Vail Daily column: The foundation for growth
It’s early on Monday morning, and I’m sitting on an airplane bursting with travelers headed to Orlando. Some are business people headed to meetings while others seem to be jumping out of their seats with excitement as they head to vacation in sunny Florida. As it happens, I’m one of the business travelers on my way to a large industry conference to speak on the topic of “growth.”
As I’m reviewing my presentation and preparing for my keynote, I’m focused on the fact that growth is a central theme in most, if not all, organizations. You’ll find the topic detailed in many business plans and hear it bantered about in meeting upon meeting. Yet, for many companies, consistent growth remains exceedingly elusive.
Over the years, the industry audience to which I’m speaking has focused heavily on recruiting the best and the brightest candidates to drive growth. However, for the last decade, the industry as a whole has suffered high turnover and finds itself shrinking. Industry statistics show the four-year retention rate at a staggering 16 percent. Simply stated, if you hire 100 people this year, a mere 16 of those 100 will still be with the organization four years later. At the same time retention rates are plummeting, the overall demand for the industry’s services is predicted to grow significantly and steadily over the next decade.
Until now, the industry’s answer to the turnover problem has been to stay the course and continue doing the same thing while expecting different results. Isn’t that the definition of insanity? Without change, is it realistic to expect retention rates to rise? How can a company propel growth to meet rising client demand without improvement in retention?
The impact of turnover is far reaching both internally and externally. Internally, using the retention statistic above — 86 out of 100 leave within four years of hire — ponder the financial impact of the costs invested in recruiting, hiring and training these short-term employees. Externally, what’s the unquantifiable effect of turnover on client relationships and the brand image? In this industry, they are finding that customer trust is low and top college grads and career changers don’t find the profession an attractive option.
Succinctly, low retention and high turnover erode the foundation for organization growth.
While I think about the challenges this particular industry is facing, I find myself reflecting on my past experience leading a large organization. In my previous career as a senior executive at American Express, we spent time evaluating the retention challenges we faced in various sectors of the company. After thorough review and analysis, we quantified our investment in recruiting, hiring and training at over $100,000 for each new person hired. That’s a substantial amount per hire and a staggering amount to lose if someone ends up leaving our organization prematurely.
In my work today at Think2Perform, we find many companies place heavy emphasis on finding the best people with the strongest background and experience. They hire recruiting firms, conduct a multitude of assessments and put people through a series of interviews before they offer a position. Unfortunately, once hired, many of these top candidates are given little support or development and are left to figure it out on their own. Over time, their performance often suffers and many will voluntarily leave out of frustration or be asked to leave due to poor results.
Here are a few of things to know:
• The pool of trainable people is large while the pool of “leader-proof” people is small. When I say “leader proof,” I mean those people who would perform at their best regardless of their leader.
• In helping people perform at their best, selection is important, but it’s not as important as development.
• Most people don’t take a job to fail and many want to be better at their job than their company needs them to be.
The real key to growth is retention.
As a result of our findings at American Express, we made several changes to how we approached selection and development. One of the key concepts we adopted was the principle of “no bad hires”. “No bad hires” meant that if we brought someone into our organization, the leader was accountable for their success. As a result of our expanded focus on development, employee retention increased over 200 percent.
Research and experience shows that if we spend time in our organization understanding what people want for themselves and identify their goals in joining our firm, the job of leaders then becomes helping their employees achieve those objectives. Leadership goes from holding people accountable to helping them develop and achieve their goals. When individuals and organizations are mutually achieving their objectives, the environment is contagious and retention is high. It’s a win-win as growth is accelerated and the pressure to recruit is reduced.
In top performing organizations that boast the best retention, helping people get what they want for themselves is the primary job of leadership. When leaders are successful in that primary job, growth of the firm becomes explosive.
Chuck Wachendorfer is a partner and the chief operating officer at Thin2Perform, a business that improves results for executives, athletes and organizations. Think2Perform is a partner of the Vail Chamber & Business Association.