John Slimp Training & Development

A blog, like art should inspire conversation, debate and yes at times even controversy if it creates awareness or stirs thought.

The goal and objective of a company is to make a profit. The question that a company needs to answer is;

Do we make a profit as a byproduct, as an end result, by creating employee loyalty, and by establishing a culture that promotes teamwork and appreciates the contributions of the associates?

Or

Do we make a profit by destroying employee loyalty, by treating our employees as the slaves who built the pyramids and the Kings Tombs and Palaces?

There are a lot of ways Great companies build employee loyalty.

Some focus on training and providing employees advancement opportunities. Some Executives don’t take raises to ensure that their employees will get increases. Some offer the employees the opportunity to voice their opinions and to be an active part of the company growth, offering large stock options and bonus pay for performance programs.

There are many free or low-cost benefits that can increase employee satisfaction and boost company morale. Consider the following options:

• Provide direct deposit, saving workers regular trips to the bank, with the banks often offering them favorable benefit
• Offer interest-free computer loans, through which companies purchase the computer and set up a payment plan with the employee
• Order in lunch once in a while, especially during crunch time for a project
• Offer free sodas or subsidize soda and snack vending machines
• Give employees a free vacation day on their birthday or a floating holiday
• Consider discounts from local merchants — often gyms or parking lots, for example — that will give a discount if a certain number of employees sign up
• Have regular movie nights, including refreshments
• Give employees a chance to relax by treating them to tickets to a theater or a baseball game.
• Retain a coffee service to provide free — and tasty — coffee to your employees
• Offer free yoga classes to relieve stress
• Bring in a masseuse and treat your employees to a free massage
• Reward them with “work-from-home” days

Here are a few more ways great companies build employee loyalty and increase morale:

“25 Ways to Reward Your Employees
(Without Spending a Dime).”

Then unfortunately, there are the ‘other’ Not Great Company approaches: don’t do anything that will improve the workplace for the associates or improve their work lives.

• You can have as the company’s core values Accusation, Humiliation and Crucifixion. That’s sure to be a winner for building Employee Loyalty!
• You can sit in your ivory tower and condemn the actions of your employees.
• You can have the ‘no idea is a good one unless it’s mine’ attitude.
• You can base promotions or rewards on politics instead of performance.
• You can take the ‘I am King and you are peasants’ approach.
• You can set policy and procedures based on a whim and not take into consideration how it will affect the employees who actually do the work.
• You can support the employees should do more with less philosophy.

All of these things are sure fire ways that Not Great companies manage to destroy employee loyalty.

I received an email about one national retailer who reportedly downsized through workforce reduction between 150 and 200 employees in 2009 due to ‘bad business and the bad economy’. I was told that most of these employees were long time associates who had been directly involved with the prior success of the organization.

Ironically the total compensation for the top four Executives for 2009 (the same time period where 150 to 200 loyal associates were forced out) INCREASED 56.5%! Wow, I can see that business must have been very bad!

• The CFO had a compensation increase of 81.56%
• The Vice Chair had a compensation increase of 85.1%
• An Exec VP had a compensation increase of 67.7%
• Another Exec VP had a compensation increase of 54.5% (Boy, I bet he was ticked off, only 54.5 %!)

Since non-retail companies typically run an employee turnover of 10 to 15%, you might think an employee turnover of approximately 97% seems ridiculously high, but that is the national average for retail. That being said, if a company is running about a 250% employee turnover I am thinking employee loyalty is not very high and it must not be a place where employees want to work!

This behavior is sure to get you into the Best 100 Companies to work for book! NOT!

In his Article, “Employee Retention: What Employee Turnover Really Costs Your Company,” Ross Blake details some astounding statistics regarding the costs of employee turnover.

“Several well-regarded studies have recently estimated the cost of losing an employee:

• SHRM, the Society for Human Resource Management, estimated that it costs $3,500.00 to replace one $8.00 per hour employee when all costs — recruiting, interviewing, hiring, training, reduced productivity, et cetera, were considered. SHRM’s estimate was the lowest of 17 nationally respected companies who calculate this cost!
• Other sources provide these estimates: It costs you 30-50% of the annual salary of entry-level employees, 150% of middle level employees, and up to 400% for specialized, high level employees!
• Do a quick calculation: Think of a job in your organization where there has been some turnover, perhaps supervisors. Estimate their annual average pay and the number of supervisors you lose annually. For example, if their average annual pay is $40,000, multiply this by .125% (or 125% of their annual pay, a reasonable cost estimate for supervisors). This means it costs $50,000 to replace just one supervisor. If this company loses ten supervisors a year, then 10 times $50,000 equals $500,000 in replacement costs for just supervisors. This is the bottom line cost. The top line cost? If the company’s profit margin is 10%, then it costs $5,000,000 in revenues to replace these ten supervisors.”

I have to wonder and question if the Board of Directors for any organization is fully aware of the high cost of employee turnover resulting from a lack of employee loyalty. Perhaps keeping the top executives who create the turnover, costing the company major loss of profits, is not the best solution.

So now you can see two different examples of how companies handle Employee Loyalty: the Great and the Not Great.

If you are an Executive or a member of the Executive Committee for your company, what approach are you taking to make a profit?

Are you building and creating employee loyalty, and if so how are you doing that?

Or, are you having your associates build you another pyramid while you sit and observe from your palace?

If you are an employee which approach do you think your company is taking?

If you are an employee, which type of organization would you want to work for?