UNIT TWO

Recruitment refers to the process of attracting, screening, and selecting qualified people for a job at an organization or firm. For some components of the recruitment process, mid- and large-size organizations often retain professional recruiters or outsource some of the process to recruitment agencies. The recruitment industry has five main types of agencies: employment agencies, recruitment websites and job search engines, "headhunters" for executive and professional recruitment, niche agencies which specialize in a particular area of staffing, or employer branding strategy and inhouse recruitment. The stages in recruitment include sourcing candidates by advertising or other methods, and screening and selecting potential candidates using tests or interviews. Types of Recruitment & Selection Most organizations, including government agencies, have an outlined recruiting and selection process. Guidelines are documented and administered by human resources, who supervise the process accordingly. This ensures the selection process is strictly followed by hiring managers. Administering policies and procedures for recruitment and selection allows a company to find the best possible candidate for any position within its organization and also promotes growth opportunities for employees. Types of Recruitment and Selection 1. In most organizations, recruitment and selection utilizes several outlets: internally, externally or an internal promotional selection. In most cases, a company will allow current employees to apply for the position before posting the position externally. Internal Recruitment 2. When a position opens in an organization, it is typically posted on the company's intranet and in common areas, such as cafeterias, break rooms and departmental information boards. If an employee is interested in the position, she is normally required to go through a similar process as an external candidate. The employee will submit her resume and cover letter to human resources, and if she is qualified, the employee will be scheduled for an interview with human resources and the hiring manager. External Recruitment 3. If no internal candidates are selected for an open position, the company will post the position externally on Internet job boards, local newspapers and ask its employees for referrals. In most cases, employee referral programs are established and if an employee refers an outside candidate that is hired, the employee will receive a cash bonus. Human resources will screen resumes of candidates that applied, and select resumes that are qualified for the position.

Selection Methods 4. After an organization selects candidates qualified for the position, it typically contacts them for interviews and testing. Interviewing and testing are determined by the company's guidelines and procedures. In most cases, several candidates are selected and will be screened on a phone interview by human resources and asked to take assessments. Assessments can include personality, technical aptitude or academic assessments depending on the position requirements. Most organizations will require internal candidates go through the required assessments and interviews, even if they were required to take those assessments when they were originally hired. After the initial phone screens and assessments, candidates are selected to interview with hiring managers and human resources. In most cases, candidates will be required to meet with several members of the department that they will be working in and can include managers, peers and employees the candidate will be supervising. This ensures the candidate will be a fit for the organization and department she will be working in. In most cases, candidates will be brought back for additional interviews as the hiring team narrows its selection. The hiring team will then meet and make a collective decision on which candidate it would like to hire. Normally, human resources will contact the candidate and make a verbal offer. Additional Insight 5. The recruitment and selection process may take several weeks or months, which can be frustrating for the candidate applying for the position. Although the process can take time, it ensures the right candidate is being hired. This is important to many companies because hiring and training new employees can be costly. Most organization's hiring and training costs can average $7,000 to $30,000 for each new employee, depending on the position. Additional guidelines are put into place for employee retention. selection instruments

Pre Employment Testing AlignMark Applied Personnel Research Axiom Software Ltd Benchmark Testware, Inc Bettertests.com - Pre-Employment & Clerical Testing, Typing Keypad Bigby Havis & Associates Brainbench Caliper Catalyst Performance Group CDR Assessment Group, Inc.

