The widespread imbalance between recruitment and retention shows that organisations have got their priorities wrong, says Ron Eldridge. He calls for a strategic shift to address this anomaly.
Staff retention is a key issue for HR professionals. UK organisations spend billions of pounds attracting, recruiting and developing their staff yet research shows that more than half of all new starters leave their organisation within two years - and one in four leaves within six months.
The result is constant recruitment, which is not only time consuming, it is also expensive. Our research shows that nearly 70 per cent of organisations find it difficult to replace staff and, according to the CIPD, it costs an average of £4,333 to replace an employee.
"When you ask whether they have a strategy or a budget in place to retain the people they have spent so much time and effort recruiting, the answer is invariably 'no'."
What is staggering is that organisations seem content to let this happen. Many are very clear about the time and money they spend on recruitment. But when you ask whether they have a strategy or a budget in place to retain the people they have spent so much time and effort recruiting, the answer is invariably 'no'.
Why is HR so one-sided? Why are massive budgets allocated for the attraction, recruitment and selection of staff but not for retention?
This emphasis on recruitment is matched by the plethora of consultancies, candidate tracking systems and psychometric tools, all offering to sift, assess and select the most appropriate people for the role, thereby conferring a competitive advantage in terms of talent.
Given this established recruitment infrastructure, it is inevitable that HR practitioners are under considerable pressure from the business to fill the gaps as quickly as possible. However, the truth is that the successful recruitment of talent will procure very limited returns without complementary retention strategies.
Shifting the paradigm
Clearly, it is in an organisation's interests to engage and retain its employees. At the very least, a committed employee will be more motivated and will therefore impact more positively on customers and colleagues.
To develop an effective retention strategy, organisations need to address the imbalance in HR investment to encompass the lifecycle of an employee throughout their tenure at a company. This means they need to understand the psychological insights around employee commitment.
But what factors make for a more committed workforce?
At TalentDrain, we've identified three main areas which form the psychological contract between the employee and the employer: 'psychological growth needs'; 'the everyday experience' and 'the transactional relationship'.
The first of these - psychological growth needs - deals primarily with job satisfaction and the opportunities to develop personally. It centres on the individual's need to learn and grow. Boredom and stagnation are not only problems in terms of productivity, they have also been linked with stress and poor health. The perception of one's own ability to do a good job comes from a continual process of learning, developing, trying new challenges and experiencing feedback to inform one's self-assessment.
The everyday experience relates to the extent to which the employee's beliefs and values match those of the organisation as well as the ability of the individual to maintain a healthy work-life balance and a flexible approach to work.
The transactional relationship revolves around the extent to which the expectations of the employee have been met - both in terms of job content, training programmes and career management.
And yet, these areas are all too often ignored in the hiring process. Focus is given to the skills and behaviours required for the role - not to be ignored of course - but without due consideration to these three factors, there can be serious ramifications on employee turnover and the health of the organisation in general.
Dispelling the myths
So why do people leave organisations? There are many glib statements that trip off corporate tongues to explain this. For example, it is often said that people leave their boss, not the organisation. Whilst a poor manager or an unworkable relationship with a manager clearly has an impact on retention, the facts show that this is not the primary driver behind an employee's decision to leave.
Our evidence shows that only 14 per cent of people leave because of 'dissatisfaction with their manager'. Organisations need to stop explaining away employee turnover with myths such as this. Instead, they need to base interventions on what really makes employees more committed and engaged.
"Whilst a poor manager or an unworkable relationship with a manager clearly has an impact on retention, the facts show that this is not the primary driver behind an employee's decision to leave."
In 2006, we published our first Employee Retention Survey, which explored the use of exit interviews and the mismatch between employer and employee priorities in the psychological contract.
We're now undertaking a second survey and we'd like HR professionals to give their views on labour turnover and staff retention. We're looking to uncover more about the real reasons why employees leave organisations, the impact of staff turnover on organisational performance, the interventions and approaches used to retain employees and the resources allocated to staff retention.
The confidential online survey, which should take around 10 minutes to complete, can be accessed at www.talentdrain.com.
The information provided will only be used in aggregation with the answers of other respondents and, if you take part, we'll send you a free pdf executive summary of the final findings when the results are published in January 2008.
If organisations are to get the balance right between recruitment and retention, they need a much greater understanding of employee engagement. This survey will enable us to dispel some of the myths and misconceptions of retention and it will also enable us to highlight the key retention challenges for organisations.
Ron Eldridge is a director of people retention specialists TalentDrain, which provides tools and support services to help organisations understand and enhance the levels of engagement and satisfaction in the workplace. You can contact him on: [email protected]