0 Comments | Sep 13, 2010

Lose trust, lose talent.

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It’s funny how fast something new can become mainstream.  Such as the employee turnover crisis developing in major industry sectors across the US economy, for example.  Nine months ago, mentioning anything about a looming employee retention problem was certain to generate quizzical looks at best, outright derision at worst.  After all, employees were just happy to be getting a paycheck after all of the gloom, doom, layoffs, pay cuts, benefits reductions, and creative salary restructuring.  Right?

Not really.  The workforce isn’t infinitely forbearing, and employee retention is now mainstream news.  Human resources professionals are discovering that diverting time, attention, resources, and concern away from best practices for employee retention does, in fact, have a decidedly negative impact on business performance – despite conventional wisdom that employees will put up with anything for a paycheck during tough economic times.

We’ve previously reported that voluntary employee turnover is among the most expensive and insidious business costs, and companies that continually optimize employee retention techniques enjoy a significant competitive advantage over the remainder of the marketplace in any economy (white paper here).

Relatively few companies have heeded the warnings.  For example, Powers and Powers report that long term care providers are suffering substantial employee turnover difficulties at the critical point of patient care.  Edutopia reports that teacher retention is approaching crisis.  11% of new hires quit during their first year; 30% resign during their first three years, and attrition reaches 45% by the fifth year. expresses concern over a looming hiring crisis.  And Talent Management, the Wall Street Journal, HR Magazine, and many other mainstream publications are echoing concerns that employees are increasingly anxious to find a better employment situation, with up to half of the workforce actively or passively seeking a new job.

The emerging picture of why employees are leaving, or getting ready to leave, isn’t difficult to digest.  The proximate causes of the rising employee turnover rate relate to reduced salary and benefits, reduced work hours for wage employees, advancement freezes, and loss of opportunity.

Increasingly, however, we’re coming to understand the real reason for skyrocketing employee turnover rates as a loss of trust.  Deloitte reports that 48% of departing employees are leaving because they have lost faith in their employer.  In “The Speed of Trust,” Stephen M. R. Covey asserts that 29% of employees feel their management cares about their professional development, and only 42% believe executives care about them at all.

Not every employee who distrusts you will depart.  But lost trust has an additional, more insidious cost:  disengagement.  Gallup reports that 96% of engaged employees trust their management and executive team.  Of actively disengaged employees, nearly half distrust their leadership.

Is this stuff real?  In a word, yes.  Right Management reports that 54% of companies claim to have lost top performers over the past few months, and only 28% of surveyed companies said they successfully retained their key personnel.  With turnover expenses approaching (and often exceeding) three times the position’s annual salary and benefits costs (see the white paper here), employee turnover is clearly a destructive bottom line burden for businesses to bear.

We’ve spoken to literally hundreds of human resources executives about this very problem (see the blog post here).  Only a very small percentage admit difficulties in their companies.  The rest assert undying loyalty and a pervasive sense of family unity among their employees.  Some of them, undoubtedly, are correct.  But all of the statistical evidence seems to indicate that the vast majority of them are poorly informed about the true status of employee trust in their organizations.

All is not lost, however.

There are five key actions to undertake.

  1. Stop talking.  Employees who distrust you assume that when your lips are moving, you’re lying.  Ditch the party line.
  2. Start listening.  Hold meetings where the only agenda is to understand employee perspectives.  You’ll be surprised what you learn.
  3. If your organization claims to care about employees, show them.  Institute quality of life programs.  Allow flexible work hours and telecommuting.  Reinstate, or find alternatives for, lost perks that improve employee quality of life.
  4. Relax scarcity-minded restrictions.  Trust employees to act in the collective best interest, and they usually will.
  5. Stop withholding information.  Become transparent.  Air the dirty laundry.  A few might leave when they discover just how ugly things are behind the glossy corporate veneer.  But the vast majority will respect your candor.  And begin to trust you again.

Restoring trust is not difficult to do, but it must be done deliberately, and it takes courage.  Smart executives are beginning now.