In the 10th part of her series for AMBITION, Jane Sunley addresses the daunting subject of developing your business for the future
As you will know by now, if you can successfully engage and retain good people, your organisation will be more productive, profitable and perform better. But by how much?
Few organisations measure the true cost of attrition, i.e. how much is swiped off the bottom line every time a person leaves. My theory is that this is because it’s just too terrifying a figure to think about. When I talk to business leaders about this, quite often they say: ‘It’s just the way things are, it’s a fact of corporate life, a cost of doing business’, and have little aspiration to tackle in this area; there’s always something more pressing. This is a really short- sighted approach.
Of course,
some attrition is healthy –
you can’t keep everyone and you need to make
room for new ideas. However, your
objective must surely be to retain people for an optimal amount of time,
instead of losing them before they’ve been able to make a
good contribution. Many service
organisations still lose upwards of 30% of their people each year (even if they don’t admit it publicly).
What a waste.
A 2014 study by Oxford Economics highlighted the cost of losing an employee. This concluded that there are two aspects to consider:
- lost outputs
- recruitment and settling in costs
| Sector | Time taken to optimum productivity (weeks) | Cost per replacement employee (£) | Overall annual cost to the sector (£) |
| Legal | 32 | 39,887 | 805m |
| Accountancy | 32 | 39,230 | 580m |
| IT and tech | 29 | 31,808 | 1,891m |
| Media and advertising | 20 | 25,787 | 184m |
| Retail | 23 | 20,114 | 673m |
Source: Oxford Economics
Just to remind you, many organisations count the direct costs of replacing an employee but ignore the higher, indirect costs.
Indirect costs:
- Disruption to the business
- Reduced productivity/ output
- Lost opportunities/ revenue
- Knowledge loss
- Impact on customer relationships
- Reputation
- Motivation and morale
- Quality
- Continuity
- Increased competitor threat
- Knock on attrition
Direct costs:
- Recruitment
- Management time
- Interim temp cover
- Training
And if you want to use a more conservative figure in your calculations, in 2015 the Chartered Institute of Personnel and Development (CIPD) reported:
- the average recruitment cost of filling a vacancy is £4,000 (£10,000 for a senior manager)
- increasing to £6,125 when the associated labour turnover costs are included
- if things fail to work out first time around you can expect to double these for the cost of rehiring.
Some experts suggest that the costs go an awful lot further than this. Ultimately, if you’re leaching people, you’re leaching profits.
Generations Y and Z
Millennials (those born after 1981), will account for one-third of the adult population by 2020 and 75% of the workforce by 2025 (Brookings).
There are various opinions about the exact dates for each generation; don’t get too hung up on the dates – it’s the difference in attitudes and characteristics that are important.
A word of caution, every generation will be influenced by later generations so it’s not unusual to find, for example, a boomer who views the world in a similar way to a gen Y. That is great.
Definitions and influencers
| Generation | Born between | Also known as | Key influences |
| Generation Z: | 1995 – 2012 | Internet generation Gen I Digital natives | High-speed internet, smart phones, unlimited, instant access to media/all info |
| Generation Y: | 1981 – 1994* | Millennials Echo boomers | Education, technology, parental input/ support, terrorism, social networks |
| Generation X: | 1962 – 1980 | Lost generation Latch-key kids | Divorce rate, working parents/ redundancies, crime rates, MTV, AIDs |
| Baby boomers: | 1945 – 1961 | The big bulge The Joneses | Post-war years, human rights, freedom, rock ‘n roll, protests, travel |
*The emergence of this new generation as a result of high-speed internet and its influences on a new generation alters the generally cited dates of generation Y and I have amended accordingly
The chart above is there for those who revert to type and endure conflict as a result.
While it’s important not to generalise,
each generational cohort will be influenced
by the economic and environmental conditions within which they spend
their formative years. As such there
are some trends in attitude and behaviour:
Characteristics
| Baby Boomer | Gen X | Gen Y | Gen Z (my predictions) |
| Live to work | Work to live | Work to fund lifestyle | Live then work. Workplace irrelevant, new ways of working |
| Long hours and dedication | Do the necessary work and go home | Work/life balance, bored easily | Flexible, rapid progress, achievement without accountability |
| Motivated by prestige, perks, status | Motivated by change, freedom, respect, outputs | Motivated by making a difference | Motivated by being heard, progress, change |
| Knowledge = power | ‘Show me what you know’ | Ask may questions (generation why?) | Find own answers and offer solutions, values brands |
| Compliance, parent-child relationship with employer | Adult to adult relationships | Confidence to have adult to adult relationship | Offer opinions (often to the CEO): equality the norm |
| Know they’ve done a good job | Like regular feedback | Like immediate feedback | Constant feedback from variety of sources |
| Make own decisions without consultation | Take direction then get on with it | Need constant collaboration/direction | Need consultative approach, listen and be listened to as an individual |
| Like structure and hierarchy | Have a distain for authority and structure | Family values – require nurturing environment | Secure and loved parental support, expect same at work |
| Like control | Hate to be micro-managed | Need help with problem solving | Find info rather than thinking it through, expect top technology |
| Want to lead | Self-reliant, cynical | Don’t want to lead | Don’t like hierarchy |
| Resist change | Relish change | Flexibility | Super flexible, diversity is the norm |
| Value experience | Assert individuality | Experience irrelevant | Creative use of technology to find out anything/everything |
| Competitive and resilient | Want to fix boomers ‘mistakes’ | Take on tough, meaningful jobs | Manage outputs not inputs; want to do it their way |
| Parents said “You can do anything” | “Stand on your own two feet” | “You’re wonderful and brilliant at everything” | “You can be anything you want to be; whatever you do is okay with us” |
| Keep opinions to themselves | Shared their opinions | Think you want to know their opinions | Know you need to know their opinions |
| Write to me | Meet me | Conference call/Skype me | Snapchat/Facetime me |
The 10 things you need to remember about millennials
- They are socially conscious and are sceptics of big companies; they want to make an impact not only directly on the business but also on the world.
