Presentation

Report
Speak the CEO Language on
Engagement & Retention: DOLLAR$!
Dick Finnegan
October 23th, 2012
Copyright C-Suite Analytics, 2012 All Rights Reserved
Finnegan Background
•
“Recovering HR director” who has solved disengagement & turnover across 6
continents including Siberian banks, African gold mines, and the CIA
•
Author of “Rethinking Retention in Good Times and Bad”,
endorsed by BusinessWeek as offers “fresh thinking for solving
the turnover problem in any economy”
•
Author of “The Power of Stay Interviews for Engagement & Retention”
•
Noted as employee retention expert by BusinessWeek, Chief Executive Magazine,
& Consulting Magazine
•
Partners with HR Excellence Center of China to conduct employee retention
programs for Microsoft, Coca Cola, and other companies across China
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Today’s Agenda
WHY placing dollar values on turnover and engagement
is your next important step
HOW to place dollar values on turnover and
engagement
WHAT to do with your data once you have it
TO MAKE THIS EASY
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Why Care About Engagement &
Retention?
 4.1%...college grad unemployment
 3.7 MM…open jobs
 50-90%...say they will leave
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How Many $s Are At Risk?
Engagement
•
•
•
Retention
One standard deviation
improvement in engagement
increases revenue per employee
by $4,675
•
One standard deviation Turnover
costs companies 12% - 40% of
pre-tax income
•
Costs shareholders 38% in
additional value in just four highturnover industries
•
Annual cost nationally is $25
billion
For a typical S&P 500
organization, = revenue increase
of $93.5 million
Proportional increase just as large
for small/medium-companies
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The Rethinking Retention Model ®
Research-Driven, Process Based
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The Rethinking Retention Model ®
Process or Program-Driven?
Retention Processes
driven by executives from the
top like sales, service, quality,
and safety
Retention Programs
driven from the side like
surveys, employee
appreciation week,
newsletters
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Supervisors’ Impact on Retention
“If you have a turnover problem, look first to your
managers”…Gallup
Primary reason for seeking a new job is disliking boss’s
performance…Yahoo
Employees stay for managers first and co-workers
second…salary.com
Poor leadership causes over 60% of all employee
turnover…Saratoga Institute
“When employees stay, it is because of their immediate managers”…
National Education Association
Employees who stay primarily for their supervisors stay longer,
perform better, and are more satisfied with their pay…TalentKeepers
Employees’ relationships with managers “mediate” their perceptions
of pay, benefits, development, and advancement…Kenexa
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The Fortune Top 100, 2012
#1:
“Employees rave about their mission, the culture, and
the famous perks of the Plex: bocce courts, a bowling
alley, eyebrow shaping…25 cafes, all gratis”
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“Two-thirds of a company’s core is based on the
results of the Great Place To Work’s Trust Index
Survey”
“Any company can be a great place to work. Our
approach is based in the major findings of 20
years of research – that trust between managers
and employees is the primary defining
characteristic of the very best workplaces.”
The Great Place to Work Institute
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Process or Program-Driven?
Retention Processes
driven by executives
from the top like sales,
service, quality, and
safety
30%
70%
Retention Programs
driven from the side like
surveys, employee
appreciation week,
newsletters
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What The RR Model Tells Us
 Good managers are musthaves
 Managers must be held
accountable to engagement &
retention goals
 The keystone to influencing
CEOs to hold managers
accountable is DOLLARS
Engagement SCORES & Turnover PERCENTS have
little impact compared to DOLLARS!
