(Excerpted from the 2009 Recruiting Metrics and Performance Benchmark Report.  If you'd like to purchase the report, click here.)

Retention Best Practice Checklist

Poor retention is expensive and that expense is most often unrecognized and understated. Few companies measure either the causes or effects in a systematic way. A best practices program here needs at least six elements: on-boarding interviews, comprehensive employee satisfaction interviews, general worker environment surveys, exit interviews, a calculation of turnover costs and a demonstrated link to the strategic and tactical business discussions of senior management and the corporate board.

Consider this information from a MONSTER survey of 600 HR executives:

These statistics paint the best possible picture of best practice because they include all programs regardless of rigor. In the case of on-board interviews, for example, ad hoc measurement programs (whenever the boss decides one is needed) were 73% of the total. In other words, only 16% of the companies surveyed measured the experiences of new employees in a systematic way. 

Beyond the first year, comprehensive retention programs grow even more rare. True, the majority of companies perform some type of data collection and analysis, but a much smaller percentage operate systematically in all six critical measurement areas. Here are the components of a best practice program.

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(Excerpted from the 2009 Recruiting Metrics and Performance Benchmark Report.  If you'd like to purchase the report, click here.)

CEOs, the key players in enterprise alignment, become the natural partner of Staffing every time they ask, "Do we have the right people in the right places focused on the right problems?" Fortunately, CEO appreciation of talent acquisition and management has been steadily rising.

A 2007 worldwide survey of corporate leaders by The Economist listed lack of available talent as the fifth highest concern in domestic markets and the top concern in foreign markets. This would suggest that where it has not already occurred, the productive alignment of Staffing and corporate leadership is increasingly possible.

Effecting alignment with CEOs requires connecting day-to-day staffing functions directly with CEOs’ preoccupations and concerns, including:
 

• Sales growth
• Labor costs
• Local/foreign competition
• New product development
• Understanding customer needs
• Materials costs and availability
• Legal and regulatory challenges.
   

And when it comes to allocating resources:
 

• Knowledge management
• Research
• IT services and infrastructure
• Supply chain improvements
• Customer service
• Property and facilities.
   

Of all the top echelon managers, CEOs are the most responsible for defining the enterprise's mission and objectives, its big picture. Through the COO, they keep the many moving parts of a modern enterprise functioning smoothly and efficiently, while also equitably balancing the needs of the three major groups of stakeholders: clients, employees and owners. They must budget time around high impact, enterprise-wide issues—like staffing metrics.

Example A - Company X is a $370M enterprise, doing well, with 2000 employees and 10% turnover. They run a 14% Recruiting Cost Ratio ($2M in recruiting costs divided by $14.3M in total compensation recruited) that's acceptable for their type of business and size. The head of Staffing has made 10% cost cuts a priority for this year.

Example B - Same company, but the head of Staffing has made talent retention a priority. He wants to inventory the 50 most critical positions in the company, examine the succession plan for each, and engage a consultant to interview them all to assess aspirations, state of mind, feelings about the company and its prospects, need for job support, and so on. This survey and associated staff time will cost $75,000.

Example C - Same company, but this time the head of Staffing has made reducing vacancies (currently 12) in the 100-person sales force a priority, and is working with the SVP of Sales to raise sales 5% per existing territory through training.

How would you rank these priorities in order of interest to the CEO? Almost certainly in reverse order: C, B, and A. Why? Following the chart is some simple math for illustration purposes only.

(Chart above by employee size)

Example C

• $370M in sales / 88 sales territories (100 - 12 vacancies) = $4.2M average sales per territory
• Cost of vacancies = $2.1M (half of normal productivity) x 12 vacancies = $25.2M
• Productivity increase via process improvement, active coaching and training.  $4.2M x 5% increase = $210,000 per territory x 88 territories = $18.5M (plus associated costs.)
• Total potential benefit to the company, nearly $44 million

Example B

• The simple math here involves  the direct cost-to-replace for a given position.
• At 50% of salary for recruitment, signing bonus, options and relocation costs, given an average salary of $175,000 and five (10%) potential vacancies, the number is $437,500. However, this number is highly variable depending on job level, availability of talent, job market, geography, competitive landscape and other factors. Hiring costs for a single challenging position in a large company could easily run into six figures.
• The more complex math involves indirect costs. Many companies have calculated that the loss of certain key individuals would affect supplier or client relationships worth many millions of dollars.
• Company benefit: $437,000, to keep it simple, but retaining a single critical individual can cost millions

Example A

• Company benefit, $200,000

The point here is that in Examples B and C, Staffing has linked itself to two consequential issues with very significant dollar impacts more likely to command a CEO's attention than the $200,000 cost savings in Example A. This is not to say that the latter savings are insignificant, just that they are less likely to command the same CEO mindshare.