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But, having given them the opportunity to build their skills via
tuition-reimbursement, Saturday computer classes, and career plan-
ning discussions, she hopes they will leave with good feelings about
UPS and perhaps become customers someday, as many have.
The Results: By the ¬rst quarter of 2002, part-time turnover had
dropped to 6 percent, which equates to 600 workers staying who
otherwise would have left four years earlier. Annual savings due to
lowered hiring costs totaled $1 million. Lost work-days due to
work-related injuries had dropped by 20 percent, and the percent-
age of packages delivered on the wrong day or at the wrong time
dropped from 4 percent to 1 percent.3


Motek Software
The Challenge: This small, privately-held southern California ¬rm custom-
izes industrial computers for use on warehouse forklifts and dominates its
market niche. The goal of Motek™s founder and CEO, Ann Price, is to
attract the very best IT workers and make them want to remain in a work
environment that allows them to have a life outside of work.

Strategic Actions: Price expects her twenty employees to keep 9 .. to 5
°.. hours. She also buys lunches for them at the best restaurants, brings in
a hairdresser for employees once a week, and gives new employees one
month vacation per year. When employees postpone taking their vacation,
Price has been known to book it herself and go along with them to make
sure they take it. ˜˜We™re robbing ourselves of the best years of our lives,™™
she says. ˜˜I™m living proof that you can achieve the same goals and not give
that all up.™™

The Results: A turnover rate of less than 1 percent and a highly stable work-
force, which helps to avoid disruption of service to its clients.4

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IHS Help Desk
The Challenge: Even though this IT consulting and training company was
growing and succeeding, owner Eric Rabinowitz realized that a 113 per-
cent turnover rate was threatening the future of the business. On further
inspection of company data, he found that 20 percent of turnovers were
happening in the new hires™ ¬rst month on the job.

Strategic Actions: Rabinowitz began asking employees what he might do
differently and he got an ear-full. He had expected that offering full-time
work and good bene¬ts would be enough, but his employees saw them-
selves as temp workers with no career path, and were always looking for
their next job. Because most of them worked off-site, they felt like they
were working for the client. They also mentioned that they wanted more
training and a clearly de¬ned career path.
Rabinowitz realized that most employees would not stay with the
company more than two years, but resolved to give them whatever training
that would cause them to stay at least that long. He surveyed employees to
¬nd out what kind of training they wanted, then set up Web-based training
programs that met their needs. He also started a communication program
to make workers feel less isolated at remote locations”he created a news-
letter and hired an employee advocate to visit work sites once a week and
create a stronger bond with the company. The company also improved its
bene¬ts plan to include dental and life insurance, and started incentive and
employee recognition plans.

The Results: Within a year, the company had lowered its turnover rate to
19 percent.5

Meers Marketing Communications, Inc.
The Challenge: This small advertising and marketing communications ¬rm
serves large clients by offering superior service and long-term relationships.
However, the company began to experience turnover rates as high as 50
percent, compared to an industry average of 30 percent. As a result, they
started losing clients as well, some within the ¬rst year. Owner and CEO,
Sam Meers, knew that keeping clients less than a year meant they were
probably losing money on them.

Strategic Actions: After losing a large client and taking another look at the
¬rm™s bottom line, Meers started working with a consultant to complete a

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202

strategic planning process, with a major emphasis on employee retention.
One of the ¬rst issues addressed was hiring the right people in the ¬rst
place, so Meers instituted a more rigorous interviewing process for appli-
cants. Job candidates would be required to be interviewed multiple times
by a variety of people before an offer was made.
To create more ownership and give employees more of a stake in the
company™s success, Meers decided to open the company™s ¬nancial books
to employees. He would go over the ¬nancials with employees on a
monthly basis and tie their bonuses to the performance of the company and
to their own performance on a 50-50 basis. Meers also enlisted the help
of all employees to create a procedures manual documenting 150 agency
processes so employees would know exactly what was expected and how
to do it. Finally, he committed to understand the differing needs of each
employee, and decided to give them more ¬‚exible work hours, or leaves
of absence, or whatever they might need to achieve a better balance be-
tween work and home life.

