How being a 'Good Boss' is more cost effective

Ultimately, retention is about how an organisation manages its employees, or more specifically its relationships with its people.

commentary Research reveals that companies who exhibit the hallmarks of being a 'Good Boss®', experience better growth than their competition.

Data collected by researchers Hewitt Associates indicate that 'Best Employers' experienced 13 percent revenue growth between 2000 and 2002, compared with seven percent for other companies. 'Best Employers' also had an average profit growth of 21 percent in the same period, compared with minus 44 percent for other companies.

At an even more fundamental or micro level it is important to understand what a new employee costs. Staff turnover costs are estimated to range between one to two times an employee's salary. These costs fall in to direct and indirect categories:

Direct Costs

  • Cost of termination (including payout arrangements)
  • Cost of hiring (advertising, recruitment fees)
  • Cost of new hire (only 60 percent as effective in the first three months)

Indirect Costs

  • Lost or damaged customers
  • Additional marketing and sales expenditure to win replacement customers
  • Loss of intellectual capital
  • Lost opportunities
  • Decrease in 'bench strength' for succession planning
  • Transfer of knowledge to competition
  • Decreased morale and increased stress
  • Negative effect on reputation

Nonetheless, not all staff turnover is necessarily bad. Ironically, a low turnover and high retention rate in some organisations may pose just as serious a problem. A high retention rate may indicate a workforce that is stagnant, comprising of the walking wounded or worse still the walking dead -- those who are too frightened to leave. These people consider their work prospects elsewhere to be too bleak, when viewed under the equivalent terms and conditions of their current employer.

Such a workforce is hardly the foundation for an organisation to move forward and respond to the challenges of today's dynamic and changing business world. What is therefore important is selective retention or retaining the right people.

Ultimately, retention is about how an organisation manages its employees, or more specifically its relationships with its people. Apart from the obvious cost savings in retaining the right people, there are other significant, lasting benefits to an organisation, which are not thought of.

These include:

  • Challenge and satisfaction
  • Management by crisis
  • Staff feeling appreciated
  • Higher customer retention levels

The bottom line is, businesses with an engaged and committed workforce will return a much better result for shareholders. People who enjoy their work and feel appreciated will tell others and even advocate their employer as a good employer or an employer of choice. At the end of the day 'Good Boss' companies make more money -- proof that being a decent employer pays off in many ways.

© 2005 Kerry Larkan is a Consultant, Speaker and Author who devised the concept of 'Good Boss ~ Bad Boss®', for more information or to download the white paper Good Boss ~ Bad Boss®, visit his Web page.