Consulting Psychologists Press Inc Criteria Corp CritiCall Pre-Employment Testing for Public Saftey Dispatchers & Calltakers DeGarmo Group Employee Selection and Development, Inc. Recruitment cost can be reduced by. 1. Taking more people from employee referal. 2. Getting profiles from networking. 3. Getting right person, becuase if the person taken has not appropriate skills then it will add to recruitment cost as it will effect the team, chances are more that people from the team may leave the job due to demotivation. so its very important that person especailly in managerial position should have required skills for a particular job. Recruitment Time can be reduced by. 1. Keeping the database ready for future requirements. 2. Aalways keep the pipeline ready. 3 Ways Recruitment Process Outsourcing Reduces Operational Cost Given todays economic environment, greater operational cost efficiency is an organizational imperative. The recent recession has driven a significant change in hiring demand and requirements for most businesses, causing companies to reevaluate their recruitment process and cost structure. Following are three ways that outsourced recruitment can help to reduce costs while adding business value. 1. Cost Reduction Through Shared Risk When a business downturn hits and recruiting needs suddenly drop, so does a companys need for recruiting staff. Likewise, when the business is expanding into another product category or region of the world, recruiting needs may suddenly spike. Outsourcing the recruitment function allows a company to pass along the cost risk of those resources to the business partner. Recruitment Outsourcing firms like Hudson RPO take on the responsibility of efficiently adjusting resource levels when hiring fluctuations happen so the client does not bear the burden of carrying unnecessary staff, or conversely, being short when greater resources are required. 2. Faster Time to Hire Time is money and hiring new professional level employees takes a lot of both. From sourcing resumes to conducting interviews and negotiating offers, acquiring a new employee taxes your internal resources. Plus, each day a job requisition remains unfilled, your business loses the benefit of that employees contribution and wastes recruiting and budgetary resources that could be dedicated to other initiatives. Outsourcing all or part of your internal recruitment function can reduce your time to hire dramatically by leveraging: A global database of thousands of screened, specially skilled professionals and sourcing channels that significantly increases your talent pipeline. Access to a greater amount of recruiting and screening professionals than you can carry on your own staff, who can scale their volume of work with the requisition load.

Vendor and process management that allows you to focus on making hiring decisions while leaving the less strategic administrative duties to your RPO partner.

3. Streamlined Recruitment Processes One of the most common problems we see with the recruitment lifecycle is that its a disjointed and uncoordinated multitude of practicesgood and badacross organizational functions, departments, divisions and regions. Often, this causes overlap in advertising purchases, training and on-boarding procedures, as well as poorer hiring decisions and ultimately higher operational costs. Procuring an RPO project gives you the opportunity to rethink these processes. The RPO vendor will help examine your recruitment process workflow(s) to determine where overlap, excessive cost, and inefficient practices may exist. Then, an outsourced model can be created for you, providing you with service levels and success metrics that exceed the status quo. These practices have been shown repeatedly to yield increased efficiency and satisfaction with the recruitment lifecycle, resulting in overall cost reduction for your company. All of these factors contribute to achieving lower cost per hire your ultimate goal. Human Resource Management: Functions In order to achieve the above objectives, Human Resource Management undertakes the following activities: 1. Human resource or manpower planning. 2. Recruitment, selection and placement of personnel. 3. Training and development of employees. 4. Appraisal of performance of employees. 5. Taking corrective steps such as transfer from one job to another. 6. Remuneration of employees. 7. Social security and welfare of employees. 8. Setting general and specific management policy for organizational relationship. 9. Collective bargaining, contract negotiation and grievance handling. 10. Staffing the organization. 11. Aiding in the self-development of employees at all levels. 12. Developing and maintaining motivation for workers by providing incentives. 13. Reviewing and auditing manpower management in the organization 14. Potential Appraisal. Feedback Counseling. 15. Role Analysis for job occupants. 16. Job Rotation. 17. Quality Circle, Organization development and Quality of Working Life. VRS Guidelines Subject:- Voluntary Retirement Scheme/Voluntary Separation Scheme for the employees of Public Enterprises. The parameters on the basis of which the VRS could be formulated by the PSUs for their employees have been spelt out in this Departments OM of even number dated 5.5.2000.

However, there are certain points on which clarifications have been solicited by the PSEs as well as the administrative Ministries/Departments. These points have been examined in the Government. The points as well as the clarifications are given here under:1. Whether allowances like Personal Pay, HRA, NPA, Family Planning increment are to be included for computation of ex-gratia? Basic pay plus DA only is to be taken into account for computation of ex-gratia under VRS. 2. Whether the post of the employee who has taken VRS is to be abolished? There shall be no recruitment against vacancies arising out of VRS. 3. Whether any arrears of ex-gratia are to be paid in the event of pay revision being sanctioned subsequent to voluntary separation? Ex-gratia will be re-calculated on the basis of revised pay scale and the difference be paid. 4. Can notice pay in lieu of notice and TA for settling in the Home Town or elsewhere be paid to the employees who are to opt or have opted for VRS? One month/three months notice pay (as per service conditions applicable to the employees) may be paid. TA for the employees and family would also be admissible to the place where he intends to settle down after taking VRS. For this purpose, the entitlement will include transportation cost of personal effects and travelling cost of self and family members, as admissible under the entitled classes. 5. Under the Gujarat pattern, will the compensation for the balance service be calculated @ 25 days for every year of service left? Compensation under VRS modelled on the Gujarat pattern will consist of salary of 35 days for every year of service completed and 25 days for every year of service left until superannuation. 6. Under VSS, will the employee be entitled for 60 months salary even if he has not completed 30 years of service? No. 7. 60 months salary as ex-gratia is permissible under VSS scheme of Department of Heavy Industry. If the VSS scheme is modelled on Gujarat pattern (para 5 of O.M. dated 5.5.2000), will the employee be still entitled for 60 months salary if he has completed 30 years or more service? Sixty months salary as compensation is attached to VSS package of the Department of Heavy Industry only and not under the Gujarat model.

