Is Your Organization Spending In All The Wrong Places?

Studies show a surprising reason why your people are leaving and why it will cost you more than you realize

If you organization is like many today, there are more open positions than there are people to fill them. You are offering higher salaries, bigger bonuses, and enhanced benefits. Yet there is still a steady stream of people leaving, and you can’t find replacements fast enough to turn the tide.

If the impact of the great resignation has shown us one thing, employees have choices. And they are taking advantage of them. Some take this opportunity to retire, and others are looking for positions that better fit their post-covid lifestyles. In fact, the number of “quits” increased in November of 2021 to a high of 4.5 million (+370,000)[1] , and more than 19 million US workers—and counting—have quit their jobs since April 2021.

But what if it’s not about the money? What if money isn’t the reason people are leaving?

How bad does employee turnover affect your bottom line?

Turnover of employees is expensive and challenging. The financial costs of recruiting new people can be daunting, not just in terms of money spent on recruiting but also time spent on training them and lost productivity.

Several studies have found that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. That means for a manager making $80,000 a year, your company will spend $40,000 to $50,000 in recruiting and training expenses.

Although these numbers may not be startling, the reasons employees leave may be a revelation to some.

What is it if it’s not the money, and it’s not the benefits?

A September 8th article from McKinsey & Company[2] revealed the results of an extensive study of both company and employees found a big difference between why people ACTUALLY leave and why companies THINK they are leaving.

The big reveal is that you can’t fix what you don’t understand. I saw a great quote about this from the McKinsey article, “By not understanding what their employees are running from, and what they might gravitate to, company leaders are putting their very businesses at risk.”

The chart below indicates why employees say they are leaving versus why they think their employees are leaving:

is your organization spending in all the wrong places? 1

As you can see, the top three factors on the left are not even close to the factors employers consider as most important. I find this table interesting because those top items listed on the left don’t necessarily have a hard cost associated with them versus the right side, which will most likely have financial considerations. For many organizations, it’s just easier to throw money at the problem and work it as a financial transaction than create the relationship and culture needed to meet employee needs.

Here’s where you should focus your spending

Based on the research, it’s time to understand how to attack the problem for your particular organization. I’ve narrowed this down to three areas of focus:

  • Understand your employees’ needs, how well your company and management team are meeting them, and what you need to do to meet them. For our clients, the best tool is the Employee Passion Survey. We know that passionate employees are focused, engaged, and committed to doing their best in everything they do. As a result, they deliver exceptional value to their customers, whether external or internal.Passion contributes more towards value creation than any other human capability. Since the primary purpose of your organization is to deliver value to your customers through your products and services, the more passionate your employees are, the more you will provide the value your competitors cannot match.This survey measures employee passion on two levels:
    • Passion for the job: the degree to which employees are emotionally connected to their work and are committed to doing their best.
    • Passion for the organization: the degree to which employees are emotionally connected to its purpose, values, vision, and leaders.

    Why passion? Because passion indicates what is important to your employees and measures the level of trust within your organization.

    is your organization spending in all the wrong places? 2

  • Remove toxic leaders and managers from the organization while developing the ones with potential. You may have heard the phrase, “people don’t leave companies. They leave managers”. Several studies have indicated that over 50 percent of employees left their jobs to leave their manager and improve their overall life at some point in their career. Everything DiSC Work of Leaders™ is a classroom training program that helps leaders understand their leadership styles and how their individual tendencies influence their effectiveness in specific leadership situations. We combine this program with a CheckPoint 360™ assessment. This is a 360-degree leadership assessment used to help managers identify and prioritize their development opportunities and leadership skills.
    The assessment is also used to bring to the surface management issues that could lead to low employee productivity, morale, satisfaction, and turnover. It compiles a feedback system from direct reports, peers, supervisors, and even customers. The program is personalized to develop specific leadership skills based on that feedback. It may also indicate toxicity amongst your leaders that needs to be addressed.
  • Develop a people-first culture and make your team feel valued, inclusive, and have a sense of belonging. We’ve written many times about the importance of building a people-first culture. Several workplace models, including Everything DiSC and The Integro Trust Model, consistently focus on the premise that trust is the foundation of all successful relationships and a people-first culture. That being said, there are some specific things you can do to get there:
      • Measure where you are now to create a baseline or snapshot at a single point in time so you can identify changes in the future and give a base of comparison, a critical component to improving quality.
      • Equip your leaders with the skills to meet employee needs by identifying employee perceptions of how well intrinsic needs are being met around:
        • fairness and respect
        • opportunities to learn and grow
        • the ability for people to feel like an insider
        • understanding the impact of their work (i.e., that it is has meaning)
        • being part of a winning team

    These skills will result in the ability to build trust, coach, and mentor, develop a culture of inclusion, help people see the impact of their work, and build high-performing teams.

  • Incorporate flexibility. An inclusive workplace that entices retention requires leaders to be flexible and understand the individual needs of employees….and meet them. Understanding an individual’s needs and listening to those needs helps people create options that increase employee satisfaction. This will allow you to rethink policies and incorporate more flexibility into them.


Stop spending on attraction whle ignoring retention

The purpose of this article was not to convince you to stop spending on employee salaries, bonuses, and premium benefits. it is to demonstrate that the cost of employee retention is not as straightforward as throwing money at it, but it is not an abstract concept either. Replacing employees is a significant investment. It should be no surprise that continually spending on compensation and bonuses creates a spiral that results in a bidding war with your competitors.

You absolutely should have a fair, competitive salary and benefits package, but missing the key indicators of your attrition rates will inevitably result in spending money in the wrong places and hurt company morale, productivity, and profitability. It’s time to start paying attention to what your current employees really want and not what you THINK they want.

Solicit feedback regularly. Make informed decisions. Communicate with your people. Create a people-first culture. Identify the drivers in your organization that improve the employee experience…and watch your retention rates soar.

Ready to start focusing your spending in all the right places? Reach out and schedule a time to talk now.



POSTED ON: Employee Engagement