Here’s an interesting 5 minute exercise you can do next time a manager complains that you focus too much on team building or recruiting properly or on improving staff retention.

Team Building or Staff Turnover?

Get a blank piece of paper and, up the top, make a note of the vacant position’s title and its likely annual salary.

Below that, list the hourly pay rate of all the people who will be involved in the recruitment and selection process. To get an hourly rate you can take each person’s approximate annual salary, divide it by 52 to get a weekly rate, and then divide the weekly rate by 38 to get an hourly rate.

Next, below your hourly rates, draw a line straight down the middle of the page from top to bottom.

Now, text on the left, numbers on the right, write down the following items:

• The cost to run an ad for this vacancy online and/or in a newspaper.
• Contractor or labour hire costs whilst recruiting for the vacancy.
• Interview expenses like flights, hotels if you are bring the person in from elsewhere.
• (You’ll need a few lines for this one) Total number of hours spent by every person in the process and then multiply the number by the person’s hourly rate. The total hours may include such activities as writing and placing job ads, sifting through applications, phoning job candidates, meeting and greeting, interviewing, testing, reference checking, 2nd round interviewing, arranging medicals, making offers, phoning or writing to unsuccessful candidates, etc.
• Any sign-on bonus you may pay.
• The likely recruitment agency fee if you use an agency.
• Employee Referral Bonus if you found the new employee via a current employee.
• (You’ll need a few lines for this one) Total number of hours spent by every person in the new employee induction and orientation process and then multiply the number by the person’s hourly rate. The total hours may include such activities as booking training rooms, liaising with new starters, sending out paperwork, meeting and greeting, conducting formal induction training, meetings with each manager and colleague (yes, it could be a long list you’re writing here), IT support to set up equipment, colleagues working with the new starter to train them, etc.

Next, add up all the numbers on the right hand side.

That’s just for one employee.

Now, ask the manager how many people work in the organisation and what is the staff turnover rate? If they say: “We have 100 staff and our turnover is 10%,” then that equals 10 employees leaving every year.

That’s 10 vacancies every year.

Finally, take your grand $ total from the right hand side of your page and multiply it by 10 (for the ten vacancies per year).

Ask the manager if they would like to keep some of that money for their own budget.

You’ll usually get a little more support for good team building by doing recruitment & selection the right way . . .

HRwisdom

Many Australian businesses focus purely on pay and conditions to attract and retain good staff. Unfortunately, such an approach has limited impact. Today’s HRwisdom blog post shares some excellent ideas to reduce staff turnover and retain good staff.

Why does a focus on pay and conditions only have a limited impact on reducing staff turnover?

Imagine running one of those ‘blind taste tests’ where you ask blindfolded 16 year old volunteers to taste different types of soft drink. Serve the volunteers samples of prune juice, water, tomato juice, and lemonade, you’ll get some fairly distinctive results. You may even get some swearing.

Next, serve the 16 year old blindfolded volunteers ten different types of lemonade drinks and see what happens. You’ll have a tough time establishing clear points of difference and loyalty to your brand of lemonade may be hard to come by.

Now, try applying this blind-folded taste test to your company’s pay and conditions. If your company is like most other companies, you’ll be watching your competitors, paying what they pay, and generally staying near the pack.

Ask your potential employees and current employees to go blindfolded and taste test all the different pay and conditions on offer out there in the labour market. Just like the lemonade scenario, you’ll have a tough time establishing clear points of difference. Loyalty to your brand of pay and benefits may be hard to come by. 

Add to the mix a skills shortage, ageing demographics, a return of the war for talent and you may be wondering what to do about your employee turnover issues.

Furthermore, re-run the blindfold test every few months as other companies adjust their pay and conditions to stay with the pack – you’ll probably feel your employee attraction and retention problems intensify.

Click here: Employee Retention Plan

One important piece of the employee loyalty and employee retention puzzle is the slightly obscure concept of employee culture.

