by Michael Gregoire, Chairman and Chief Executive Officer, Taleo Corp.

Employees Leaving? Here’s Why and What You Can Do About It.

Oct 23, 20085 mins
BudgetingIT Leadership

When an employee quits, it costs your company: downtime, customer satisfaction, hiring and training someone new. Know how much? Experts say it's up to a whopping 250% of annual compensation.

Do you think a soft economy lessens your need to engage your staff? Think again. Your most valuable asset—and single biggest investment—is walking out the door. Your greatest competitive differentiator—your talent—is seeping out of your organization’s business engine while you are asleep at the wheel. That is unless you are managing and measuring the performance of your talent while filling the pipeline of succession.

It’s now a proven fact that talent drives business performance. Your executive team and board know this already. They are waiting for you to execute your talent management strategy. When will you deliver?

When employees make the decision to leave a company, replacing valuable staff can cost from 30 to 250 percent of annual compensation. These numbers take into account lost business performance, customer satisfaction, cost of acquisition and the high cost of developing new staff to the same level of performance as predecessors. Developing a solid program for reducing staff turnover, however, can be tricky in the best of times—and even more so during an economic downturn.

According to the U.S. Bureau of Labor’s most recent statistics, IT jobs are at the leading edge of job growth and expected to grow by 18 percent from 2006 to 2016. This is currently more than twice as fast as the average for all other occupations.

For the CIO, this is further complicated by another key statistic from the Bureau of Labor: approximately 40 percent of all U.S. employees will leave their jobs within the next 12 months. On the surface, the current economy—fueled by the collapse of the housing market and current credit crisis—appears to be the culprit. However, the telling statistic for U.S. employers across all departments is that more than half of that turnover is actually workers voluntarily walking out the door. But why?

Effective talent management cannot solely be the focus of HR. Indeed, it’s becoming increasingly mission-critical for today’s CIOs to develop a centralized and streamlined process for HR to meet employee retention and recruiting initiatives. When it comes to staff turnover, here are four top reasons people decide to leave an organization and what smart CIOs can do to mitigate the situations:

Poor communication: To foster an environment where employees are empowered and encouraged to stay, companies should look to make retention a high priority and implement programs that increase employee satisfaction. This can mean addressing inconsistent workplace practices and ineffective collaboration and knowledge sharing between business units and departments. To improve communication, incorporating more transparent and consistent management processes can help enhance the relationship between managers and staff. This also includes developing internal mobility initiatives that combat excessive turnover and boost corporate financial performance.

Substandard tools and resources: Outdated and ineffective technology can hinder effective workflow—translating to low productivity and performance. Talent management automation solutions can help companies track employee productivity, retention—and even predict when employees are leaving. Organizations should also carefully consider implementing a technology system that can help streamline talent management processes. Such talent management tools include applicant tracking and goals management. Performance management tools can ultimately help managers and staff to deliver performance reviews, career and succession plans, align goals, and identify mentors through a unified, user-friendly solution.

Lackluster training initiatives: The main goal of talent management is aligning workers to business goals and powering improved business performance. Today, CIOs are struggling with the realities of skills shortages, managing people through change and creating an effective workforce. Enhancing staff training not only allows employees to work more effectively, it is essential in improving productivity outcomes. By providing more structured as well as packaged and “always on” virtual training programs, organizations can clearly demonstrate that they are interested in making employees feel valuable—while helping them advance their careers.

No clear career path: Business is in the midst of a sea change when it comes to staffing and retaining superior talent. Successful companies will be the ones that understand what’s causing employee turnover and are able to mitigate its impact and cost to businesses. In a down economy (and particularly in an organization impacted by layoffs) high performers can become disillusioned and disengaged and take advantage of a more friction-less, technology-enabled job search right from their desktops. Today’s high performing talent demands solid opportunities to advance within the organization. To attract and retain motivated people, today’s forward looking CIOs need to align the performance management strategy with the demands of the talent pool—and even create their own succession planning.

Smart CIOs need to understand and proactively address the key reasons why employees may leave and look towards fostering a solid foundation for employee retention—a combination of process and technology—for leveraging new and existing talent management technologies.

CIOs should ultimately note that highly-skilled IT workers remain in demand. Weathering the financial storm involves taking a more proactive talent management approach and mitigating the risk of talent loss, which can help ensure that talented workers will be more committed to staying with the organization.

Particularly in today’s economy, workers need to be considered a core competitive asset. Now is the time to make sure you can manage talent risk better than Wall Street managed financial risk. Don’t let the alternative scenario drive your organization to a similar crisis point. Take a proactive stance today.

Michael Gregoire is chairman and chief executive officer of Taleo, a provider of on-demand talent solutions. He previously served as executive vice president of global services for PeopleSoft and executive director of the EDS New York Information Solutions Organization. Gregoire has been named one of Consulting Magazine’s “Top 25 Most Influential Consultants.”