By Ken Columbia
Special to Newspapers & Technology

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Any doubt that even the smallest amount of employee turnover can cost big money? In a Nov. 6, 2003, article, “The Real Cost of Turnover,” Staffing.org Information and Resources (www.staffing.org) examined 23 cost-of-turnover measures and studies. The results: Turnover can cost a company anywhere from $10,000 per employee to as much as 200 percent of employee compensation. A 2001 survey by the Hay Group, “The Retention Dilemma” (www.haygroup.com/library/index.asp), meanwhile, disclosed even higher costs, estimating that turnover can cost employers as much as 40 percent of annual profits. The sluggish economy notwithstanding, Hay estimated that as much as 33 percent of employees had planned to quit their jobs within two years. What’s more, of those employees planning to leave, between 30 percent and 40 percent have already checked out emotionally, focusing instead on their next jobs rather than their current ones, Hay said.

People leaving

More troubling, new hires are heading out the door almost as fast as they can be hired. Research by the Center for Creative Leadership (www.ccl.org) indicates that within the first 18 months, up to 40 percent of new hires leave.

And costs associated with losing these new hires could even higher. To begin with, there’s the performance forfeited by the new hire. The company never gets a full contribution out of the new employee who disconnects from the job and starts preparing an exit strategy.

Then, of course, there are those replacement costs, so you must add the costs of recruitment and coming up to speed to the probability of turnover. Finally, there are the costs to team spirit that affects how the team functions.

What about managers? Nearly half of all managers at U.S. firms are actively looking for another job or plan to do so when the economy improves, according to a 2002 survey of more than 500 mid-managers by the consulting firm Accenture (www.accenture.com). Somewhat surprisingly, their primary motive is not how well they are getting along with their boss or a lack of upward mobility but how well they are being paid.

Salaries for middle managers have either been frozen or declined in the recent past and have not kept up with the cost of living. According to the Accenture study, 56 percent of those hunting for jobs cited pay or benefits as their goal in seeking a new job.

Job turnover extends to the most senior levels of management as well. The Corporate Leadership Council (www.corporateleadershipcouncil.com), an association of HR executives, reported in a recent study that half of all upper-echelon hires left their posts within the first three years.

Serious vulnerability

This is a serious, unprecedented vulnerability to employers, investors and the bottom line. Managing turnover is an increasing difficult challenge. Many companies underestimate the cost of turnover and consequently under-invest in reducing it. The key to retaining managerial and technical staff is to understand the real causes of turnover from the employee’s point of view. Only then can remedies be designed and applied in ways that will yield a positive return on investment.

The Hay Group report, based on the responses of almost 1 million employees in 330 companies across 50 countries, indicates that pay is not the only major factor underlying employee dissatisfaction. Interestingly, the survey indicates that employees are also most likely to become discontented and leave when their skills are not properly developed or their talents are not properly used.

Think the Hay Group survey wasn’t close enough to home? Yet another survey, this one dubbed “The Rewards of Work: What Employees Value,” found that turnover costs ranged from 100 percent to 700 percent a staffer’s annual salary. The group found a turnover rate of 18 percent, fueled mainly due to a lack of training and development. The study was co-sponsored by Nextera, Sibson Consulting Group and World-at-Work (www.worldatwork.org).

This next survey is knocking on our door. The Council of Presidents of the National Journalism Organizations completed a study in 2001 called “Newsroom Training: Where’s the Investment?” funded by the John S. and James L. Knight Foundation.

The results: Journalists said a lack of training is their major cause of job dissatisfaction; 66 percent said they received no regular skills training. Other findings: Woefully little money was budgeted by companies for training; most respondents said that $500 was the most they could spend annually per journalist for training.

What’s more, during the current economic slump, training was among the first budget items to be slashed. The report can be obtained at www.knightfdn.org/default.asp?story=publications/journalismtraining/index.html

The late Katherine Graham’s observation on newsroom training was, “Journalistic excellence and profitability go hand in hand.” This point was also emphasized in a Nov. 11, 2002, presentation, “The Learning Curve: Are News Organizations Failing Their Best and Brightest?” by Robert H. Giles, curator of the Nieman Foundation.

According to Giles, the average newspaper industry expenditure aimed at formal training is less than 1 percent of payroll. The national average is 2 percent, he said, citing the Readership Institute at the Media Management Center at Northwestern University.

The National Association of Manufacturers recommends companies earmark 3 percent of their payroll to training, Giles said. For companies such as newspapers, that percentage should be even higher, he said. “So here’s the paradox: a rich industry that has not made the sustained, long-term investment in developing its best and brightest and keeping them on the payroll, in the interest of good journalism and good profits.”

The NAA in its own November 2001 Pipeline Study, found employees:

Join a newspaper for training, career opportunities and pay and benefits.

Stay at a newspaper because of good supervision, work and life balance and training and development.

Leave newspapers for better career opportunities, supervision, empowerment and pay and benefits.

Training and Development magazine, published by the American Society for Training and Development, discusses the importance of retaining talent in an article entitled “Tides of Talent.” It stated that, “keeping experienced, high-potential talent is the key to sustaining a competitive advantage.” The article also notes that this problem will pose a large risk for employers when the economy turns around.

In another TD magazine article, authors Beverly Kaye and Jordan Evans discuss key findings from a meeting of 25 global talent leaders. These leaders shared best practices, among them:

• Become an employer of choice. One talent manager said that her organization agreed to compete on compensation and benefits and win on creating a training and development culture.
• Manage high-potentials carefully. Focus on engaging and retaining the high-potential employees before economic recovery begins and before they are in even greater demand.
• Train as an investment. A number of the global talent leaders noted that they are continuing to make a serious investment in training, despite the fluctuations of the economy, in the process creating employees who are efficient and effective in what they do.