What does it cost you in dollars and cents every time an employee leaves your company? According to Stacey Grant-Thompson, Senior-Vice President for Strategy at Manulife Financial, most Canadian business owners can’t answer that question.
“We all acknowledge that turnover is difficult, disruptive, and cumbersome, but often it doesn’t get quantified,” said Grant-Thompson, speaking at the PROFIT/Chatelaine W100 Idea Exchange in Toronto on June 5. A survey conducted by Standard Life (which Manulife acquired the Canadian operations of last year) found that 82% of employers hadn’t put a number to the cost of an exiting employee.
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Expenses associated with turnover identified by survey respondents included “the cost of lost business in terms of disruption when an employee leaves; a loss in terms of training; the departure costs themselves; disruption to productivity; and the expense of hiring new people,” according to Grant-Thompson. By Manulife’s calculations, those individual costs add up to a significant amount of money—about 40% of an employee’s salary. Using the baseline of the average Canadian salary ($48,000), “an average turnover departure was estimated [to cost] about $18,000,” Grant-Thompson explained.
With a five-figure price tag for replacing exiting employees, it’s imperative that businesses do everything in their power to retain staff. That means understanding what makes workers switch jobs, something Manulife’s findings suggest employers aren’t always good at. The company polled 1,000 employees at 400 firms to find out what the chief motivators were for people considering job offers.
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Unsurprisingly, a competitive salary topped the list. But the survey also found that 90% of employee respondents rated a group savings and retirement plan as somewhat or very important, versus just 64% of employers. When a job didn’t include such a scheme, staff were three times as likely to exit that company over the next 12 months. “There continues to be an overemphasis on cash compensation up front as being the most critical thing,” Grant-Thompson said. “Sometimes you’re underestimating the kinds of benefits that you can provide to an employee to both attract them and keep them.”
Businesses have been better at responding to another key retention motivator: flexible work hours (86% for employees and 69% for employers). In 2013, Manulife launched an internal program called WorkSmart, which now includes some 3,300 employees. WorkSmart allows employees to adapt their working schedule and location to their particular needs, such that some staff come into the office for part of the week, work between locations, or work exclusively from home.
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The program is delivering real results. “Our turnover rates—both voluntary and non-voluntary—for WorkSmart participants are lower [than average],” noted Grant-Thompson. “And on our engagement studies, we’re actually finding that the engagement and productivity of those employees are higher.” Initially-skeptical managers have been brought around by these results. It doesn’t hurt that 16% of the employees awarded Stars of Excellence (Manulife’s top recognition program) are part of WorkSmart, or that Manulife is hoping to reduce real estate costs by 25% now that many employees work off-site.
“WorkSmart is not necessarily going to be appropriate everywhere,” Grant-Thompson acknowledged. But most employers can afford to do little things like allowing employees to be home when their kids get back from school in exchange for an hour or two of work in the evenings.
Most businesses could afford to do more to retain employees, and Grant-Thompson pointed out that any costs to keep employees satisfied are far outweighed by those of failing to do so: “I don’t know about you, but $18,000 walking out the door is a lot.”
MORE RETENTION STRATEGIES:
- How to Give Employees the Agency They Crave »
- Why It’s a Great Time to Fire Someone »
- Why Employee Loyalty is Declining »
- The Employees That Deserve 80% of Your Attention »
- When to Fire a New Hire »
Have you tried offering flexible working arrangements? Would a program like WorkSmart work for your business? Share your experiences and thoughts using the comments section below.