Speak the CEO Language on Engagement & Retention: DOLLAR$! Dick Finnegan October 23 th, 2012...
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Speak the CEO Language on Engagement & Retention: DOLLAR$! Dick Finnegan October 23 th , 2012 Copyright C-Suite Analytics, 2012 All Rights Reserved
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Transcript of Speak the CEO Language on Engagement & Retention: DOLLAR$! Dick Finnegan October 23 th, 2012...
Speak the CEO Language on Engagement & Retention: DOLLAR$!
Dick FinneganOctober 23th, 2012
Copyright C-Suite Analytics, 2012 All Rights Reserved
2 0 1 2 S T R A T E G I C T A L E N T M A N A G E M E N T F O R U M
Finnegan Background
• “Recovering HR director” who has solved disengagement & turnover across 6 continents including Siberian banks, African gold mines, and the CIA
• Author of “Rethinking Retention in Good Times and Bad”, endorsed by BusinessWeek as offers “fresh thinking for solving
the turnover problem in any economy”
• Author of “The Power of Stay Interviews for Engagement & Retention”
• Noted as employee retention expert by BusinessWeek, Chief Executive Magazine, & Consulting Magazine
• Partners with HR Excellence Center of China to conduct employee retention programs for Microsoft, Coca Cola, and other companies across China
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Today’s Agenda
WHY placing dollar values on turnover and engagement is your next important step
HOW to place dollar values on turnover and engagement
WHAT to do with your data once you have it
TO MAKE THIS EASY
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Why Care About Engagement & Retention?
4.1%...college grad unemployment
3.7 MM…open jobs
50-90%...say they will leave
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How Many $s Are At Risk?
Engagement• One standard deviation
improvement in engagement increases revenue per employee by $4,675
• For a typical S&P 500
organization, = revenue increase of $93.5 million
• Proportional increase just as large for small/medium-companies
Retention• One standard deviation Turnover
costs companies 12% - 40% of pre-tax income
• Costs shareholders 38% in
additional value in just four high-turnover industries
• Annual cost nationally is $25 billion
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The Rethinking Retention Model ®
Research-Driven, Process Based
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The Rethinking Retention Model ®
Process or Program-Driven?
Retention Programs driven from the side like surveys, employee appreciation week, newsletters
Retention Processes driven by executives from the top like sales, service, quality, and safety
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Supervisors’ Impact on Retention
“If you have a turnover problem, look first to your managers”…Gallup
Primary reason for seeking a new job is disliking boss’s performance…Yahoo
Employees stay for managers first and co-workers second…salary.com
Poor leadership causes over 60% of all employee turnover…Saratoga Institute
“When employees stay, it is because of their immediate managers”… National Education Association
Employees who stay primarily for their supervisors stay longer, perform better, and are more satisfied with their pay…TalentKeepers
Employees’ relationships with managers “mediate” their perceptions of pay, benefits, development, and advancement…Kenexa
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The Fortune Top 100, 2012
#1:
“Employees rave about their mission, the culture, and the famous perks of the Plex: bocce courts, a bowling alley, eyebrow shaping…25 cafes, all gratis”
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“Two-thirds of a company’s core is based on the results of the Great Place To Work’s Trust Index Survey”
“Any company can be a great place to work. Our approach is based in the major findings of 20 years of research – that trust between managers and employees is the primary defining characteristic of the very best workplaces.”
The Great Place to Work Institute
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Process or Program-Driven?
Retention Processes driven by executives from the top like sales, service, quality, and safety
Retention Programs driven from the side like surveys, employee appreciation week, newsletters
70%30%
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What The RR Model Tells Us
Good managers are must-haves
Managers must be held accountable to engagement & retention goals
The keystone to influencing CEOs to hold managers accountable is DOLLARS
Engagement SCORES & Turnover PERCENTS have little impact compared to DOLLARS!