8. Whether PF, leave encashment, gratuity, notice pay, LTC are payable to employees in case of voluntary retirement? These are to be paid to the employees opting for VRS as per the provisions of the relevant statutes and the service conditions. These are outside the computation of ex-gratia on voluntary retirement. 9. Is any minimum qualifying service necessary for opting for VRS? No age bar or minimum qualifying service is prescribed. 10. Do the companies have the choice to opt for either the Gujarat model or VSS on DHI model for the sick and unviable units? The Boards of the sick and unviable PSUs are obliged to offer VSS on DHI pattern to the employees. The Board have the option to offer, in addition, VRS on Gujarat pattern, in which event the employees will have a choice between the two schemes. 11. The managements have the right to reject the VR application of certain employees as they have to ensure that the company is not denuded of talents. In that case, what would be the treatment given to such employees who have been retained by the management in case the PSU is closed. Will they be offered VSS in case the PSU is closed. Will they be offered VSS even after a lapse of three months or will they be paid retrenchment compensation under ID Act? The cases of such employees will be covered under he final settlement on closure of the unit. If the benefit of VSS is extended on closure, such employees will also receive it. 12. Whether Casual Leave may be encahsed up to he date of notification of VRS or actual date of relief of employee? CL may be encahsed on pro-rata basis up to the date of relief of employee. 13. What would be the compensation payable in case where the balance of service left under superannuaion is less than 250 days and sum of the salary for the balance period is less than Rs. 25000/-. The computation is explained in the enclosure. 14. Whether he notice period pay is to be paid in addition to 60 months salary as compensation in case an employee has completed 30 years of service and the remaining period of service is 75 months. If the application of an employee for voluntary retirement is accepted instanteously and payment is arranged by the management on the same day, the concerned individual would be entitled to payment of ex-gratia along with the notice period pay. It is, however, clarified that payment of ex-gratia for service rendered or left over service before superannuation as well as the amount

payable for the notice period should not exceed the basic pay plus DA that would have been paid to the employee who has opted for voluntary retirement till the date of his superannuation. For example, if an employee opts for voluntary retirement a few months before the date of superannuation, say at 57 years and 10 months, the payment should be restricted to 2 months basic pay plus Dearness Allowance. In circumstances where the management takes time to take a decision about the acceptance of an application submitted by the employee for voluntary retirement and allows the notice period to lapse or the individual concerned has drawn full salary during the notice period served by him, in these cases notice period pay would not be admissible as the individual has already drawn the salary during the notice period. 15. Whether it is mandatory to introduce new VR Scheme or continue with the existing scheme? The new scheme has been introduced in supersession of the old scheme. 16. If the VRS is implemented in the middle of any particular month, whether full months salary is to be computed for VRS purpose? An employee is entitled to payment of salary till the date of voluntary retirement, regardless of the date of implementation of the VRS. As for computing the completed years and months of service for the purpose of ex-gratia, the datum will be the date on which the employee in question had joined service. 17. If the employee has completed 20 years and 9 months service whether he will be paid compensation for 20 years service or compensation for 20 years of service plus proportionate days salary for the nine months service also? The calculation would have to be based on every completed year of service or part thereof. The part of the complete year served shall be entitled for ex-gratia on pro rata basis. 18. Whether service rendered in other PSEs would be taken into account for purpose of computation of VRS from the latter employing organization? This would be taken into account only on transfer of cash equivalent of Earned Leave and Provident Fund. Gratuity would be as per the provisions of the Act. 19. Will notional pay revision from 1992 and 1997 be taken for computation of VRS/VSS benefits? In the new VRS/VSS scheme, there is no scope for computation of the ex-gratia on notional salary revision. 20. Will encashment of sick leave at the time of taking VRS/VSS be permissible?

Encashment of sick leave has nothing to do with VRS/VSS. Its encashment will depend on the management decision, based on the service conditions. 21. Will the casual workers be included for the purpose of VRS/VSS who have completed more than 20 years of service? Casual workers will not be entitled for VRS/VSS. Refer to para 9 of O.M. dated 5.5.2000. 22. Whether the contract employees appointed on contract basis can be considered as temporary employees for purposes of VRS? If yes, how the compensations would be calculated? Contract employees are outside the purview of VRS. 23. How would the computation of ex-gratia (VRS) under Gujarat pattern be done? As per enclosure. All he administrative Ministries/Departments of the Government of India are requested to bring the foregoing clarifications to the notice of the Public Enterprises under the administrative control for their information and necessary action. (OM No. 2(32)/97-DPE(WC)GL-XXXV dated 8th December, 2000) As per section 25F of the industrial dispute act you have to give a retrenchment compensation for 15 days for every completed year of continuous service. You have to serve one month's notice before retrenchment or pay slary therof to the Workmen. Furhter you have to give a notice in FORM P/Form PA depending on the applicablity of Chaprter VA or Chapter VB of the Act if the Central rules are applicable to u in otherwise cases please refer state rules. IF your firm is a Government undertaking or engaging more than 100 workmen in preceeding 12 months Chapter VB will be applicable. In these circumstances you have to take the approval of the appropriate government for retrenchment. If the retrenched person is already involved in any court case against your corporation, in such circumstaces it is better to take legal opnion. Retrenchments, transfer of business and insolvency: A reason to initiate retrenchment, relating to the business's "operational requirements", must exist for a lawful retrenchment to take place under South African law . Employers are able to terminate the services of an employee (retrenchment) for one of the following reasons: economic, technical or structural reasons. The procedure that needs to be followed for a dismissal based on "operational requirements" (retrenchments) is regulated in terms of section 189 of the Labour Relations Act. The required procedure is as follows: REQUIRED RETRENCHMENT PROCEDURE 1. Consultation:

When?

Unless the employees request collective meetings or are unionized, meetings should be held individually with all employees that could be affected by the proposed retrenchment,. It is a requirement that this should take place as soon as the employer contemplates retrenchment. Consultation must take place (in order of precedence):

With whom?

in terms of a collective agreement, with a workplace forum, with a registered trade union whose members are likely to be affected, or

with employee who is likely to be affected The parties are obliged to enter into meaningful interaction or joint consensus seeking process and to attempt to reach consensus on the following:

About what?

avoiding the dismissal [examples could include adjusting working hours, eliminating temporary labour, eliminating overtime, offering early retirement, minimizing the number of dismissals, the timing of the dismissals, ways to lessen the effects of the retrenchment for those being retrenched, the method for selecting the employees to be dismissed, the payment of severance pay. ( Where employees are offered alternative employment on substantially similar terms and conditions of employment, the Company is not obligated to pay severance pay.)

Employees are entitled to the minutes of all meetings. CCMA may be asked to intervene on request from employer. 2. Retrenchment: Disclosing of information in writing: When contemplating retrenchments, the organisation must issue letters to all employees in the affected unit, advising them of the pending retrenchment and the date when consultations will commence. Decisions concerning retrenchment cannot/ should not be made prior to the consultative process taking place. An employer has to disclose relevant information in writing, including the reasons (eg economic, technical or structural) for retrenchment, alternatives considered to retrenchment and why those alternatives were rejected,

the number of employees likely to be affected and their various job categories, proposed method of selection criteria, timing of the retrenchment ie the time when, or the period during which, the dismissals are likely to take effect, severance pay proposed, (the statutory requirement for severance pay is one week for every year of completed unbroken service. The amount of severance pay is however subject to consultation and can be increased by agreement between the parties.) assistance that the employer will be offering (examples could include offering employees time off to attend interviews, early release should a new job be found, issuing letters of reference, psychological counseling etc), possibility of future re-employment and issues around reemployment.

Should there be a dispute about information provided, it will be up to the employer to show why information is not relevant. Disclosure of information disputes can be decided by either the Labour Court or the CCMA. 3. Opportunity for Feedback The employer must give the other consulting party an opportunity to make presentations. Representations must be considered and be responded to by the organisation. 4. Criteria for selection If no agreement is reached on the criteria for selection, criteria must be fair and objective. (The LIFO [last in first out] principle is often applied at the time of retrenchment, but is not the only consideration. Employees with key established skills or who occupy a specific specialized position may be retained, and a poor performance record may be taken into consideration.) Offers of alternative employment should be made known and offered to all employees. Voluntary retrenchment offers must be considered initially during consultation before being offered to employees. The terms must be clearly defined to ensure that there is no dispute thereafter. Statutory notices of termination of services are handed to those employees who are to be retrenched once the consultation process has been completed and all employees' counter proposals, questions and concerns have been addressed in writing. LARGER RETRENCHMENTS The following provisions apply if an employer with fifty or more employees contemplates retrenching either -

ten employees - if the employer employs up to 200 employees twenty employees - if the employer employs between 201 and 300 employees thirty employees - if the employer employs between 301 and 400 employees forty employees - if the employer employs between 401 and 500 employees fifty employees - if 500 and above or, if in the twelve-month period preceding notice of retrenchment, the employer contemplates retrenching a total number of employees falling into any of the above categories.

Part-time workers and casual workers are employees for the purposes of the statute. In this regard, the new section 200A presumes other categories of persons to be employees, unless the contrary is established. Once retrenchments are contemplated, the employer must deal with an identified consulting partner according to the following hierarchy:

parties identified in a collective agreement; a workplace forum and any registered union with affected members; any registered union with affected members; and the affected employees and their representatives.

Section 189(3) requires the employer to issue a notice in the form of an invitation to begin a consultation process to the relevant consulting parties. When notice is given, the employer is required to disclose all relevant information and in the event of a dispute regarding disclosure, the onus will now be on the employer to show the information sought is not relevant. A process of consultation needs to be embarked on which is defined as "an engagement in a meaningful joint consensus seeking process" in an attempt to reach consensus on issues such as measures to avoid or mitigate retrenchment; selection criteria; and severance pay. After the conclusion of the sixty day facilitation process, and if there is no consensus between the parties, the employer is then entitled to give notice of termination of contracts of employment in terms of section 37(1) of the Basic Conditions of Employment Act and a registered union or the employees who have received notice of termination may either

give notice of a strike in terms of section 64(1)(b) or (d) of the LRA; or refer a dispute on the reason for the dismissal to the Labour Court for adjudication.

If neither party requires the appointment of a statutory facilitator, the parties may not dismiss or engage in industrial action or refer a dispute to the Labour Court respectively, for an equivalent sixty day period. If any consulting party wishes to challenge the fairness of a consultation process, it may challenge the outcome in the Labour Court. Any application in this regard must be brought within thirty days of the issuing of a notice of termination of employment.

HANDLING A DISPUTE ON RETRENCHMENT Workers may elect after the consultation process to either strike, in certain circumstances, or refer the matter to the Labour Court for adjudication. Strikes should be conducted in terms of section 64, essentially like all other strikes. Secondary strikes are permitted on 14 days notice. If you want to challenge the lawfulness of a retrenchment, you should immediately refer this matter to the CCMA for conciliation. You should consider approaching a labour attorney/ expert for assistance to ensure that your rights are protected... (Call Labour Protect on 0860 522687 to arrange to consult with the nearest labour expert on the network.) If a retrenchment dispute is not resolved in conciliation, then the matter may be referred either to arbitration or to the Labour Court. Previously a retrenchment matter not resolved at conciliation had to be referred to the Labour Court. However now section 191(12) of the Labour Relations Act seeks to lessen the Labour Court's work load in that individual employees who have been retrenched will have an election to refer the dispute either to arbitration or to the Labour Court. (It may be more expeditious with regard to time and cost savings to arbitrate, rather than proceeding to the Labour Court.) Relevant Legislation: Labour Relations Act 1995 (section 189) and Basic Conditions of Employment Act 1997 sections 35, 37 and 41. This document is based on literature available from the CCMA What is an Exit Interview? An exit interview is typically a meeting between at least one representative from a company's human resources (HR) department and a departing employee. (The departing employee usually has voluntarily resigned vs. getting laid off or fired.) The HR rep might ask the employee questions while taking notes, ask the employee to complete a questionnaire, or both What's the Purpose of an Exit Interview? Human resources departments conduct exit interviews (also called exit surveys) to gather data for improving working conditions and retaining employees. However, a hidden purpose is to help employers avoid costly litigation down the road, caused by "disgruntled" employees. In other words, your comments and the notes an HR rep takes during your exit interview might be used against you in court, should you decide to sue your former employer. Exit Interview Questions - Samples Listed below are samples of the types of exit interview questions that employers commonly ask departing employees.

What is your primary reason for leaving?

Did anything trigger your decision to leave? What was most satisfying about your job? What was least satisfying about your job? What would you change about your job? Did your job duties turn out to be as you expected? Did you receive enough training to do your job effectively? Did you receive adequate support to do your job? Did you receive sufficient feedback about your performance between merit reviews? Were you satisfied with this company's merit review process? Did this company help you to fulfill your career goals? Do you have any tips to help us find your replacement? What would you improve to make our workplace better? Were you happy with your pay, benefits and other incentives? What was the quality of the supervision you received? What could your immediate supervisor do to improve his or her management style? Based on your experience with us, what do you think it takes to succeed at this company? Did any company policies or procedures (or any other obstacles) make your job more difficult? Would you consider working again for this company in the future? Would you recommend working for this company to your family and friends? How do you generally feel about this company? What did you like most about this company? What did you like least about this company? What does your new company offer that this company doesn't? Can this company do anything to encourage you to stay? Before deciding to leave, did you investigate a transfer within the company? Did anyone in this company discriminate against you, harass you or cause hostile working conditions? Any other comments? Employee Retention: What Employee Turnover Really Costs Your Company Employee turnover can be a result of many causes within your individual organization. Sometimes it is a result of improper hiring, sometimes it is a result of improper managment techniques, and sometimes it may be a symptom of a deeper problem within your organization. Turnover is a result of a sales person leaving the company whether voluntary or involuntary.

In some cases, tunover can be good as most successful companies will promote their better performing employees into higher positions. However most tunover can be considered bad as they are usually a result of terminations based on poor performance. It's one of the largest costs in all different types of organizations, yet it's also one of the most unknown costs. It's employee turnover. Companies routinely record and report costs such as wages and benefits, Workman's Compensation Insurance, utilities, materials, and space, yet most companies have no and report the cost of employee turnover. It can be much higher than you think. How Much is it Costing You? Several well-regarded studies have recently estimated the cost of losing an employee:

SHRM, the Society for Human Resource Management, estimated that it costs $3,500.00 to replace one $8.00 per hour employee when all costs -- recruiting, interviewing, hiring, training, reduced productivity, et cetera, were considered. SHRM's estimate was the lowest of 17 nationally respected companies who calculate this cost!

Other sources provide these estimates: It costs you 30-50% of the annual salary of entry-level employees, 150% of middle level employees, and up to 400% for specialized, high level employees!

Do a quick calculation: Think of a job in your organization where there has been some turnover, perhaps supervisors. Estimate their annual average pay and the number of supervisors you lose annually. For example, if their average annual pay is $40,000, multiply this by .125% (or 125% of their annual pay, a reasonable cost estimate for supervisors). This means it costs $50,000 to replace just one supervisor. If this company loses ten supervisors a year, then 10 times $50,000 equals $500,000 in replacement costs for just supervisors. This is the bottom line cost. The top line cost? If the company's profit margin is 10%, then it costs $5,000,000 in revenues to replace these ten supervisors.

Do These Numbers Seem Unbelievable? Here's an actual calculation from a well-regarded organization in my community. The HR Manager of this human services organization (housing for disabled persons, sheltered workshops, etc.), estimated that 30 entry level people leave his organization on average every quarter. This averages out to ten people per month. Let's be extra conservative and shave SHRM's estimate (see above) down to $3,000.00 to replace each employee. This amounts to $30,000 per month, or $1,000.00 in employee turnover costs every day of the month! Annually, this totals $360,000.00. Actual turnover costs are usually much higher than we think they are -- until we estimate them. You may be thinking, "Some employee turnover is unavoidable, even desirable." You're right. Some turnover is necessary, to replace marginal or poor employees with more productive ones and to bring in people with new ideas and expertise. However, high turnover costs are both avoidable and unnecessary. This is where companies need to focus their efforts. The goal is to retain valued performers while replacing poor ones. Most companies group both types of performers together when looking at turnover. By doing so, they're missing the cost and significance of replacing the good performers. Why Don't More Companies See This as a Costly Problem? There are a variety of reasons this is not seen as a problem, all of which cost companies in expertise and dollars. How many of these occur in your organization? 1. No process is in place to tabulate costs. One survey found that only 44% of its respondents had a process in place to estimate turnover costs; 43% of companies relied on intuition, and 13% had no process at all. (1)

