunami metaphor to describe “what is about to happen in the employment market”.

“If we think in terms of normal tidal movements being essentially caused by the gravitational pull of the moon and liken this to the pre-GFC market, where employer-of-choice initiatives and career progression opportunities were the major ‘pulling’ force influencing the mobility of employees, what we are about to experience is the equivalent of a tsunami or at least a tidal surge of very large proportions.”

The GFC, says Sork, the managing director of Sork HC, has been the equivalent of a quake that shocked the global employment market, rapidly reducing employment opportunities and placing many businesses into panic mode. “The subsequent management behaviour within these organisations (aggressive, coercive, directive - leveraging fear and insecurity to drive short-term performance) has been the displacement wave that has been travelling for the last 18 months to reach our shores.”

Economic forces have essentially held back the normal levels of mobility and employees have been staying with their employers out of necessity (driven by security rather than desire), he says. The additional impact of fear-based management and leadership behaviour means “the power behind the desire to move on has been building considerably”.

The effect of this will be like a large wave hitting the return of market confidence and the growth of employment opportunities, Sork says. “Rather than the normal calm tidal shift, there will be a surge of employee mobility driven by the desire to leave their existing employer (the ‘push’ phenomenon).”

This will leave many organisations “essentially immobilised because of the talent exodus they will suffer”, he says. “It is virtually too late to stop this happening now as the damage caused by aggressive leadership and management behaviour has been done.”

The phenomenon will intensify as those same organisations - in rushing to fill vacancies - will enhance their employment opportunities in ways that ultimately disappoint new recruits. Sork says this represents “phase one” of a three-phase process.

“We are starting to see the signs of this phase appear right now,” he says, noting that the Olivier Job Index is reporting demand for staff up by as much as 19 per cent for some specialist positions. He predicts “frenetic [hiring] activity” will begin within the next few months, with a pause over the Christmas break although job ad levels will remain significantly higher than usual during this period.

Recruitment industry unprepared for upturn

Sork notes that in previous recovery cycles the recruitment industry was reasonably well positioned to capitalise on the surge in demand for staff, but this time around it moved quickly to reduce its workforce and “many [agencies] are now going to be left short of consultants”.

He expects that, as a result, the industry won’t benefit from the recovery to the extent it has in previous cycles, partly because technological developments - including job boards and social media - give employers greater direct access to talent “and to a much higher volume than we have seen before”.

Attaching and on-boarding success unlikely

Phase two will occur “as the wave retreats”, Sork says. “A high proportion of employees who were running away from their GFC employer in phase one will have made decisions that were not fully considered. The key motivator in their decision making will have been to ‘get away from here’.”

Their new employers, he predicts, “will likely do what is historically a poor job of attaching and on-boarding [them], particularly given the market pressure to have them up and running and producing as quickly as possible. The combination of accepting a job that does not meet the two key sets of criteria - ‘what I want’ and ‘what I don’t want’ - coupled with poor attachment will lead to many of these employees realising that they have made a rash and poor decision”.

It is very likely these employees will look to move again, he says. “Employers will also realise the impact that their poor hiring, attachment and on-boarding has had, as their businesses see high levels of fall-outs in the first six months [post-hire]. They will likely realise that their managers need to focus on managing the business and outsourcing will again become the preferred option for a while. Attachment and on-boarding will remain the critical differentiator in whether organisations will be able to break the recruit and replace cycle that will challenge many.”

“Pull” forces return

Phase three, Sork says, will see the employment market begin to stabilise again and the return of the normal “pull” forces.

“This is a far more pleasant environment for both employers and employees. The way organisations invest in their human capital will dominate the strength of ‘pull’ force they generate. It is important to note that those employers that have maintained a focus and investment in their people during the GFC will be far more protected and will achieve this phase faster than others.”

Those employers that have maintained a commitment to their people, he says, will experience less attrition in phase one, and will be better placed to secure top talent and minimise the impact of phase two.

“Key to moving to this phase and then ensuring you are creating a culture that is engaging and achieves sustainable high performance is leadership and management behaviour,” he says. “Organisations that invest in the behavioural impact of their leaders and managers will position themselves as constructive cultures and achieve employer-of-choice brand value.”

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