Using Tools for Putting a Cost on Turnover

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Using Tools for Putting a Cost on Turnover

  1. 1. Using Tools for Putting A Cost on Turnover Dick Finnegan Founder, Retention Institute Copyright Retention Institute 20010 All rights reserved 1
  2. 2. Finnegan BackgroundCEO of C-Suite Analytics; solved turnover across 6 continents including Siberian bankers, African gold mines and the CIA Author of “Rethinking Retention in Good Times and Bad”, per BusinessWeek “offers fresh thinking for solving the turnover problem in any economy”Author of “The Power of Stay Interviews for Engagement and Retention”, published by SHRM 2011Noted employee retention expert by BusinessWeek, Chief Executive Magazine, Consulting Magazine, and HR Excellence Center of China 2
  3. 3. How Important is Calculating Turnover’s Cost?Turnover is typically reported in #s and %s, whereasreporting turnover costs and retention savings in $sgenerates more: Urgency Accountability ACTION… and action is required by HR, top management,operations, finance, and others to improve retention 3
  4. 4. Finance Must Own Turnover Costing and Reporting Because…1. Finance is qualified to conduct all complex financial analyses for your company3. Finance brings credibility and authority to your retention initiative5. Finance reports important metrics to your board and executive teamHR might track and analyze retention data but ideally only Finance should place a cost on turnover and report itFinance brings AUTHORITY! Once Finance realizes the $ cost of turnover, your company’s CFO will encourage your CEO to elevate retention’s importance and establish retention goals top to bottom, to the first-line supervisor level 4
  5. 5. Which Jobs Should You Measure?Clues to consider:  If your intiative is for your total company or a division, are there one or two dominant jobs that will receive most of your focus? If so, you might limit your initiative and your cost study to these jobs  If your initiative is for your total company or a division but covers a variety of jobs, can you combine these jobs into groups based on pay and estimated replacement cost and conduct one cost study for each group?  If your initiative is for one or two jobs only, conduct your cost study for just these jobs 5
  6. 6. Measuring “Lost Productivity” Matters MostTurnover cost calculators typically measure direct costs in categories such as “separation”, “vacancy”, “acquisition”, and “placement”…and indirect costs such as “lost productivity”“Lost productivity” measures how much work doesn’t get done and often times costs more than all other categories combined and might include: Incomplete work such as products not built, calls with increased hold times, medications delivered off schedule Reduced quality such as items returned, customer complaints, re-doing work Lost customers who move to a competitor, leave long lines rather than buy, or follow your ex-employee to their new companyMeasuring “lost productivity” is art more than science and will never be completely accurate. The calculator at TheRetentionFirm.com offers a creative way to determine a good estimate of lost productivity’s cost 6
  7. 7. Free Turnover Cost CalculatorsThese calculators are among the best available on the web. The firsttwo apply to any job and the remaining ones are for specific jobs inspecific industries. Some require registration. Check yourprofessional association to see if they have one for your industry The TalentKeepers Cost Calculator http://www.TheRetentionFirm.com/ Wyoming Department of Workforce Serviceshttp://www.wyomingworkforce.org/resources/tools_turnover.aspx TopMark LLC sales calculator http://www.top-mark.com/turnover_cost_calculator.htm Cornell University’s School of Hotel Administrationhttp://www.hotelschool.cornell.edu/research/chr/, then click “Cornell HospitalityTools”, then “Turnover Cost Evaluator” National Commission on Teaching and America’s Futurehttp://www.nctaf.org/resources/teacher_cost_calculator/school_calc_sdp.asp Trinicon Group Cost Worksheet for truck drivers http://www.trincon.com/resources/cost-calculator 7
