In chatting with a friend, a former GM at a Fortune 50 company on the topic of human resources; how this department fits into most organizations, and how this department is often sidelined. They are given the focus of handling benefits, firing and disciplinary actions.  The conversation then jumped into some of the trendy things companies do to in the name of excellence such as letting go the bottom 10% of the employees. This idea may sound good in theory but quickly gets perverted, and defeats the intent of the approach, as seen from some of the examples of the challenges my friend saw.

• Hiring Managers regularly hired staff that they intended to fire the next time the purging took place - they had their favorites that they were not about to loose.  This practice resulted in a lot of churn and unnecessarily drove up on-boarding expenses.
• Managers regularly released more senior employees sacrificing experience and institutional knowledge.
• Managers ensured they retained those of the same race and nationality, and let go of others that did not look like them.
• While the company stated the intent was to release the bottom performing 10%, there was no metrics applied.  The decisions were subjective, and as the previous examples show, many of the factors used to select the unlucky individuals had nothing to do with performance.

Turnover is a natural part of any organization, but I challenge the benefit of creating a policy that embraces a revolving door for employees.

Numbers vary by organization; at a financial services firm I worked with, the number used was about $8,500/employee as the cost of replacing an employee.  The cost does not cover the loss of institutional knowledge, or the learning curve to bring a new employee up to the needed performance level, the loss of productivity of other employees who are disrupted by the release of their colleague.

Some tips for reducing employee turnover:

Create Advancement Opportunities: Employees become frustrated if they do not have the opportunity improve their skills or pay grade. Provide access to training opportunities such as workshops, seminars, conferences, and even certification courses. Align these training opportunities with future potential for both the employee and the firm and not based on past performance.

Offer flextime: Working parents are especially likely to leave a company if they cannot fit family obligations into their schedules. By offering eligible employees flexible work hours and telecommuting when possible, you are increasing job satisfaction and your ability to attract a wider pool of talented candidates.  One company found in a survey that 93% of workers who used flextime considered it a major factor in their decision to remain with the firm.

Keep your team happy and healthy: In addition to a traditional benefits package (health insurance, retirement plan, paid vacation), consider offering sponsorship to sports events, and other networking, and cultural events that allows people to connect outside of the work and share experiences together.  Create opportunities that the team might not otherwise be able to participate or do on their own.

Create a Sense of Community:  Some firms work with non-profits such as Habitat for Humanity, and their leadership provided time off for the employees to connect outside of their regular jobs. These opportunities created great bonding for the employees and goodwill for the firm.