Employee Retention Issues? Look in the Mirror (Part 1)
Part 1 of 2-Part Series on the Important and Timely Issue of Employee Retention There is a saying that employees don’t leave companies, they leave managers. Today, they are leaving more than ever. According to recent U.S. Department of Labor statistics, the average tenure of an employee in the U.S. is now only 1.5 years. We have ample statistics that clearly indicate money is NOT the reason for employees leaving a company. They do not resign on impulse, or in a “Jerry Maguire” moment of anger, delirium, or a personal epiphany. When they decided to join your company, they initially saw the opportunity as a great fit for their career and wanted it to be a successful long run. Unfortunately, somehow, the wheels they thought fit came off. If you take the time to thoroughly investigate the true reason for their leaving – AND YOU SHOULD – you will likely uncover that it’s not the products, customers, industry, competition, location, coworkers, commit,e or tools they have at their disposal. IT’S THE LEADERSHIP! When employees or ex-employees grumble about “culture,” or that “communication is poor,” or express frustration at the lack of career progression and professional development, they are telling you that it is the leadership they are unhappy with and leaving. Clearly, company leaders are responsible for setting the culture, communication, and career development within a business. For the sake of your company, and more importantly, your people, take one moment as a leader and be brutally honest with yourself in answering these questions: Do you find yourself behind closed doors a good portion of the day as you strategize or execute in private? Do you put your personal gain over your employee’s best interest when making decisions? Do you consistently affix blame on the departing employee for “not following the process” or working hard or smart enough? (Have you ever blamed yourself?) Do you promise the “stars” in career progression, but consistently find an excuse why the company cannot deliver them? It’s time to look in the mirror and answer these questions. A “company” is a legal entity. A “business” is a collection of assets and liabilities. No one resigns because of that. It’s the decisions, the motivation, the atmosphere, the ethics, the support, the training, the vision, and the direction set by leadership that will properly engage employees to stay with you in a highly productive manner. If they are not engaged, then take another look in that mirror! The next time an employee resigns, resist your patterned behavior to shrug it off as “another underperformer who didn’t follow the process.” Take a moment to reflect in that mirror on what it actually is they are resigning from. Too many times it is not the departing employee who doesn’t “get it.” It’s not the company they are leaving. IT IS YOU! So you looked in the mirror and – employee retention issues are your fault. Admitting that is a good first step. Should you act immediately to improve employee retention challenges? Can’t you just add it to the projects scheduled later this year?” Check out these two recent findings published in a recent Kiplinger report as to why you should act NOW. Unemployment held at 4.1% in December 2017. Look for 3.8% by the end of 2018 as it becomes harder for employers to find suitable candidates. The short-term unemployment rate (less than six months) has fallen to its lowest level in 65 years. Further proof of a tightening labor market is evidenced by lots of job openings in certain sectors, including health care, food services, construction, transportation, and warehousing. Openings in health care and food services are at their highest level in 15 years. If you lead a company of 500 or fewer employees, the urgency is heightened. The shortage of qualified workers is starting to squeeze small businesses. In industries such as manufacturing and construction, many small firms are finding themselves forced to hike wages. Not just to lure new hires… many smalls need to pay more just to keep their current workers from jumping ship. The problem will only worsen later this year. The economy is accelerating, and many small businesses want to expand in order to cash in on rising orders. But those expansion plans will bump up against the constraints of a tight job market. What are retention or engagement warning indicators you should be looking for? According to the U.S. Department of Labor: 55% of Employees are currently searching for other job opportunities. 40% of organizations report that losing key employees is the top concern. 33% of new hires quit their job in the first 6 months. 33% of employees know within 1 week if they will stay with that company long term. What do the statistics look like for companies with highly engaged employees? They are: 2x more likely to remain with their current company. 3x as likely to do something good for the company that was not asked of them. In addition: 51% are more likely to have engaged employees when companies’ values are properly communicated, clear, and understood by all. 78% of employees communicate they would retain/stay longer with their current company if they could see a clear career path for their career. “So, how much is subpar employee retention costing my business?” Employee turnover costs include more than job posting fees and recruiter commissions. Some costs include, but are not limited to: Revenue loss from unfilled Jobs. Pre- & Post-employment administrative functions and expenses. Pre-employment screening and interviews for replacement hires. Training Costs for new hires and promotions. Loss of Productivity due to overworked remaining employees. Loss of knowledge transfer opportunity. Click here for the full list of 20 Retention Cost Metrics available upon request. To help you identify your company’s specific cost of retention, we found this calculator on bonus.ly that you may find helpful. Just remember to check the “assumptions” that these automated calculators use to make sure they accurately represent your company’s situation. Up Next: Click Here