  8. 8. Build Momentum With DataCost data has no value if it is announced once and then filed away.Once again, Finance brings authority to these announcements.Consider the following real-life examples that companies have usedto leverage this data to drive behaviors: A $10,000 employee company found that each 1% of turnover cost or saved$366,000 A major hotel chain that was spending $350 million on turnover projectedthat by cutting turnover in half their stock price would increase by nearly 25% Another study reported that turnover costs represent more than 12% of pre-tax income for the average company but those companies with high turnoverlose nearly 40% of earningsSo identify ways with Finance that you can leverage your turnovercost data to stimulate commitment to reduce turnover among yourtop-to-bottom management team 8
  9. 9. Costing by Job GroupThe next slide provides a format example for calculating and reportingturnover’s cost by job group. This example is for a rural, 100-bed hospital.You will see:  All job titles have been collapsed into 5 groups, with each group representing jobs that are similar in pay and replacement costs  The turnover cost for these groups can now be used to both report cost for each group and the total hospital  Comparing cost by job group directs us to which group deserves our first attention; in this case we learn that the cost for nurse turnover accounts for 71% of the total turnover cost for this hospital and should therefore be the first area addressed The formula for this calculation is to divide the total annual nurse turnover cost by the total hospital annual turnover cost…3,846,882 ÷ 5,402,801 = .71 or 71% 9
  10. 10. Job Group Example Job Cost/Exit Exits/Year Cost/Year Non-skilled Nurses aid $7,273 20 $145,460Skilled hourly Phlebotomist 11,825 30 354,750 Licensed Rehab 20, 429 21 429,009 hourly therapist Nurses Surgical 49, 319 78 3,846,882 nursesManagement All top 52,225 12 626,700 managersTotal Cost/Yr $5,402,801 10
  11. 11. Put Cost Data to WorkCompetitive Advantage:Only 33% of U.S. organizations place a cost on employee turnover,and this number decreases to 18% around the world. Fewer leverageit in ways discussed in here, so developing this data and using it toimprove retention is a clear competitive advantageNext Up - Retention Goals:Armed with data and Finance at your side, your path becomes clear toapproach top management to set retention goals for your targetedarea as well as for all managers and supervisors who work there 11
  12. 12. Introducing The CERP Program Certificate of Completion is hereby granted to: Kristin Scott to certify that this person has completed all the requirements of the Certified Employee Retention Professional Program and has earned the CERP distinction Granted: June 7, 2011 Richard P. Finnegan, Founder www.c-suiteanalytics.com 12
  13. 13. Certfied Employee Retention Professional program (CERP) is an applied certification program based on the Rethinking Retention Modelsm  Stay-at-Home: All tools are delivered to individuals online but are offered here for group participation with direct facilitation by Founder Dick Finnegan  Development: A developmental opportunity for an HR or Operations leader who can earn up to 26 SHRM re-certification credits  Completion time is 3-6 monthswww.c-suiteanalytics.com 13
  14. 14. 26 SHRM Credits! www.c-suiteanalytics.com 14
  15. 15. 6 CERP ModulesModule #1: Building Blocks Module #4: Narrow the Front Door Executive Sponsor Hiring Those Who Stay Organizational Areas Check Progress Turnover Cost StudyModule #2: Operationalizing Module #5: Script the First 90 DaysRetention Tipping point Retention Goal-Setting Onboarding Exit Surveys Module #6: Challenge PoliciesModule #3: Tool Building Policy Review Employee Value Proposition Strategic Benefits Employment Branding Will Include Stay Interviews! Trust Building “The Power of Stay Interviews for Engagement and Retention”, SHRM, 2011 www.c-suiteanalytics.com 15
  16. 16. After A Few Months With The CERP Program… • BOST Healthcare reduced turnover by 38% and is on track to save $180,000 this year • Burcham Hills Retirement Community reduced turnover 72% and is retaining 100% of new nurses for at least 6 months www.c-suiteanalytics.com 16
  17. 17. The Certified Employee Retention Professional Program Certificate of Completion is hereby granted to: Kristin Scott to certify that this person has completed all the requirements of the Certified Employee Retention Professional Program and has earned the CERP distinction Granted: June 7, 2011 Richard P. Finnegan, Founder Dick Finnegan 407.772.2710 DFinnegan@RetentionInstitute.com www.c-suiteanalytics.com 17

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