Money’s Not Everything in Retention Wars

Even in a tight labor market, the U.S. turnover rates don’t quite compute. The rates are the highest they’ve been in about two decades despite the increased retention efforts of corporate America. The recent upswing in voluntary quit rates is particularly worrisome. In response, firms are starting to examine these issues more closely. In some cases, they’re looking beyond individual corporate practices such as compensation and benefits to the bigger picture, that of the organization’s culture.
Human resource management sage Jack Fitz-enz argues that the foremost reasons fueling employee defection are discontentment with supervisors and with company culture, and he claims that supervisor/employee relationships are a major shaper of culture. Recent surveys from Gallup and Mercer support the contention that a considerate boss is of greater importance than more pay or better perks when it comes to retention.
This “money isn’t everything” school of thought has a lot of other support in the management literature. For example, a new study from Towers Perrin, “Meeting the Global Rewards Challenge,” reports that while compensation and benefits are important, the work environment -- including how challenging the work is -- has a big impact on retention. This applies even to those coveted (and turnover-prone) information technology workers. When the Hay Group asked 172 IT professionals who’d recently changed jobs why they’d left, the most commonly cited reason was that they just didn’t enjoy work, and a lack of support from management was also commonly cited.
This doesn’t mean that employees don’t care about compensation, but culture may be increasingly important as employees try to reconnect with their jobs. Drs. Jim Harris and Joan Brannick, coauthors of Finding & Keeping Great Employees, say that the turbulence and uncertainties of the 1980s and 1990s caused many people to feel disconnected from their organizations. Now, many want more balance between work and their personal interests and values, an attitudinal shift from what could be termed the work-centered lifers of earlier decades to the life-centered workers of today. To help such people form an emotional bond at work, employers must start with corporate culture, argues Roger E. Herman, author of Keeping Good People. He writes, “An organization's culture is crafted, confirmed and communicated from the top. Beliefs in how things are done permeate the organization, including how people are valued, empowered, trusted and cared for.”
Harris and Brannick also urge employers to renew the employee connection, a feat accomplished by identifying the essential culture that guides the corporation and ensuring that staffing and retention initiatives are aligned with the core culture. They argue that there are four separate but equal core cultures: customer service, innovation, operational excellence and spirit. While each core value can contribute to the sense of employee connectedness, it is critical that the organization embrace one as its operational driver and that management then align its initiatives with the culture.
Trust is one manifestation of a healthy culture. SAS Institute, for example, trusts employees to balance their professional and personal lives, and it provides ample opportunities, benefits and flexibility so they can strike that balance. “Employees determine whether we flourish or fail,” says CEO Jim Goodnight. “If we make the effort and invest resources in our employees’ professional welfare, everyone wins -- the employee, the customer, and the company.” In an industry where the typical turnover rate is 20%, the turnover at the Cary, NC, software firm is below 4%. That stability allows the company to turn out new versions of its software more efficiently and economically.
Southwest Airlines is often pointed to as a prime example of a customer-focused culture. The company’s emphasis on hiring the right people, those who fit the culture, has led to its enviable retention success. Interview questions are strategically designed not only to test for specific job requirements but also to identify shared characteristics such as common sense and decision-making skills. In 1999, Southwest hired 5,000 people following 70,000 interviews of the best prospects from 160,000 applicants. The selection process is labor-intensive and relatively expensive but aligning strategies to match the culture seems to work. Southwest’s turnover rate is just 9%, the lowest by far in the industry.
Experts say that cultural alignment creates strategic focus -- correlating actions with objectives -- and avoids a chronic leaping from one reactionary program to another. Such cultures give employees a stronger sense of what the company is and where it is going, and this reinforces personal connections with work. The theory goes that once they’ve found a culture that suits them, people don’t want to risk losing their sense of belonging to a special group and participating in something that makes a difference.
====================================================

A new Workforce article on retention in high-turnover industries is at http://www.workforce.com/feature/00/05/14/. The article includes various sidebars showing how specific companies boost retention.
An article by Jennifer Laabs called "Will To-Die-For Benefits Help Retention?" appears in the July 2000 edition of Workforce magazine. See http://www.workforce.com/feature/00/05/04/.
For more information about the Towers Perrin survey, see
http://www.americanquality.com/Quality%20News/053000-2.htm.