by Chris Czarnik, 2024 Marketing & Distribution Convention General Session Speaker

I often get asked by CEO’s and company presidents about ways they can increase employee retention. I first ask them, 鈥淲hat is the cost of losing and replacing an employee in your organization?鈥� I鈥檓 often met with a blank stare or a puzzled look. 鈥淲e have never put a number to that鈥︹�� is a common response.

What I know, after presenting in front of some 4,000 CEOs and company presidents over the past five years, is this: If it鈥檚 not a number on the P/L sheet, they don鈥檛 put the time and resources towards dealing with it. I鈥檓 not saying that company leaders are callous; I鈥檓 just saying that they only have the bandwidth to deal with critical issues to the organization鈥檚 financial health. So without turning retention issues into a number, it will never get the attention it needs to improve.

A few years ago, the Society for Human Resource Management (SHRM) estimated that the cost of losing an employee, recruiting their replacement, and training them equated to 38% of that employee鈥檚 annual wages. That number is low, in my opinion, but let鈥檚 go with it for the purposes of this discussion. That would mean, if you lost and replaced four $50,000 employees last year, the cost to replace them was about $76,000. If you turned over 10 employees at that level last year, the direct and indirect cost was $190,000. So where are you tracking that number on YOUR P/L? Likely, you aren鈥檛鈥� which is kind of the crux of the issue.

The retention and development programs that I teach companies to install often cost almost $0. They do, however, cost the one thing your people (including you) likely have the least of鈥� time. It is difficult for organizations to commit the time to employee retention and development programs until they can calculate the ROI of making the effort. In the past that was hard to calculate; but no longer.

So, based on this formula, what was your organization鈥檚 cost of turnover last year? Ready to keep that loss from happening again this year? Good鈥� Read on.

How can we improve our retention efforts to decrease our employee turnover? One simple word: Significance.

If you are familiar with psychology, you may know a concept called Maslow鈥檚 Hierarchy of Needs, which states that human beings go through a series of needs as they grow as a person. These needs begin with the basics (food, water and shelter) and top out at self-actualization (experience, purpose and meaning).

For human beings, the need for significance comes somewhere in the middle of their employment journey. After working with thousands of job seekers in the middle/late part of their career, I know that two things consistently matter: 鈥淒o I make a difference in the world, and will anyone miss me if I weren鈥檛 there?鈥� If you think about your own work journey, you will probably find that after you had achieved a certain level of pay, benefits, and security, your significance to your organization, your coworkers, your customers and your community became very important to you. If that has been true for you, I think we can assume it is true for most people.

So, here鈥檚 the payoff: People stay when they can see the link between their work and the welfare of others. Those 鈥渙thers鈥� might be coworkers or customers, vendors or the community. Being able to show an employee why their work matters, and to whom, is the first big step in improving retention. People stay where they are needed and valued. That is not some vague generalization or obscure concept. Showing the link between a person鈥檚 work, and how that work makes someone鈥檚 life easier or better, creates significance in their life and fulfills one of our most basic needs. People STAY where they are NEEDED.

And by the way鈥� if you cannot connect a person鈥檚 job to significance鈥� why does the job exist in the first place?

Don鈥檛 miss Czarnik’s presentation on Revolutionizing Talent in the Modern Workforce and the Breakout Session immediately following on Wednesday, October 23 at the Marketing & Distribution Convention in Addison, TX.