Increasing Employee Retention or Reducing Attrition?

INDEX:

Retention Solutions
Funding Employee Retention Programs
Reducing Attrition
Factors to Consider in the Cost of Attrition

It may be that these two topics seem to you to be the same thing. They are the "flip side" of each other alright. But when it comes to demonstrating the impact of mentoring and gaining support for your program, there is a critical difference. One works with decision makers, such as CEOs, Board members, and state legislators, and the other does not.

Retention Solutions

The most frequent methods for increasing employee retention have been to provide orientation and some level of mentoring support and guidance, at least for novices if not all junior employees. This authorís reviews of such programs find that they DO increase retention to some extent, perhaps 15-20%. However, this ìbumpî is not as significant as is often desired, nor as high as a more comprehensive mentoring program can provide. A comprehensive mentoring approach can attain retention rates as high as 96% over five years. (Texas A & M at Corpus Christi, etc.) In fact, it could be argued that one would not even want a higher retention rate, for surely, not everyone who tries a specific career will be effective in that career.

What a comprehensive mentoring program should provide will be discussed later in this article. Our purpose at this point is to affirm the value of an effective program for what it can mean to employees and the organization. Clearly, even when an organization can not offer the top salary, it can still effectively compete for and keep quality employees by treating them professionally and by expecting and supporting effective employee performance.

The more an organization can demonstrate to candidates and new employees that it can help them achieve their original career goals, the more effectively that organization can be in recruiting and retaining those employees. However, such a statement is easier said then done. Never-the-less, there is now extensive documentation of the power of mentoring programs to increase employee success and, thereby, to improve the ability of an organization to attract and retain the best new employees. Simply stated, mentoring program success breeds staff success, which breeds organizational success in attracting and retaining successful employees, which increases the quality of overall performance.

Funding Employee Retention Programs

The most typical way to provide a new employee support program has been a ìcommon senseî approach, which is founded on two assumptions:

Since we all were once beginners, we all know what is needed to better support our recent new hires.
Every one accepts the value of increased support for new, and especially novice employees.

Each of these assumptions contain some element of truth of course. But experience has clearly demonstrated that each contains unexamined fatal flaws. Regarding providing a program based on our own initial year experience ignores the dramatic changes in our profession which have occurred since that time and the fact that mentors, our very best employees, do not feel they have all the answers as themselves. This flaw has led to the wide spread discovery that ìNot every good employee makes a good mentorî, and to mentoring programs which have ìeased the stress for new employees, or support junior employee development, and helped a bit with their retention, but not helped us to improve the quality of staff and organization performance or increased the desired results.

Finding funding for ìcommon senseî mentoring and mentoring incentives has been a challenge too. While mentoring programs seem so logical to employees, sadly, such programs are often perceived as less than essential by the people who are decision makers on the Board, state or provincial policy, and legislative levels. This has led to inadequately supported and abbreviated programs which do not have the capacity to provide the desired results, or to stronger programs while grant funding endures, but which cannot be sustained when the grants are unavailable. Clearly, the case for common sense approaches to new and junior employee support are not as compelling nor as valued as we need.

A more recent approach has been to focus efforts to generate funding for mentoring programs on increasing employee retention. This can be viewed as an attempt to demonstrate one of the major the benefits of effective mentoring, which is increased numbers of effective employees. Many studies in every kind of demographic, field and geographic setting have shown the ability of effective mentoring programs to increase retention. Some examples of the impact of mentoring on employee retention include, for example in education, one of the more challenging fields in which to improve retention:

Texas A & M University, Corpus Christi, whose program has delivered a 96% retention rate after five years.
The New Teacher Center at the University of California, Santa Clara, which is directed by Ellen Moire and has reported about 95% retention after 3 years.
Others include the La Fource, La. School District's Beginning Teacher Program, The Beginning Teacher Support program at Governors State University in Illinois, and the Washoe County School District mentoring Program at Reno Nevada.

As powerful a demonstration of ìsuccessî as these programs are, many decision makers still question the value of mentoring and even increased retention. This may be because the intended benefits of retention, improved employee performance and results, are less concrete, although no one doubts they occur to some extent. The bigger challenge has been that itís harder to demonstrate these benefits have occurred as a result of effective mentoring.

Reducing Attrition

Clearly, we need a different strategy if we are to create and adequately sustain the mentoring programs we know we need. To do so, we have begun to look for a clearer connection between our programs and the ìbottom lineî. The goal has been to collect and present local data which clearly show a monetary value for better support of developing employees. This is why the most recent strategy for gaining mentoring support has been to demonstrate the true cost of employee attrition, which is the negative ìflip sideî of the more positive retention factor. In other words, rather than trying to show the less tangible benefits of increased retention, we must show the cost-effectiveness of decreased attrition.