2. Costs are not reported to top management. It's a business axiom that one of the best ways to get top management's attention is to show them what something costs. However, most top management never gets to see turnover cost estimates because most companies don't measure them -- or if they do, they don't report them to top management. 3. It's an inescapable cost of doing business. Except, it's not! While some turnover is unavoidable and desirable, most turnover, especially among your better and top performers, is largely avoidable. Thinking that turnover is just a normal cost of doing business is the same quality of thinking which says that accidents are just an inescapable part of being in the construction business. 4. It's an HR problem. While HR needs to be a key partner in reducing turnover cost, this is a strategic issue requiring top management's attention and actions, in addition to HR's efforts, to resolve it. 5. Costs are underestimated, and so they register less concern. If costs are underestimated because the organization doesn't agree on or know what to measure, the statistics generated either register less concern than they should, or are disputed and held in disregard. What Costs Need to be Fully Estimated? A comprehensive program measures the following costs:

Exit costs Recruiting Interviewing Hiring Orientation Training Compensation & benefits while training Lost productivity Customer dissatisfaction Reduced or lost business Administrative costs Lost expertise Temporary workers

There needs to be advance agreement among Human Resources, Finance, and Operations as to which cost measures will be considered valid. Then, it has to be measured and reported. 6. Waiting until there's a crisis. I was amazed when the executive director of one organization told me she knew that one of her capable managers was unhappy, but decided it wasn't necessary to take action because she hadn't received a letter of resignation yet. Prevention is what works best. Begin to measure your turnover costs and, very importantly, look at who is leaving so you'll know if you're retaining your best people.

The time to do this is now. Waiting until there's a crisis to take action limits your options and success rate. It also often triggers the common response of offering more money to get someone to stay, instead of fixing the original problem. Why Do So Many Retention Efforts Fail? These are among the most common reasons company retention efforts fail, even when they're implemented by capable people. 1. No assessment, so ineffective solutions are chosen. In their hurry to correct a costly problem, companies often forgo conducting a relatively brief and cost-efficient assessment in order to correct the situation faster. However, implementing a solution without diagnosing who is leaving, and why they're leaving often results in solutions that are incapable of solving the root causes behind turnover. Diagnosing the reasons behind turnover always pays for itself. Don't start without an assessment. 2. Implementing too many solutions instead of the most effective solutions. Managers often brainstorm a number of plausible solutions, then implement many of them -- especially those favored by top management. However, what is most needed is to select and implement a limited number of solutions which will be most effective at solving the problem. Implementing too many solutions, even good ones, will diffuse your resources and weaken your efforts and success. 3. No way of measuring success to know what works. How do you know which retention solutions you've implemented are working effectively and which aren't, where you need to make refinements, and what strategies you need to drop if you don't have a way of measuring your results? How Do We Do a Better Job of Retaining Employees -- Especially Our Most Valuable Ones? First, rank your employees in three categories: best performers, middle performers, and lowest performers. Your objective is to retain your top performers; develop and retain your middle performers, turning them into near-top or top performers if possible; and potentially replace your lowest performers. Second, agree internally on the measures you'll use to calculate turnover costs. Be certain you're taking all costs into consideration. Most organizations greatly underestimate them. Third, report turnover costs to top management on a monthly, quarterly, and annual basis. When turnover costs are unacceptably high, or higher than your industry's average, do an assessment. Find out who is leaving and why they're leaving. Exit interviews can help you find out why. You need to know if it is your top, middle, or lowest performers who are leaving so you can gauge the expertise level leaving your organization. You're obviously going to employ (and pay for) different strategies if your top performers are voluntarily leaving, compared to middle or lowest level performers. Develop solutions capable of solving the problems you uncover, and only implement a limited number of them. Measure the success of your retention efforts, and refine them. Two Very Key Strategies to Save a Large Amount of Time and Money.

Very key strategy # 1: Don't wait until turnover costs become unacceptably high before you implement an ongoing retention program. Put a retention program in place before you have crisis situation. You not only must find out why employees leave your organization, you must also find out why others stay. Very key strategy # 2: Survey your top performers now in order to find out what keeps them there, why they might leave, what type of competitive offers they may find attractive, and what they need to be happier and more productive in their jobs. You'll do a better job of keeping them (along with their expertise and value). You'll also find out highly beneficial information about improvements your organization needs. This means driving improvements in your organization by what your best people tell you, instead of focusing on taking care of the ever-present complainers in every organization.