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Posts Tagged ‘Retention’

Employee satisfaction is essential to any effective employee retention strategy – any good HR manager knows that. However few managers think of the impact that employee satisfaction has on their customers and ultimately company profits. One can assume that happier, more productive employees will make more sales, treat customers better, and ultimately make more money for the company, but few companies have analyzed this assumption to the extent that Sears, Roebuck and Company has. Sears has put this common assumption to the numbers test and the results are intriguing to say the very least.

1992 was the worst year on record for Sears, losing almost 4 billion dollars on over 52 billion dollars in retail sales. The early and mid 1990s were truly trying times for the retail giant and tested the will and resolve of managers and employees alike. During this time the company was in near shambles, morale was low, revenues were suffering, and the bottom line was hemorrhaging red ink. This was in stark contrast to nearly a century of stellar results that Sears had comfortably enjoyed. For Sears, something needed to be done, and fast!

Sears began their turnaround by identifying three key objectives: Creating a compelling place to work, a compelling place to shop, and lastly creating a compelling place to invest. One of the tools used to establish these objectives was the employee-customer-profit chain. The employee-customer-profit chain is essentially a flow chart that diagrams revenue creation starting with employee attitudes and satisfaction, followed by its effect on customer satisfaction, and ultimately the effect on revenue and bottom line profit generation.

One thing Sears realized it needed to do was exert a greater effort focusing on the customer. This is often times easier said than done for many organizations. However Sears took an innovative approach to increasing customer focus. Based on the employee-customer-profit chain, it realized that it could not better focus on the customer without first focusing on its employees.

For Sears 70% of its workforce was part-time status and turnover among its part-time workforce had become alarmingly high. Sears suspected that low morale and poor employee attitudes towards the company were to blame. Sears began a rigorous process of measuring employee attitudes and satisfaction via a 70 question employee survey. The results of this survey were then juxtaposed to customer satisfaction surveys and ultimately compared to revenue and profit trends for the company. The correlations drawn from the data were greater than Sears could have ever imagined.

Undoubtedly Sears expected to see some positive correlation between employee and customer satisfaction and ultimately revenue and profit generation; however they were amazed to see just how great an impact employee satisfaction levels had on the bottom line. The data revealed that for each five point improvement on the employee attitude scale, there was a subsequent 1.3% improvement in customer satisfaction, and a 0.5% increase in revenue growth.

A 0.5% increase in revenue might sound miniscule, however when it is based on revenues of over 50 billion dollars it adds up quickly and significantly. For Sears this would equate to a 250 million dollar increase in revenues a year! This revenue increase does not require investments into advertising, new facilities, or improved operations, only an investment into the satisfaction and happiness of employees.

There are also cost savings that can be attributed to improved levels of employee satisfaction. It should come as no surprise that happy employees stay in their jobs longer than unhappy employees. By focusing on increasing employee satisfaction Sears was able to concurrently increase revenues and reduce the costs associated with employee turnover. Sears was also able to determine that employees with greater levels of satisfaction and a favorable attitude towards the company were more likely to speak positively about the company and recommend shopping there to friends and family members. By increasing employee satisfaction Sears was able to generate free word of mouth advertising spread by its employees, thus in a way reducing the reliance on paid advertising to generate revenue. Sears realized the importance of its employees and their levels of satisfaction and made it a corporate goal to increase levels of employee satisfaction throughout the company.

Sears feels that employee satisfaction levels are so important to the company’s health and vitality that it treats attitude and satisfaction numbers the same as “hard” financial numbers. Sears is so committed to these numbers that it has them audited by an accounting team to ensure validity and reliability just as it does with all of its internal financial measures.

For Sears its turnaround did not take place overnight. It took several years of hard work and dedication from managers and employees at all levels. Improving levels of employee satisfaction was not the sole contributing factor to Sears’ remarkable turnaround. However it is fair to assume that without the focus on the employee as a base to better focus on the customer the turnaround at Sears would not have been as quick or amazing as it was.

As business leaders we should all pay careful attention to the approach that Sears took to improving its bottom line. The urge to drastically cut costs through outsourcing, layoffs, reducing benefits, and streamlining operations might well be overly complex solutions to a relatively simple problem. In lieu of cost cutting initiatives to preserve profit margins, a customer focused approach might be a better solution. As we can learn from Sears focusing on the customer ultimately begins by focusing on the employees who serve the customer. Give it a shot, your employees, your customers, and ultimately your shareholders will thank you for it!

