As we hover over historically low unemployment, more employees are scouring job sites, searching for the answer to their discontentment. A study by Work Institute found that one in four workers left their jobs in 2018. Companies are being hit with $600 billion in turnover costs as employees play musical chairs. Exit interviews found that 77 percent of employees could have been saved.
Career employees have become extinct. The days of starting and ending a career with the same company seem like something out of a quaint Norman Rockwell painting. Millenials are expected to have twice as many jobs over the course of their careers as Baby Boomers. Just because it’s become the norm doesn’t mean it has to be that way. We explore six companies that employees rarely leave to see what makes them different.
Pay your people
Costco Warehouse retains 94 percent of its workforce year-over-year. That is unheard of in the retail space that sees an average turnover of 60 percent. Costco’s average employee makes $22 an hour versus Wal-Mart at $13.38. Costco also offers full benefits — health and dental care — that extends to its part-time associates. This is all wrapped up in their Conscious Capitalism philosophy.
How can Costco afford to pay associates twice the industry average while extending benefits to part-time employees? Strong employee retention frees up a lot of money to do the right thing. Replacing an employee costs anywhere from 21 to 50 percent of their yearly salary. Instead of running on the hiring hamster wheel, hire good people, pay them what they are worth, treat them like family and watch them stick like glue.
Give them ownership
Clif Bar may win the employee retention trophy with their stunning 97 percent keeper rate. Obviously, Clif Bar does a lot of things right from strongly encouraging employees to put their health first to building customized professional growth plans for each team member.
The most interesting initiative is their employee stock option program (ESOP). Founder Gary Erickson almost found himself forced into private equity funding in 2000 to buy out an existing owner while avoiding getting gobbled up by a multinational corporation. Instead, he opted for ESOP as it was a closer match to the companies’ core values. This one savvy move, that Erickson has credited for Clif Bar’s lofty retention rate, created a culture of ownership by forging a personal connection with the company.
There have been numerous studies of companies who incentivized their workforce with ESOP. One twenty-year study found employee wages were a third higher and net worth was double the median household for ESOP participants. Retirement assets were also twice the national average. In turn, workers reported feeling fairly compensated, felt they were a valued part of the collaborative management culture and that the company was a great place to work. Voluntary turnover rate measured half that of non-ESOP companies.
Take the extra time to hire exceptional people
Netflix finds themselves dead last on this list, and that is exactly how they want it. Each year, they only lose 4 percent voluntarily while 8 percent are shown the door through something called the keeper test. Simply put, would you fight to keep an employee you knew was getting ready to leave? If the answer is no, why keep them around at all? Though it is a bit Darwinesque, this echoes through to Netflix’s policy of only hiring ‘A’ players.
Every organization has that indispensable layer of innovative, high-performing, results-driven employees. Everyone loves working with these individuals that lift up the team and make everyone look good. Why hire anything else? Hiring the best does translate into offering higher salaries and a more involved hiring process, focused on character and values. The meteoric rise of Netflix is a testament that a company packed with ‘A’ level talent can produce amazing results.
Grow your employees
Would you expect housekeepers at a major hotel chain to have an average tenure of twelve years? That is exactly what Hyatt has done. The key to their success is growing their associates and making them part of the fabric of the business. Drawn from the Stanford School of Design, Hyatt’s training program focuses on listening. They mine their employees to find better ways to solve common problems. Who better to propose solutions than those on the front line?
Hyatt has developed a program to identify strong managerial candidates and provide them with the proper training to become the leaders to take Hyatt into the next generation. Their number one source of new hires is through employee referrals. They also want employees to feel comfortable being themselves and have championed a diversity program that has received accolades from the NAACP, AARP and LGBTQ equality. Hyatt grooms and trusts its associates implicitly and has structured their entire business around fostering career employees.
Develop passion and teamwork
Location Labs retains 95 percent of its employees with a range of innovative techniques from carefully curating the companies’ digital image to using exit interviews as an opportunity to learn. One of their more interesting approaches is going the extra mile to develop passion and teamwork in their employees. COO Joel Grossman describes it as, “Are people here at sunrise to hit a deadline? Do I like spending time with these people even when I’m not being paid to do it?”
They’ve developed the Spartan Shield award to highlight those individuals that go above and beyond to help others. The focus at Location Labs isn’t on individual achievement, but more in how one’s actions help the whole.
They develop passion by focusing on work that makes an impact. “In knowledge work, it’s really important people feel empowered and productive,” said Grossman. He largely sees retention as an offshoot of productivity.
Embrace remote work
Work life balance becomes more important by the day. In our always-connected business culture, many employees are expected to be available 24/7 when those unforeseen fires flare up. Yet many businesses continue to clutch onto the rigid approach of expecting employees to occupy a cubicle from 8 to 5 and limit working from home. This lack of flexibility makes employee’s lives difficult, stretching them ever thinner while juggling mounting responsibilities.
Buffer has gone all-in on remote work by having no corporate office. All workers are remote. This is one of the reasons they have a 94 percent retention rate. They’ve found that leaving behind the office boosted productivity by cutting the cord of office distractions. Treating employees like adults and affording them the flexibility to find that balance in their work life builds trust and loyalty.
The common thread running through all these companies is one of trusting and caring for their people. They treat their people with respect. They install a culture that promotes personal growth, accountability, transparency and fairness. For many companies, this will equate to a sizable cultural shift to a more employee-first mindset. It won’t happen overnight, but the benefits to the organization can’t be understated.