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The Turnover Cost Team
Representatives
from…
 HR/Recruiting
 Finance
 Position SME
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The Turnover Cost Team
Representatives from…
HR/Recruiting
Finance
But the Most
Valuable
Player is…
Position SME
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An Accountability Clue
2-ball off the 6-ball
The secret to influencing the
CEO to set retention goals
is to ask the CFO to put a $
cost on turnover first… then
both the CEO and CFO
become advocates for what
you’ve always known, that
retention must be managed
on the operations side of
your company as well as in
HR
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Einstein Knows Best
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Introducing…
The very best turnover cost
calculator I know
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Calculating the Loss of One Nurse
Direct Costs + Lost Productivity
= One Exit’s Cost
…based on 11 data points
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Nurse Turnover: Baseline Data
1. Nurse annual average compensation &
benefits $75,000…$312.50 per day
2. Annual average compensation & benefits all
positions $60,000
3. Projected nurse exits this year 200
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Nurse Turnover: Direct Costs
4. Separation…exit int, admin costs, separation pay
$100
5. Vacancy…temp help and OT $5,000
6. Acquisition…advertising, agencies, emp referrals,
travel, interviews, assessments, bkgd chks, ref chks,
physicals, bonuses, relo $2,900
7. Placement…new supplies, onboarding days, training
days $3,750
Total direct costs: $11,750
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Nurse Turnover: Lost Productivity
Moving From Direct Costs
Lost Productivity
8. Annual revenue ÷ FTE $240,000
9. Workdays per year 240
10. Average workdays position open 20
11. 50% workdays to total effectiveness 10
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Nurse Turnover: Lost Productivity
Moving From Gross
Net Lost Productivity
Total gross lost productivity $37,500
(salary and benefits while position open $6,250)
(vacancy costs $5,000)
Total net lost productivity $31,250
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Nurse Turnover: Summary
Total direct costs $11,750
Total lost productivity costs $31,250
Total cost per exit $43,000
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Nurse Turnover: Summary
Total direct costs $11,750
Total lost productivity costs $31,250
Total cost per exit $43,000
X 200 exits this year $8,600,000
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Nurse Turnover: Summary
Total direct costs $11,750
Total lost productivity costs $31,250
Total cost per exit $43,000
X 200 exits this year $8,600,000
Savings 20% $1,720,000
Savings 50% $4,300,000
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Hospital Example/
Rolling 12 Months In 5 Job Bands
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Mega-Savings
Hotels: Major chain spending $350 MM on turnover so
cutting turnover in half would increase stock price by nearly
25%
Brokerage: More than half of brokerage clients changed
companies to follow a broker who left so what is the real
turnover cost?
Fast Food: Taco Bell found top 20% stores for retention had
double sales and were 55% more profitable
Call Centers: Lost productivity costs are 4.4 X direct costs
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Specific Free Calculators Available
For Sales…
www.top-mark.com/turnover_cost_calculator.htm.
For Hotel Administration…
www.hotelschool.cornell.edu/research/ctr/. Then click on
Cornell Hospitality Tools, then 2005
For Truck Drivers…
trinicon.com/resources/cost-calculator
For Teachers…
www.nctaf.org/resources/teacher_cost_calculator/school_cal
c_sdp.asp.
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Introducing…
The very best engagement
calculator I know
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The Research Source
“Watson Wyatt analyses show that a significant
improvement (one standard deviation) in employee
engagement is associated with a 1.9 percent increase in
revenue per employee.“
“Debunking the Myths of Employee Engagement”,
Watson Wyatt…now Towers Watson…..2007
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Engagement Calculator Example
 Organization earns $100 MM in annual revenue
 Conducted engagement survey that reported scores
on scale of 1-10
 Targeted ultimate score was 8
 Actual organization score was 7
 Distribution of scores indicates 1 SD = 1
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Engagement Calculator Example
6
7
8
1
10
If
organization
score is 1 SD
below target
score…
Actual
Score
Target
Score
SD = 1
Organization is losing 1.9% of
revenue… .019 x $100 MM = $1.9 MM
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Engagement Calculator Example
Sales Department
 Organization earns $100 MM in annual revenue
 Conducted engagement survey that reported scores
on scale of 1-10
 Targeted ultimate score was 8
 Actual sales department score was 9
 Distribution of scores indicates 1 SD = 1
 Sales department salaries & benefits = 10% of
organization’s total salaries & benefits
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Engagement Calculator Example
Sales Department
6
7
8
9
1
10
If sales dept.
score is 1 SD
above target
score…
Target
Score
Sales
Dept.
Score
SD = 1
Sales dept is achieving 1.9% of additional revenue…
.019 x $100 MM = $1.9 MM x .10 = $190,000…when
sales department salaries & benefits comprise 10% of
organization’s total salaries & benefits
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This Engagement Calculator Works!
“The C-Suite Analytics Engagement Calculator is a welcomed, oneof-a kind tool to help organizations fully grasp the value of
engaged employees…as well as the huge number of dollars left
on the table when employees don’t give their best. Perhaps its
greatest value is that it distinguishes managers who influence
engagement from those who do not, in specific dollar values.
This calculator is based on broad-based research and its
algorithms have a solid statistical foundation. It can work with
any engagement survey and assumes that survey measures
engagement in a valid way.”
Dr. Gary Borich, Ph.D
Endowed Fellow, Quantitative Methods Program
The University of Texas at Austin
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Patent-Pending
The engagement calculator is patent-pending
which means you may use it but no one may sell
its use to you.
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Next Steps For You
Incorporate the costs of turnover and the values of
engagement in every report you make, especially
down to the manager level so that you can…
Influence your
executives to hold all
managers
accountable for
achieving
engagement &
retention goals
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To Make This Easy
For a detailed white paper on how to calculate the costs
of turnover and the dollar values of engagement…
Please Leave Your
Business Card
Dick Finnegan
[email protected]
407.694.3390
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