At The Rainmaker Group we are committed to helping your organization maximize possibility through its most valuable assets – its people. We have the tools and techniques to help you improve levels of employee satisfaction. From selecting and retaining great employees, to coaching existing employees to realize their full potential we have what it takes to create a work culture that employees enjoy and appreciate. Your employees and customers will thank you. Give us a shout today!

1-866-988-7246

Even though it’s an “employer’s market” with millions of capable people looking for work due to the recession, many employers are making these five costly employee retention mistakes.

 

Mistake #1: Assuming employees “won’t dare leave now due to the recession.”

 

Many organizations have discontinued their employee retention programs, figuring they aren’t needed because their employees would be crazy to leave now.

 

While it’s true that most of your good employees won’t leave now, some employers lose some of their most valuable employees during economic downturns and recessions.

 

Why?

 

Having already undergone several waves of layoffs, many organizations now operate as lean as possible, continuing to employ only their critical skills and best-performing employees.

 

If even one of those key or high-performing employees leaves, the impact can be significant.

 

Every time there’s more bad economic news, reduced customer orders, or another layoff, many employees ask themselves, “I wonder if I’ll be next?”

 

If another employer, possibly one of your competitors, can offer them a job with more security, don’t you think some employees will at least consider it?

 

Or, if their families are complaining about increased workloads and time away from home, including nights and weekends, and another employer offers a job with improved work-life balance, won’t some employees consider taking it?

 

Is this really the time to potentially risk losing the employees who are getting you through the recession?

 

You want to be looking for ways to better serve and retain customers, not dealing with costly employee turnover.

 

Mistake #2: Assuming other employers aren’t hiring or making strategic job offers.

 

Many organizations have kept only their most valuable employees: the ones with the most skills, knowledge, expertise, important customer relationships, and highest productivity.

 

All of these are attributes other employers, especially competitive ones, value.

 

Even though their talent management plans don’t include hiring new employees now, some employers will make special allowances to hire valuable employees away from key competitors.

 

 And, it’s also not unheard of for companies to terminate one or more existing employees in order to gain another employer’s “star.”

 

Mistake #3: Not talking with your best employees about how they’re coping.

 

Many high-performing employees were already working to full capacity before the recession; now, many of them have even more demands and responsibilities.

 

Meet with them one-to-one in private, asking questions like these:

 

1)     Do they feel overloaded or overwhelmed? If so, what might help reduce this? Can some of their work or projects be delegated to others?

 

2)     Have their families complained about the hours they’re working?

 

3)     What would they like from you to help them work more comfortably and effectively?

4)     If they were going to consider leaving the organization within the next six months, what might make them do so? (Don’t be afraid to ask this question fearing you’re putting thoughts in their heads that aren’t already there. They’ll appreciate your honesty).

 

5)     How do they describe their relationship with their immediate boss?

 

While this dialogue is always important, it’s especially important now; it helps establish relationships of open communication and trust which is one of the most effective employee retention strategies there is.

 

Mistake #4: Not paying enough attention to the relationships between employees and their immediate bosses.

 

Research has continually shown that the quality of the relationship employees have with their immediate boss is the number one reason they leave.

 

If their boss places more and more demands on them while treating them as less than a valuable asset during a difficult economy, this will prompt some employees to look now, or decide to leave once the recession’s over.

 

Train managers how to retain good employees; make retention part of their job descriptions; and make good employee retention at least 25% to 33% of their bonuses. Employee turnover will usually decrease.

 

Notice that the one-to-one conversations recommended in Mistake #3 can help you uncover and correct concerns in this area.

 

Mistake #5: Assuming employees will stay once the recession’s over.

 

Just because capable employees don’t leave during the recession, you can’t assume they won’t leave once it’s over.

 

Because they often do.

 

Several times after past economic downturns and recessions, the Society for Human Resource Management (SHRM), has reported that two-thirds or more of existing employees intended to seek new employers.

 

When the economy improves, you don’t want to be spending resources on employee recruitment and hiring and training replacement employees, you want to take advantage of increased business, and recoup lost revenues.

 

Avoiding these five key employee retention mistakes will help you avoid spending tens or even hundreds of thousands of dollars and substantial amounts of administrative time later.

 

© 2009 Ross Blake Associates, Inc.