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Best Practices in Managing Employee Turnover Webinar
The document discusses employee turnover, defining it as the rate at which employees leave and are replaced, and distinguishes between good and bad turnover. It explores common myths surrounding turnover, the importance of corporate culture, and the impact of turnover on business performance and costs. Finally, it offers strategies for developing effective compensation plans to enhance retention and addresses immediate actions organizations can take to improve their turnover rates.
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Best Practices in Managing Employee Turnover Webinar
- 1. Jennifer Ferris, CCP Sr.Compensation Professional Mykkah Herner, MA, CCP Director of ISX Services www.payscale.com
- 2. www.payscale.com 14,000 Positions 3,000 Customers 11Countries 250 Compensable Factors 40 Million Salary Profiles Hi! We’re PayScale.
- 3. www.payscale.com Agenda 1 Defining andquantifying turnover 2 Common myths of employee turnover 3 The role of corporate culture in turnover 4 The impact of turnover on your business 5 Setting up your comp plan for success 6 Immediate Actions
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- 6. www.payscale.com the rate atwhich people leave a place, company, etc., and are replaced by others
- 7. www.payscale.com Good Turnover vs.Bad Turnover Adding good complexity 7 Low performer Average Performer High Performer Voluntary X% Y% Z% Involuntary P% D% Q%
- 8. Retention is Stilla Major Concern
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- 11. www.payscale.com Turnover is AlwaysBad http://lolsheaven.com/
- 12. Turnover is Bad forMorale
- 13. We can predictturnover based on generation
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- 15. www.payscale.com The Role ofCorporate Culture in Turnover
- 16. Next Gen vs.Traditional Organization Flexible work environment Training ground Strong leadership Transparency of decisions and pay Industry and/or job function Millennials vs Highly tenured
- 17. www.payscale.com The Impact of Turnoveron your Business
- 18. www.payscale.com • Morale • Engagement •Performance • Training • Knowledge retention • Nimble to market changes • Cost to replace http://www.corporatelearningnetwork.com/
- 19. www.payscale.com Setting up yourcomp plan for success
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- 21. Compensation Strategy 21 What toreward Level of competitiveness Talent Market(s) Industry(ies) Size(s) Location(s)
- 22. www.payscale.com “I found asalary report on the internet and it says I should be paid more…”
- 23. What is theright compensation mix for my org? www.payscale.com
- 24. www.payscale.com How many companiesare really giving variable pay? Most do - few don’t: Small companies 28% Medium companies 22% Large companies 20%
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- 26. www.payscale.com Immediate Actions Calculateturnover rate Identify good and bad turnover Brainstorm retention efforts that work Evaluate your comp plan – does it align with org objectives for retention?
- 27. PayScale Delivers WhereOther Compensation Providers Fall Short PayScale leads the world in compensation knowledge with the freshest and most detailed data from over 40 million salary profiles. More than 3000 organizations use PayScale’s software and intelligence to get the greatest return on their talent. Smart businesses use PayScale Insight to recruit, retain and motivate their people. Visit our blog: www.payscale.com/compensation-today Join our Group on LinkedIn: Compensation Today: HR Best Practices Jennifer Ferris, CCP Sr. Compensation Professional Mykkah Herner, MA, CCP Director of ISX Services www.payscale.com
Editor's Notes
- #2 Mykkah
- #3 Mykkah Creator of the largest database of individual compensation profiles in the world, PayScale, Inc. provides an immediate and precise snapshot of current market salaries to employees and employers through its online tools and software. PayScale’s products are powered by innovative search and query algorithms that dynamically acquire, analyze and aggregate compensation information for millions of individuals in real time. Publisher of the quarterly PayScale IndexTM, PayScale's subscription software products for employers include PayScale MarketRateTM and PayScale InsightTM. Among PayScale's 2,500 corporate customers are organizations small and large across industries including Mozilla, Tully’s Coffee, Clemson University and the United States Postal Service.
- #4 Jen
- #5 Jen
- #6 Before we go much further, a quick aside here – as Mykkah and I were working on creating this webinar, we found ourselves trying to make light of things when we could, since turnover, whether its good or bad, isn’t really all that fun. That being said, we’re hoping our attempts at humor resonate with you as well, hence a little snip of Dilbert here before we move on.
