Businesses have a strong financial incentive to attract and retain good employees. A major portion of a company’s wealth is invested in its intellectual capital – the knowledge, skills and abilities of its employees. Companies lose money when the ‘talent’ becomes disenchanted or walks out the door.

So just how much of an issue is employee attrition and why should you care? The numbers speak for themselves.

A recent Canadian study found that employee attrition has risen 25% in the last five years[2]. It found that average costs to the organisation are 18 month’s salary for every management professional who leaves and six months pay per hourly employee. Do a quick calculation in your own organisation. The bottom line costs are frightening, but what about the top line cost? If your profit margin is 10%, and the cost of replacing a Manager is $60,000 (18 months salary of a $40,000 per annum team member) then you need to achieve $600,000 in sales to cover that personnel loss!

Just how valuable is retention? One source estimated that a 10% reduction in employee turnover was worth more money than a 10% increase in productivity or a 10% increase in sales.

While some staff turnover is just a normal cost of doing business, (and some turnover is even desirable) most turnover especially among your better and top performers, is largely avoidable.

Here are a few tips to developing employee engagement:

Cultivate Leaders

According to a 2003 SEEK survey, getting along with the boss or knowing that the boss likes them can be more important to an employee than pay or benefits when it comes to job satisfaction.

Emotionally unintelligent managers put organisations at risk. When Gallup surveyed over 1,000,000 employees they found that the biggest single reason people left their jobs was because of their boss. It found that people leave managers, not companies.

Organisations need to cultivate and reward managers (at all levels) for great work. Invest in their development, give them the skills they need to do their jobs and make retention part of their performance objectives.

This doesn’t mean as a business owner you can defer to your managers. Employees tend to stay in organisations with senior leaders who are visible and communicative and who demonstrate that they care. Spend time with your employees, listen to them and invest in them. They are a truly precious resource.

Measure employee turnover

Agree internally on the measures you’ll use to calculate employee turnover costs. Be certain you are taking all costs into consideration. A comprehensive programme measures the following:

• Exit costs
• Recruiting
• Interviewing
• Hiring
• Orientation
• Training
• Compensation and benefits while training
• Lost productivity
• Customer dissatisfaction
• Reduced or lost business
• Administration costs
• Lost expertise
• Temporary workers

Don’t wait for a crisis to implement a retention programme

All organisations should have a retention strategy in place. In this day and age it’s as vital to an organisation’s profitability as the right computing solutions. Don’t wait until employee turnover costs become unacceptably high before getting started.

Survey your top performers now

You need to find out why employees leave but you must also find out why others stay. You’ll get highly beneficial information about improvements your organisation needs to make. Every company has its ever-present complainers. By surveying your top performers you’ll focus on what your best people tell you. Ask them what keeps them there, why they might leave and what they need to be happier and more productive in their jobs. Even the process of asking them such questions will positively impact on retention.

Remember your people are your key to upping your organisational performance. Develop them well and they will develop an invaluable loyalty to you, but moreover, they’ll develop a passion for the role that’ll ensure their longevity.

See Infinitus™ Leadership Development for ways in which you can start developing your people.