The Challenge of Employee Attrition- How Bad Is It?
National projections suggest that, during the decade of 2000-2010 about 1/2 of all employees in many major industries and settings nationally will need to be replaced. This is due to the maturity level of the "baby boomer" generation. While these national level data are alarming, most decision makers would rather know their own organization's attrition rate AND the actual cost of that attrition to the organization and its stake holders. Clearly, locally specific staff and cost data are better for motivating local action.

All of this means that, for every organization, the strategic starting point to increased new employee support is to be able to clearly show two factors:
1. The extent of your organization's need to recruit and employ new staff during the next five to ten years.
2. The actual total and per employee costs of employee attrition in your own organization.

Organizations need to use two ways to establish the first set of data on employment needs:

End-of career attrition, largely a result of retirement
Early career attrition

Reducing End-of Career Attrition
Until recently, organizational efforts have most often been to offer early retirement packages as incentives to cause attrition of the most senior staff members. The primary motivation has been to reduce the cost of these high salary employees by replacing them with less expensive younger employees. Now that the problems are the quality of performance and having enough good staff for our business needs, the challenge has reversed to ìhow can we keep people who might want to retire?î

The starting point for addressing these concerns is the development of a profile of the age of current employees and extrapolating the numbers and dates for their eligibility for retirement. This is an important set of information to know, since you want to target them with retention efforts, or at least, you must be able to replace them.

Improving the retention numbers at the end of the career requires a different set of strategies than does increasing retention early in the career. Efforts should primarily focus on increased employee earnings that will increase a pension later, affirmation of the value of elder staff contributions, and on providing new, invigorating leadership responsibilities. Among other possibilities, appointment as a mentor, serving in mentoring roles, and receiving a mentoring stipend fit these needs very well.

Reducing Early Career Attrition
While you need to know and address the number of staff who will retire, you also need to know how many employees are leaving before retirement age. This is a more critical factor to quantify as it is one over which your organization can assert considerable influence. Specifically, the organization needs to determine the total rate of employee attrition less the number retiring. The goals are to define and target a specific group of people and to do so with a different set of strategies than the end-of-career people need. Since attrition is the ìflip sideî of retention, the retention strategies we have discussed are still relevant to address attrition. What is different here is the need to know the cost of attrition. These data can be quite powerful, for they are annually repeating costs which are assumed to be necessary. These costs are so accepted as to have become almost invisible expenses.

Your strategy should have three parts:

Find out how bad early career staff attrition really is
Determine the total organization and per employee cost of attrition
Present in a compelling way, a comparison of the cost of attrition and the cost of mentoring support for development of employees.

If done carefully, you should be able to show that the organization is spending MORE on attrition than the cost of mentoring.

In other words, it costs more to do it wrong than it does to do it right!

This argument is all the more compelling because your organization does not need new money to do an effective job of supporting and keeping new staff. Effective mentoring will reduce the amount of money the organization is already spending and losing each year to attrition! Effective mentoring more than pays for itself every year. Further, while that cost savings alone is enough a reason to do a quality mentoring program, there are many other reasons as well, like the improving employee performance and learning, saving supervisory time, and increasing continuous improvement momentum, significant non financial benefits in their own right.

Factors to Consider in the Cost of Attrition

Here are some things to consider that demonstrate clear financial costs. You basic need is to know the cost to the organization when an employee leaves or is not rehired?

What you want to identify are your organization's costs for:

New employee recruitment, especially for recruiting the kind of diverse staff a great organization wants?
Management time for trips to job fairs & colleges, screening applications time, interviewing, meetings to make decisions?
Newspaper, journal, Internet and other ads
Technology specialist time for placing recruitment and job info on the organization web site
Brochure and flyer printing, folding, addressing, and mailing
Personnel staff time processing applications, answering phones, dealing with certifications, and other inquiries, etc.
Cost of background checks
New employee initial orientation
New employee training during the first year or two? (both that just for new employees and all other organization training)
Reduced results during the year or two that a new employee is learning their new job?
Reduced results when an employee leaves with what they have learned from trial and error, and a different new employee is hired without that hard won experience and starts over at the beginning again.
Loss of work flow continuity when employees leave or are not rehired because they are not as successful as required?
Management time spent orienting, evaluating, coaching, developing, and supporting new employees who are not retained?

Collect these data and figure it out as a cost for each individual employee. Then compare that to the cost of mentoring per employee. In many organizations, you will be thousands of dollars ahead by doing the right thing.

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