- #7 The actual dictionary definition of turnover is: the rate at which people leave a place, company, etc., and are replaced by others. The formula to get you to that number is: the number of separations in the period divided by the average number of employees in the period, multiplied by 100. Our intention today is not to just talk about turnover, but rather turnover and retention. We think of retention efforts as being slightly more strategic vs. turnover or reduction efforts which are more tactical or reactionary. Something to think about - when you are reducing turnover, what is your goal? What are you trying to accomplish?
- #8 To add some complexity, let’s talk about good turnover and bad turnover – the two shouldn’t be lumped together. What do I mean by that? For example, imagine a scenario where you were disappointed when a high performing employee decided to leave the organization – this is an example of ‘bad’ turnover. On the other hand, an example of good turnover might be a low performing employee finally putting in their resignation. In this case, and most people have been there, a sigh of relief might be in order. Other examples of good turnover – if you are trying to change something about your organization (growth, culture, etc.) and you have people who are stuck in the old way of doing things, sometimes the only way to move forward is to have those people move on. Another example – if you have somebody in a job that requires a high influx of information on a regular basis (maybe a technical job where things are changing and evolving really quickly) and they are very tenured, sometimes these folks are not bringing new information to the table. Turnover here might be beneficial as a way to bring in fresh ideas. One more example of good turnover – you have an employee who, frankly, has a bad attitude. They are ‘poisoning the well’ so to speak and are having a negative impact on morale. Maybe its not such a bad thing when they move on.
- #9 This is from PayScale’s 2015 Compensation Best Practices Report. What we see here is that for the 5th year in a row retention is a major concern, and it has been since the end of the recession. The main message here – you aren’t alone in worrying about turnover and retention issues.
- #10 All of these intersecting organizational systems have an impact on one another, either directly or indirectly. If your key issue is retention, for example, you should be looking at all of these other systems to identify your solution. Is it your recruiting? Maybe you aren’t bringing the right people in to the organization in the first place. Maybe its the compensation? Your employees think they aren’t paid fairly – perhaps because there isn’t a high level of transparency around how they are paid. Is it the lack of engagement in your organization? Or, maybe its performance? Are people given clear expectations so they know how to perform? What about your culture? This is that nebulous “fit” question. And finally, budget/revenue – how is your budget being impacted by your retention issues? And how is your turnover impacting your revenue potential? Or, maybe retention isn’t your root cause. If its engagement for example, run through the list again with that in mind. There are potentially many different causes of turnover, and we’ll talk about a few more in depth shortly.
- #11 Mykkah
- #15 Pipeline in place Training systems/programs Planned, regular turnover – cut from salary to pay for costs
- #16 Jen Let’s talk a little more in depth about the role of culture in turnover.
- #17 If there is or develops a mis-match between culture and employee, we run the risk of heightened turnover. And again, in some contexts, that could be a good thing. Next generation vs. traditional organizations – when we talk about traditional orgs we are thinking about organizations that have been doing the same things for the past 50+ years – maybe it’s an insurance agency, or a hospital. Now – this is not to say that all insurance agencies are “traditional,” but you get the idea. On the other hand, a “next gen” organization is one that is finding a new way to create that critical relationship between the employee and the employer. As an example, a next gen organization might be one that is tech-based org, or, focused on a newer industry, like digital marketing. MYKKAH pop in about slide deck background. Flexible work environment – Some folks are more drawn to a flexible work environment (flexible hours, WFH, etc). On the other hand, some prefer a more structured environment (8-5, with 2 breaks and an hour for lunch). Again – if you make a shift from structured to flexible, you might lose people – and vice versa. Training Ground – some organizations know they can’t compete for talent with their bigger brother/sister down the street. Instead, they will sometimes aim to bring in folks at a more junior level, train them up for a few years, and then celebrate their onward movement to the bigger company. Strong Leadership – generally speaking, many employees are engaged by work environments in which they have confidence that the organization will succeed. Strong, communicative leaders drive retention. [MYKKAH: Consistent, skilled leaders…] Transparency – Based on some recent studies PayScale has done around engagement and retention, we know that employees are twice as likely to want to stay in organizations where there is high transparency of pay practices. This doesn’t mean you need to publish all your salaries on the intranet (or the internet), but it is certainly a strong motivator for organizations to examine their current level of transparency and move toward more. Beyond pay, transparency of decision-making is increasingly sought after in “next gen” organizations and amongst millennials. [MYKKAH: increased use and frequency of DACI grids…] Industry and/or job function – some jobs, by their nature, tend to hold people for shorter tenures. Sales jobs, for example. Or lower level / more entry level jobs. Tech. Also, some industries are built around faster turnover expectations, and some much slower: hospitals, universities, banking, etc. Millennials *vs* highly tenured employees – the idea here (as we mentioned earlier) is that not all millennials are shorter-tenured. And, not all Baby Boomers want to stay in their jobs forever
- #18 Mykkah
- #20 Jen So let’s shift gears and talk more about the cost to motivate people
- #21 Jen – Here is an overview of some of the things to think about to ensure that your comp plan will help you have more of the right kind of turnover and less of the wrong kind. - Having a clear strategy - Paying competitively to the market - Creating a solid Base Pay Plan based on that market data - And, creating an Incentive Plan, if applicable Let’s go into more depth on each of these areas now.