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The Turnover Cost Team
Representatives
from…
HR/Recruiting
Finance
Position SME
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The Turnover Cost Team
Representatives from…
HR/Recruiting
Finance
Position SME
But the Most Valuable Player is…
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An Accountability Clue
2-ball off the 6-ball
The secret to influencing the CEO to set retention goals is to ask the CFO to put a $ cost on turnover first… then both the CEO and CFO become advocates for what you’ve always known, that retention must be managed on the operations side of your company as well as in HR
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Einstein Knows Best
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Introducing…
The very best turnover cost calculator I know
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Calculating the Loss of One Nurse
Direct Costs + Lost Productivity = One Exit’s Cost
…based on 11 data points
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Nurse Turnover: Baseline Data
1. Nurse annual average compensation & benefits $75,000…$312.50 per day
2. Annual average compensation & benefits all positions $60,000
3. Projected nurse exits this year 200
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Nurse Turnover: Direct Costs
4. Separation…exit int, admin costs, separation pay $100
5. Vacancy…temp help and OT $5,000
6. Acquisition…advertising, agencies, emp referrals, travel, interviews, assessments, bkgd chks, ref chks, physicals, bonuses, relo $2,900
7. Placement…new supplies, onboarding days, training days $3,750
Total direct costs: $11,750
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Nurse Turnover: Lost Productivity
Moving From Direct Costs Lost Productivity
8. Annual revenue ÷ FTE $240,000
9. Workdays per year 240
10.Average workdays position open 20
11. 50% workdays to total effectiveness 10
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Nurse Turnover: Lost Productivity
Moving From Gross Net Lost Productivity
Total gross lost productivity $37,500
(salary and benefits while position open $6,250)
(vacancy costs $5,000)
Total net lost productivity $31,250
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Nurse Turnover: Summary
Total direct costs $11,750
Total lost productivity costs $31,250
Total cost per exit $43,000
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Nurse Turnover: Summary
Total direct costs $11,750
Total lost productivity costs $31,250
Total cost per exit $43,000
X 200 exits this year $8,600,000
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Nurse Turnover: Summary
Total direct costs $11,750
Total lost productivity costs $31,250
Total cost per exit $43,000
X 200 exits this year $8,600,000
Savings 20% $1,720,000
Savings 50% $4,300,000
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Hospital Example/Rolling 12 Months In 5 Job Bands
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Mega-Savings
Hotels: Major chain spending $350 MM on turnover so cutting turnover in half would increase stock price by nearly 25%
Brokerage: More than half of brokerage clients changed companies to follow a broker who left so what is the real turnover cost?
Fast Food: Taco Bell found top 20% stores for retention had double sales and were 55% more profitable
Call Centers: Lost productivity costs are 4.4 X direct costs
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Specific Free Calculators Available
For Sales…www.top-mark.com/turnover_cost_calculator.htm.
For Hotel Administration…www.hotelschool.cornell.edu/research/ctr/. Then click on Cornell Hospitality Tools, then 2005
For Truck Drivers…trinicon.com/resources/cost-calculator
For Teachers…www.nctaf.org/resources/teacher_cost_calculator/school_calc_sdp.asp.
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Introducing…
The very best engagement calculator I know
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The Research Source
“Watson Wyatt analyses show that a significant improvement (one standard deviation) in employee engagement is associated with a 1.9 percent increase in revenue per employee.“
“Debunking the Myths of Employee Engagement”,
Watson Wyatt…now Towers Watson…..2007
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Engagement Calculator Example
Organization earns $100 MM in annual revenue
Conducted engagement survey that reported scores on scale of 1-10
Targeted ultimate score was 8
Actual organization score was 7
Distribution of scores indicates 1 SD = 1
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Engagement Calculator Example
1 108
Target Score
Actual Score
7
SD = 1
6
If organization score is 1 SD below target score…
Organization is losing 1.9% of revenue… .019 x $100 MM = $1.9 MM
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Engagement Calculator ExampleSales Department
Organization earns $100 MM in annual revenue
Conducted engagement survey that reported scores on scale of 1-10
Targeted ultimate score was 8
Actual sales department score was 9
Distribution of scores indicates 1 SD = 1
Sales department salaries & benefits = 10% of organization’s total salaries & benefits
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Engagement Calculator ExampleSales Department
1 108
Target Score
Sales Dept. Score
7
SD = 1
6
If sales dept. score is 1 SD above target score…
Sales dept is achieving 1.9% of additional revenue… .019 x $100 MM = $1.9 MM x .10 = $190,000…when sales department salaries & benefits comprise 10% of organization’s total salaries & benefits
9
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This Engagement Calculator Works!
“The C-Suite Analytics Engagement Calculator is a welcomed, one-of-a kind tool to help organizations fully grasp the value of engaged employees…as well as the huge number of dollars left on the table when employees don’t give their best. Perhaps its greatest value is that it distinguishes managers who influence engagement from those who do not, in specific dollar values.
This calculator is based on broad-based research and its algorithms have a solid statistical foundation. It can work with any engagement survey and assumes that survey measures engagement in a valid way.”
Dr. Gary Borich, Ph.D
Endowed Fellow, Quantitative Methods Program
The University of Texas at Austin
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Patent-Pending
The engagement calculator is patent-pending which means you may use it but no one may sell its use to you.
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Next Steps For You
Incorporate the costs of turnover and the values of engagement in every report you make, especially down to the manager level so that you can…
Influence your executives to hold all managers accountable for achieving engagement & retention goals
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To Make This Easy
For a detailed white paper on how to calculate the costs of turnover and the dollar values of engagement…
Please Leave Your Business Card
Dick Finnegan
407.694.3390