The Results: In the year following implementation of these measures, the
¬rm only lost one person. Said Meers, ˜˜People like the culture and because
of that, they do good work for our clients. . . . It™s a much more consistent
experience for our clients and our staff.™™6


Steak and Shake
The Challenge: When Peter Dunn took over as CEO of this fast-casual
restaurant chain, earnings had slipped, and crew turnover stood at 200 per-
cent”markedly higher than the 129 percent average reported by other
restaurants in its category. At 50 percent, management turnover was also
excessive.
If Dunn was going to achieve his goals to turn around the company
and fuel an expansion, he knew he was going to have to reduce the high
turnover among store employees because it was negatively impacting guest
satisfaction scores. The company told investors that it could save $2 million
to $4 million per year by increasing the retention of front-line workers. He
also estimated that bringing manager turnover under control could save
another $1 million to $2 million per year.

Strategic Actions: Dunn hopes to build customer retention based on in-
creased employee retention, an idea known as building a ˜˜virtuous cycle,™™
similar to the ˜˜service-pro¬t chain™™ described in Chapter Ten. One of the

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ways the company planned to do this was by giving store managers more
freedom to make decisions about how to increase revenues and ef¬ciency.
For the ¬rst time ever, Stake and Shake has provided managers with statis-
tics on each store™s operations, including turnover rates, customer satisfac-
tion data, drive-through ef¬ciency, and which items produce the most
pro¬t. Managers were challenged to create their own business plan for their
stores and share them with employees
The company also decided to increase bene¬ts to front-line workers,
starting with a 50 percent reduction in their vision and dental expenses, in
addition to the health care insurance, and a full range of other bene¬ts it
already offers. One of these bene¬ts is life insurance, which the company
believes produces the greatest reduction in turnover for the money spent.
Stake and Shake has also increased the amount of time new hires spend
being oriented, based on industry data showing that restaurants that give
four or more hours of orientation enjoy turnover rates 34 percent lower
than those who provide only an hour or two.

The Results: In less than a year, manager turnover had dropped to 30 per-
cent and turnover among front-line workers was down 24 points, to 176
percent. Guest satisfaction had improved from 81 percent to 86 percent
and same-store sales had increased by 12 percent.7


FleetBoston Financial
The Challenge: To reduce annual turnover in the bank™s retail operations,
which had reached 25 percent overall, with rates as high as 40 percent
among tellers and customer service representatives. Such high turnover
rates had put the bank™s customer-focused strategy at risk. An analysis of
the bank™s employee survey and exit interview data had suggested that
employees were leaving because of low pay and heavy workloads. Despite
raising pay rates and installing more ¬‚exible pay arrangements, turnover
rates continued to rise.

Strategic Actions: The bank suspected that the reasons employees were giving
for leaving during their exit interviews were safe and super¬cial responses,
and that they were reluctant to discuss the real reasons. Fleet retained Mer-
cer Consulting to conduct a comprehensive analysis of workforce charac-
teristics and management practices that most directly in¬‚uenced employees™
decisions to stay or leave.

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The 7 Hidden Reasons Employees Leave
204