- By 2015 already more than half of millennials have had three or more jobs.
- They’re digital natives, in many cases almost from birth – they’re super-connected.
- They value innovation in business on a par with profit – they want to be entrepreneurial.
- Autocracy is their least favourite leadership trait; they question and reject traditional business practices.
- They want to work digitally and independently yet also value collaboration.
- They expect to be consulted and have their opinions respected and acted upon.
- They expect to be rewarded according to performance and capability rather than age and experience.
- They value EQ over IQ – knowledge is definitely no longer power because…
- They have access to every piece of information ever written in a click of a button (or swipe of a screen) and can therefore find out anything they need to know immediately.
All this challenges the way in which organisations plan for their future people needs.
When it comes to succession, this is an area that needs a clear plan. In days gone by, people were moved around like chess pieces and some were prepared to wait for ‘dead men’s shoes’. Now people have wised up and want to have their own aspirations met. For this, they need access to ways of driving their own progress, knowing where and what the opportunities are or could be. They need transparency.
Discussing aspirations and ‘the next job’ should start from day one. Stop asking that interviewing question: ‘Where will you be in five years?’
Who knows?
You could discuss people’s ambitions and where they want to be next, though, and then talk about how you can help them to get there.
This is great for engagement and, interestingly, is very likely to help you retain them longer-term.
Career webs and networks
Regularly reviewing employees’ aspirations and progress is essential. If it aligns with the business, it’s important to ensure that wants, needs and desires are fulfilled. Be aware that not all talented people want ‘promotion’ – the career ladder or career path is an outdated notion.
Think about career webs and networks instead. So instead of a linear, upward approach to progression and ‘promotion’, someone might move sideways, say from marketing into HR. Or they might join a project team in another discipline for the experience even though in the traditional sense it wouldn’t be seen as an ‘advancement’.
And let’s not forget the graduate whom, having slogged away to achieve a good modern languages degree, has abandoned her early aspirations of translation work to be welcomed enthusiastically into the world of luxury hotels where she’s succeeding and growing. Or the psychologists who, like fellow psychology graduates, acting legend Katharine Hepburn and Playboy magazine founder Hugh Hefner, decide to pursue a more ‘creative’ media career.
This flexibility of approach provides opportunities for businesses that are ‘great places to work’ to snap up the top talent.
So, because everything moves so much faster in century 21, it makes sense to review frequently as change can be rapid. You have to automate this, the data is faster, easier, more up-to-date and more accessible. It’s impossible to keep track otherwise.
Also recommended is the use of succession- and business-planning techniques to identify:
- roles likely to be created or freed up in the future
- who is aspiring to change
- what it will take to get them job ready
- who is ready to take on a job
- who is overdue a move
- who is at risk of leaving
- who should be managed out of their role or out of the business? The disengaged are mini-saboteurs threatening your business?
If, despite all the circumstances and support being right someone is disengaged and not making a positive contribution, they need to be helped up or managed out before they have a detrimental effect on others.
People have a right to know where they are going. They want to know when and how they will get there and how they could be affected. An effective way to do this is through employee-led regular career reviews. This seems obvious though for so many organisations this is a tick-box exercise or doesn’t happen regularly at all. Millennials will not put up with that – they will find it elsewhere…
When managing aspirations:
- be realistic
- encourage people to drive their own progress
- think strategically – avoid panic recruiting
- be very aware of future plans and needs
- when someone leaves, review options before replacing
- look internally first
The amount of activity and resource allocated to recruitment is disproportionate to that invested in engagement and retention. As an example, a company spending £500K per annum on recruitment that can’t, or won’t, find even 20% of this figure to invest in HR technology to transform engagement and retention.
Research shows that if people’s aspirations were met, 70% of those who leave an organisation would stay. That’s pretty major stuff and a compelling reason to sort this out. (Source: Purple Cubed).
Harvard Professor Howard Stevenson, together with business leader, Eric Sinoway, explored the subject of workplace personalities further in order to identify employees who are good for organisational culture, and those who are hurting it. They categorised them as follows:
STARS: the employees we all love – those who ‘do the right thing’ (i.e. perform well, the ‘right way’, in a manner that supports and builds the desired organisational culture).
HIGH POTENTIALS: those whose behaviour we value – who do things the right way but their skills need further maturation or enhancement. With development, time and support, these people are the future stars.
ZOMBIES: those who fail on both counts. Their behaviour is misaligned with the cultural aspirations of the organisation; their performance mediocre. They are the proverbial ‘dead wood’. But their ability to inflict harm is mitigated by their lack of credibility. They don’t add much, so the cultural damage they do is limited (and, naturally, these are the employees most organisations try to ‘flush out’).
VAMPIRES: the real threat. They perform well; however, they do so in a manner that is at cross-purposes with desired organisational culture. Because their functional performance is strong, they acquire power and influence. Over time, they also acquire followers: the zombies who share their different set of values and aspire to better performance.
Soon, there’s a small army of vampires and zombies attacking the stars, high potentials and leaders, eroding your culture a little every day. If you let them…