- #22 Jen – Making sure you have the right strategy is foundational to getting your comp right. The first thing you want to think about in terms of strategy is your talent market, or markets. Where are you competing for talent for your positions? Think in terms of industry, size, and location. And, remember that your talent market might look very different from one segment of your organization than another. For example, here in Seattle the competition for tech positions (think competitors like Amazon and Microsoft) looks very different than the competition for customer service roles, for example. In this case, you might want to consider (in fact, we would highly recommend it!), segmenting your workforce and identifying the different competitive sets accordingly. Next is level of competitiveness – what we mean by that is where in the market you want to target. Do you want to be a leader in the market and target the 75th percentile, for example. Or, maybe you have a fantastic benefits package, so you want to lag the market in terms of base pay and target somewhere around the 40th percentile. And again, you certainly don’t need to, or necessarily even want to, have the same strategy for all positions across the board. One other thing to think about here are hot jobs. If you have jobs in your organization, and you likely do, that are hot, or moving up in the market very quickly in terms of pay, you want to keep a close eye on those and perhaps have a different strategy for them entirely. Hot jobs can be difficult to recruit for, and especially painful to lose. And finally, what to reward. What is it that your organization values? Is it high performance? Is it obtaining additional (job-related) certifications or education? Or, maybe its something else. Put some thought into this and be sure to incorporate it into your overall strategy to ensure you are compensating things that matter to your organization.
- #23 Mykkah Market – fair pay – competition - etc Transparency… people are looking… competitive landscape for talent, etc.
- #24 Jen – Describe the cake tiers Gotta get the base pay plan right before you can layer on top of it. Also, for some jobs, the base pay is critical! This is often very true in entry level jobs: if the level of compensation is not meeting the employee’s basic needs, no amount of perk will matter.
- #25 Mykkah Defining Incentive vs Bonus (Umbrella term vs getting specific) Bonuses remain a popular component of compensation plans, with 76 percent of employers reporting they give bonuses. This percent is up from previous years. In 2013, 75 percent of employers reported giving bonuses, and in 2012 and 2011, those numbers were 71 and 70 percent, respectively. Also, 43 percent of employers report having a bigger bonus budget for 2015. These numbers could reflect employers’ attempts to more closely align pay with performance as well as keep base pay more manageable while still providing financial incentive for best performance. • Directors and managers (76 percent) and Executives (70 percent) are more likely to receive bonuses than other employee groups. • Regardless of size or industry, employers cited individual incentive bonuses are the most popular choice in 2014, as they did in 2013, 2012, and 2011.
- #26 Mykkah
- #27 Jen We always want to give you something that you can do as soon as you hang up the phone or walk out of your office… here are some immediate actions for you: - Calculate Turnover Rate – know what your starting point is. You don’t know if you have a problem if you don’t look at what’s going on. - Identify good and bad turnover – again, not all turnover is created equally. Think about what might constitute good turnover in your organization – try to split out the turnover rate by good/bad and track that over time. Talk with your executives about the good turnover you have, in addition to the bad. - Brainstorm efforts that work – if you find you have more of the wrong kinds of turnover than you want, what might you do to reduce that turnover? - evaluate your comp plan – you need to know what you’re trying to accomplish before you can accomplish it. Talk with your executives about your goals for retention & then look at your comp plan with those objectives in mind. Will your plan help you accomplish what you’re trying to do? If you’re trying to consistently get fresh ideas into your organization, paying high with excellent benefits won’t encourage people to move onward and upward (making space for new people & ideas) Quiz: Do you currently track turnover? - Yes – we lump all turnover together - Yes – both good and bad - Yes – both voluntary and involuntary - Yes – we define and track multiple turnover reasons - No – but we will now!