HRwisdom strongly recommends you take a look at an excellent article from Smart Company which describes a particularly powerful employee culture that has been carefully developed by a successful company. The company’s strong focus on developing their corporate culture has paid off in terms of profitability and with a staff turnover rate of just 3%.

In its focus on employee culture, this company describes itself as being slow to hire, and quick to fire and it has a range of ‘left field’ differentiators which include:

• A division in the business called Culture Club which only manages employee culture. The Culture Club has no managers or directors in its ranks and all potential employees must pass through the separate Culture Club selection process before joining the business.
• All employees are trained to use Twitter and get 10 minutes a day to tweet about life working at the company. This is used for internal and external purposes.
• Other than meeting legislative requirements, there are no formal annual leave allocations – employees just take as many holidays as they feel they deserve. This has loyalty impact but also forces managers to ensure they only hire the right type of employees in the first place.
• The company is very active in social activism and recently gave a major company, customer, and employee donation to help build an eye hospital in Cambodia.
• Perhaps of most interest: All new employees are offered $2,000 to quit when they have completed the new starter training program. Apparently, less than 3% of new employees take the cash and leave. Imagine the impact that has on employee culture…

HRwisdom highly recommend this Smart Company article on employee attraction and retention. We leave you with a quote from the article in which the MD of the company says:

“Culture is the most important thing to attract the best people. Gone are the days when you can just pay people more. They want their jobs to offer them more, and they want great places to work. If you want to maintain the brightest and the best, then corporate culture is everything.”

For information on developing your employee culture and reducing staff turnover, click here: Employee Retention Plan

HRwisdom

Many Australian businesses still face uncertain times.

An recent article in The Australian newspaper described the potential threat of a GFC 2 resulting from the debt-ridden economies of Europe.

At HRwisdom we are very much focussed on being proactive and taking positive planning steps (and we’ll talk more soon about some excellent employee retention tools you can use).

However, for those businesses in Australia which may be suffering or trying to manage their costs very closely, we have put together an excellent free HR resource which explains:

How To Manage Redundancies Without Destroying All Employee Goodwill

In this HRwisdom resource, we have turned to industry expert Jacqui Alder to offer practical advice to businesses facing this difficult issue.

In this redundancy information we look at:

• What are the advantages and disadvantages of offering voluntary redundancies versus conducting forced redundancies/involuntary redundancies?
• What are the steps involved in the redundancy process?
• How to select people for involuntary redundancy?
• How to communicate throughout the redundancy process?
• Should you march someone out immediately when making them redundant?
• How can you implement redundancies without destroying all employee goodwill?
• A case study.

You can access the information via the home page sign-up:  redundancy information

Kind regards,

HRwisdom

The recent debacle at Toyota which has seen the company lose a reported $155 million per week has been widely reported. With continuing product recalls around the world, the losses are estimated to have caused an astonishing $30 billion loss in Toyota’s valuation on the stock market.

At HRwisdom we always focus on ideas and practices that can actively improve or protect a business. Today, we refer you to an excellent analysis of how poor HR policies and staff management practices potentially led to the $30 billion loss at Toyota.

The Eight Bad Staff Management Practices

In his excellent analysis, John Sullivan lists the eight bad staff management practices that contributed to Toyota’s massive downfall.

