Is Turnover Back in Vogue? One Trend to Pay Attention to in 2005

 by: Paul R. Dorf, Ph.D., APD

Upper Saddle River, N.J. - January 10, 2005 - With the start of the year, a flurry of articles have appeared, talking about what we can expect in the way of business trends during 2005. One of the most alarming issues is the intention of many employees to seek new jobs now that the economy is starting to improve. A recent joint survey by Society for Human Resources Management (SHRM) and CareerJournal.com indicated that 75% of the employees polled said they would like a different job; 43% want to increase their compensation. Similarly, a recent survey by Monster.com indicated “93% of the respondents plan to job hop.”

Many companies have taken credit for the lower level of voluntary turnover that they have enjoyed during the last few years. Although some improvements in turnover are based on positive actions that companies have taken, others appear to be strictly related to the fear of employees to look for other jobs when our economy is limping along. We believe that the old adage, “the devil I know is better than the devil I don’t know”, is a major influence in why employees have stayed where they are for the time being.

If the surveys are a realistic indication of what we can expect, the question arises: what should companies do now to thwart a big increase in turnover of trained employees seeking better opportunities? Our experience has shown that there are five (5) key steps that a company can take to generate positive results. These steps are:

1. Clarify the Compensation Philosophy – What is the labor market that the company needs to compete against for qualified employees? What is the level that the company should pay against that market? What is the best mix of pay elements for their employees? Is the pay program consistent with its Business Plan and Marketing Strategy? Addressing these questions will help the company establish a baseline against which to benchmark pay and pay practices, and establishes the company’s commitment to its compensation programs.

2. Review the Procedures for Determining Pay – What are increases based on? How will they reward varying contributions of employees doing the same job, but at different levels of performance? How equitable is the system, and how consistently is it applied? Ensuring that pay practices are equitable builds trust among employees, provides a measure of comfort with the system, and allows employees to determine how their pay is impacted by their performance.

3. Review the Performance Evaluation Process – What is the basis for making personnel decisions, including pay increases, promotions and transfers, terminations, assessing training needs, identifying expectations and accountabilities, etc.? Having a consistent means by which personnel actions are administered provides for fair treatment among employees, and assists managers in applying policies and procedures consistently among their staff.

4. Identify the Top Contributors – What is being done to determine which employees are most valuable and whose loss would seriously harm the company’s ability to operate successfully? What is the company doing to insure that employees are happy, and stay? Employees are a company’s most valuable aspect. Ensuring that the best performers are recognized for the above-par contributions to the organizations will further motivate them to exceed their goals, and can encourage other employees to challenge themselves.

5. Evaluate the Communications Process – Is management able to communicate effectively with employees? Is communication trusted and able to relay appropriate information to employees? Has management communicated its commitment to its employees and to fostering a rewarding work environment? In many instances, the biggest problem is that employees don’t know where they stand in the eyes of management. In addition, they often don’t understand how the pay programs work, or what they need to do to move ahead. This lack of understanding leads to discontent, frustration, miscommunication, problems, and eventually to the feeling that the “grass is greener elsewhere”.

Addressing these issues doesn’t insure that turnover will not increase. But it should certainly provide a strong indication to employees that their organization cares and is taking the necessary actions to improve their working environment.