Why Succession Planning is Rarely a Success
The numbers are staggering. 10,000 Baby Boomers hit retirement age every day, and 60% of all business owners are over age 55. According to recent surveys by the Exit Planning Institute, PNC Bank, and Kent State, 80% of business owners have no transition plan or have not documented or communicated a succession plan. Furthermore, 80% of these businesses are simply not saleable, nor do they have a proper talent pipeline to continue on. Of the remaining 20% that are sold, 12% will be sold, but not at the original asking price. The study also discovered that 40% of business owners did not have a plan that covers their forced exit (death, disability, divorce or illness). Perhaps Benjamin Franklin said it best: “By failing to prepare, you are preparing to fail.” Even when succession planning is undertaken by business owners, and 98% of them feel it is important, they rarely have a plan in place. When they actually do have a plan, there are several reasons why they rarely succeed… Many think it is not important and choose to focus on the transition, rather than the transactional nature of a business. If it is family business, sometimes the family grows faster than the business, and there are other family dynamics and emotional components at work that delay or prevent an effective transition. Potential future leaders leave the company looking for greener pastures. Owners simply do not adhere to the plan, and many continue to stay long past their expected date of departure. New leaders are ill-prepared to take over, or simply do not perform to the level of the original owner. A focus on the past or a mindset fixed on, “this is the way it has always been done,” not only cripples future leadership, but puts the entire future of the business in jeopardy. Politics, time, lack of commitment and fear. Not all hope is lost. We have been a part of many succession plans that have been and continue to be successful, and they all share these characteristics… The understanding that effective succession planning is more than just transitioning to new leadership, there are transactional components at work as well. They take an objective investor’s approach to looking at their business… Is the risk at a low level and is there a potentially high ROI? Operational Efficiencies: Are there efficient processes and procedures in place that can be easily managed and communicated? Financial Strength: Looking at the metrics (ratios, receivables, banking situation), is the company operating at a high level and doing more with less? Transition Ready: If the owner should suddenly leave or pass away, how easy would it be to transition to new leadership or potentially sell the business for a high return? Legal and financial preparation? We know from our own experiences, especially in a family business that is often emotionally charged, that succession planning is an extremely necessary, but difficult exercise. In fact, according to the Exit Planning Institute, after transitioning or selling their businesses, owners “profoundly regretted” it after just (12) months. A glut of companies will be transitioning or be for sale for many years to come as the Baby Boomer generation continues to move into retirement. Focus on making your company more transition-ready, and get your advisors (Financial Planners, Attorney, CPA and other key advisors) on the same page to make sure you are financially and legally ready. It is also important to focus on your emotional readiness with a life or executive coach. Also align yourself with a well-trained executive search and business advisory group that can help you find your next leader and management team, as well as help you build your organizational bench strength. Instead of planning to fail, plan a clean transfer to the next generation that has been fully prepared and wants it, or a mutually beneficial transaction or transition to a new owner. After all, succession planning is about preparing for the transition or transaction of your life. Are you ready? SOURCES: PWC Family Business Survey; PNC Bank; Kent State; Exit Planning Institute; and Pew Research Center. The single largest transaction and transition of your life deserves special attention. Are you planning to exit and sell your business? Business Exit planning is quickly becoming a buzzword in the legal and financial communities. Your professional advisors position themselves to provide tax, risk management, wealth management, and contract preparation services. BEST Exit Plan Advisor has been trained to manage your team of tax, legal, business, and financial planners to navigate your exit strategy. Click here for more details and on how to get started. If you want to see how prepared you are for transition, take the 15-minute Assessment at no charge: There is one indisputable fact – 100% of owners will eventually exit their business. The Assessment is a multiple-choice questionnaire that does not ask for confidential or financial information. Nevertheless, it is a critical first step in starting the discussion and planning process.