One of the ¬rst discoveries was that the bank™s active history of merg-
ers, acquisitions, and consolidations had resulted in the closing of some
branches, which had raised employees™ worries about job insecurity. To
counter these concerns, the bank decided to focus on broadening career
opportunities within the organization. The idea was that if employees
could improve their mobility, they would see that as also enhancing their
marketability, making them less vulnerable to possible future layoffs.
By examining the career path history of employees, the bank had
learned that those who progressed more rapidly through different jobs were
more likely to stay. This ¬nding was surprising to some managers who
believed that employees who broaden their experience in the company and
become more marketable are more likely to pursue outside opportunities.
Managers began paying more attention to career development needs
and encouraging employees to consider a broad range of possible move-
ments within the bank, operating on faith that they would receive their
share of mobile new employees to replace those who moved on. The bank
also learned that there were two categories of employees at greatest risk of
leaving: high-performers who had been in their same position for two or
more years, and employees who had just completed their undergraduate or
graduate degrees. Managers were encouraged to initiate discussions with
these employees in particular to address the sources of their concerns.
Another interesting and valuable ¬nding was that nonexempt employ-
ees who had progressed into exempt positions tended to stay longer and
earn more frequent promotions than those who entered as exempt employ-
ees. As a result, Fleet clari¬ed and publicized its policies outlining how
nonexempts can become exempt employees, and began providing career
coaching to nonexempt employees to encourage them to pursue new
growth opportunities.
Further analysis of employee data revealed that employees whose man-
agers left the bank were themselves more likely to leave. To address this,
the bank decided to raise the amount of variable pay that managers can earn
in the form of higher performance-based cash bonuses. Fleet also replaced
departed supervisors with internal candidates, already known and trusted
by current employees.
In exploring the reasons for high ¬rst-year turnover, the bank realized
it needed to enhance its new-hire orientation process and began giving
more frequent feedback and more training during the ¬rst year of employ-
ment. Recognizing that it may also have been giving new hires more work
than they could manage, the bank reduced workloads.
Finally, the bank examined hiring-source patterns and discovered that

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employees who had been referred by other employees were more likely to
stay than employees recruited through agencies or want ads. Fleet decided
to lower its investment in recruiters and to increase the bonuses it paid
employees for referring new hires who stayed at least six months.

The Results: Within eight months of implementing the new retention ini-
tiatives, FleetBoston™s turnover rate had decreased by 40 percent among
salaried employees and 25 percent among hourly employees. The turnover
rate among ¬rst-line supervisors declined to 6 percent and ¬rst-year turn-
over dropped by 10 percent. These combined improvements are estimated
to have saved the company $50 million.8


What Do We Learn from These Success Stories?
There are common threads that run through all these stories and are worth
pointing out. Though there were signi¬cant differences in company size,
industry, circumstances, and range of solutions, all shared a common ap-
proach:

1. Resolving to take action without delay as soon as they recognized
there could be a serious threat to the fortunes of the business
2. Recognizing key employees on which the business depended and
attempting to understand how to better meet their needs
3. Implementing targeted initiatives to meet the needs of those key
employees
4. Tracking improvements to demonstrate progress and measure
success

In some cases, the approach was straightforward and based on common
sense. Others pursued a more sophisticated approach, relying on complex
analytical tools that produced some unexpected ¬ndings and led to a wide
range of solutions. In every instance, the commitment of the CEO was the
driving force for the new initiatives.


Linking Talent and Business Objectives
These stories remind us of the business imperative for becoming an em-
ployer of choice. In order to reach our business objectives, we must consis-

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The 7 Hidden Reasons Employees Leave
206

tently compete for talent and win, not just win in terms of attracting talent,
but engaging and retaining it as well, knowing that current employees,
especially the best, will always have choices to move elsewhere.
Yet, while 62 percent of corporate of¬cers said that they see the impor-
tance of linking business and talent strategies, only 7 percent said their
companies were actually doing it. And while 44 percent agreed that line
managers should be held accountable for talent objectives, only 10 percent
said their companies were doing so.9
Part of the problem lies in the fact that in many organizations, senior
leaders look to the HR department to focus on increasing ef¬ciencies and
reducing costs when they should instead be focused on creating value for
the business by linking talent strategies with business objectives. A prime
example of focusing on ef¬ciency at the expense of value is when a com-
pany measures cost-per-hire, but makes no attempt to measure quality-of-
hire.

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