1. Rewards and recognition — The purpose of any corporate reward process is to encourage and incentivise the right behaviors and to discourage the negative ones. It’s important for the reward process to incentivise the gathering of information about problems. It’s equally important to reward employees who are successful in getting executives to take immediate action on negative information. Key questions — Were rapid growth (sales have nearly doubled recently) and “lean” cost-cutting recognized and rewarded so heavily that no one was willing to put the brakes on growth in order to focus on safety? Were the rewards for demonstrating error-free results so high that obvious errors were swept under the table?
2. Training — The purpose of training is to make sure that employees have the right skills and capabilities to identify and handle all situations they may encounter. Toyota is famous for its four-step cycle — plan/do/check/act — but clearly the training among managers now needs to focus more on the last two. In addition, in an environment where safety is paramount, everyone should have been trained on the symptoms of “groupthink” and how to avoid the excess discounting or ignoring of negative external safety information. Key question — If Toyota’s training was more effective, would the managers involved have been more successful in convincing executives to act on the negative information received?
3. Hiring — The purpose of great hiring is to bring on board top-performing individuals with the high level of skills and capabilities that are required to handle the most complex problems. Poorly designed recruiting and assessment elements can result in the hiring of individuals who sweep problems under the rug and who are not willing to stand up to management. Key questions — Did Toyota have a poorly designed hiring process that allowed it to hire individuals who were not experienced in the required constructive confrontation technique? Were their hires poor learners that did not change as a result of company training?
4. The performance management process — The purpose of a performance management process is to periodically monitor or appraise performance, in order to identify problem behaviors before they get out of hand. If the performance measurement system included performance factors to measure responsiveness to negative information, Toyota wouldn’t be in turmoil today. Key questions — Was the performance appraisal and performance monitoring process so poorly designed that they did not identify and report groupthink type errors? Did Toyota’s famous high level of trust of its employees go too far without reasonable metrics, checks, and balances? Did HR develop sophisticated metrics that produced alerts to warn senior managers before minor problems got out of control?
5. The corporate culture — The role of a corporate culture is to informally drive employee behaviors so that it closely adheres to the company’s core values. Because these errors occurred under difficult driving conditions, it’s hard to blame the production group, which has a well-known reputation for Six Sigma quality in its construction. The negative reports came to functions like government, risk analysis, corporate and customer satisfaction. As a result, it is the culture within the corporate offices that need to be more closely monitored rather than assuming that the culture was aligned. It appears that the corporate culture created leaders so concerned with “saving face” and so adverse to negative publicity, that they for years postponed making the announcement of a massive recall. Key questions — Did HR’s failure to measure or monitor the corporate culture contribute to its misalignment? Was the corporate culture (the Toyota Way) so biased toward positive information that employees learned not to make waves, in spite of their professional responsibility to be heard on safety issues?
6. Leadership development and succession planning — The purpose of leadership development and succession planning processes are to ensure that a sufficient number of leaders with the right skills and decision-making ability are placed into key leadership positions. It is likely that the leadership development and the promotion process both failed to create and promote leaders who were capable of confronting problems and making difficult decisions. Key question — Was the leadership process at Toyota so outdated that it produced the wrong kind of leaders with outdated competencies, who could not successfully operate in the rapidly changing automotive industry?
7. Employee Retention — The purpose of a retention program is to identify and keep top performers and individuals with mission-critical skills. Key question — Did the retention program ignore people that brought up problems and as a result, did these whistleblowers often leave out of frustration?
8. Risk assessment — Most HR departments don’t even have a risk assessment team whose purpose is to both identify and calculate risks caused by weak employee processes. Clearly HR should have worked with corporate risk management at Toyota in order to ensure that employees were capable of calculating the long-term actual costs of ignoring product failure information. Key question — Should HR work with risk-assessment experts and build the capability of identifying and quantifying the revenue impacts of major HR errors, including a high hiring failure rate, a high turnover rate among top performers, and the cost of keeping a bad manager or employee?

Final Thoughts from John Sullivan

Toyota’s problems are not the result of a single individual making an isolated mistake, but rather due to a companywide series of mistakes that are all related to each other. So many corporate functions were involved, including customer service, government relations, vendor management and PR, that one cannot help but attribute the crash of Toyota to systemic management failure. Unfortunately, in this case, the famous Japanese saying is true. “The nail that stands out” was not encouraged to be different, but instead it was “pounded down” to conform.

The key lesson that others should learn from Toyota’s mistakes is that HR needs to periodically test or audit each of the processes that could allow this type of billion-dollar error to occur.

For more staff management advice and HR ideas you can join our mailing list or get your HR templates and Employee Retention information now.

Kind regards,

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