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Two Reasons to Improve Engagement and Retention... Revenue and Costs!

Employee engagement and retention are mercury-through-your-fingers concepts, just too intangible to provide hints on where to start. Let me suggest beginning with the most fundamental of all tangibles: dollars.

Looking from on high, disengagement and turnover are extraordinarily expensive. A Watson Wyatt survey found that improving engagement by one standard deviation lead to an increase in revenue per employee of $4,675. For a typical S&P 500 organization, this amount represents a revenue increase of $93.5 million, and the proportional increase is just as large for small- and medium-sized companies.

Regarding turnover, the Saratoga Institute tells us that turnover costs organizations over 12 percent of pre-tax income, up to 40 percent for some. Another study indicates that turnover across the U.S. costs $25 billion annually, just to train replacements. A third study tells us that turnover reduces U.S. corporate earnings and stock prices by 38 percent in just four high-turnover industries.

So now that we know the cost, what’s the fix? Data tells us the first place to look for improvements is your first-line supervisors. Dozens of studies tell us this but let’s reference just one. In their ground-breaking book, "First Break All the Rules", Gallup execs Buckingham and Coffman state clearly, "If you have a turnover problem, look first to your managers". This aligns with our experience that employees’ perceptions of their companies are a direct reflection of their relationships with their supervisors. As a result, how long they stay and whether they give their all is influenced greatly by their relationships with their boss.

So what's a call center manager to do? Manage retention and engagement like you manage sales, service, and quality. Set goals for managers and their subordinate supervisors, measure results through actual turnover data and employee surveys for engagement, and reward those who succeed and counsel those who do not. And some counseling might lead to re-assignments or terminations if those who manage people cannot retain and engage their teams.

Once this infrastructure is in place, managers ask for better applicants, want more management training, and advocate improved policies for their teams…and that's a good thing. HR then responds by improving hiring and onboarding, and all develop new thinking regarding training, schedules, work-life balance and other key policies.

The paved highway to improved employee engagement and retention is GOALS + TOOLS. Great people-managers rise to the occasion and seek skills and tools to do better.

    2. Data presented from PricewaterhouseCooper’s Saratoga Institute is from their report titled "Driving the Bottom Line: Improving Retention," 2006.
    3.The reference to turnover reducing U.S. Corporate earnings and stock prices by 38% is from research by Sibson & Company as reported in "Employee Turnover Rates & Employee Retention Statistics,", Ocober 12, 2000.
    4.The reference to turnover reducing U.S. Corporate earnings and stock prices by 38% is from research by Sibson & Company as reported in "Employee Turnover Rates & Employee Retention Statistics,", Ocober 12, 2000.
    5. Buckingham, Marcus, and Curt Coffman, 1999, First, Break All the Rules. New York: Simon & Schuster.
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Rose Polchin — 4:00PM on Sep 13, 2011

Thanks for a great article...and for further support of the link between engagement and results, Harvard Business Review recently cited, the following: "Corporations listed in Fortune's "100 Best Companies to Work For in America" had equity returns that were 3.5% per year higher than those of their peers, indicating that employee satisfaction correlates positively with shareholder returns, says Alex Edmans of the Wharton School. The results of his study of companies from 1984 through 2009 also indicate that, contrary to prior research, employee satisfaction need not represent managerial slack, Edmans says."

Original source: Edmans, Alex, Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices (January 20, 2010). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: