Organizations Bleeding Out (The Unknown Loss)

Paying Folks to Learn and Leave

It is easy to talk about statistics and point out numbers associated with employee turnover.  It isn’t easy for organizations to quantify what the turn over actually is costing.   Human resource information systems exist that can provide some numbers but those are numbers are essentially an average range.   That doesn’t give anyone a good idea of what is really going on.  It is just a number or set of numbers.    What does that mean?

I started working for Lockheed Martin in 2004, fresh out of working in a school division.  I was ready to learn, grow and take on the world.   Lockheed Martin was vast corporate mountain to climb chock full of options and opportunity.  As soon as I got on board, I immediately took to going back to school full time.  Lockheed had a tuition reimbursement program like a lot of other big companies.  All I needed to do was keep a “B” average and they would pay 100% of my tuition.   I had great ideas (actually it was the beginning of the 8 ideas a day) that I wanted to share with LM.

My management was very supportive and encouraging, in fact at the time my manager was doing the exact same thing!  One of the line managers would pull me to the side all the time and tell me to “get my education and get out as soon as I can.”

You should know the end of this story by now.   I gained valuable experience, I gained education and I became known to an industry that previously didn’t have a clue I existed.

The estimated cost to Lockheed Martin was $75,000, I would say the real cost to Lockheed was somewhere in the millions of dollars range.

National Labor Turnover Rates

According to the U.S. Bureau of Labor Statistics, the rate for separations in June 2011 was 3.1 percent. The separation rate includes employees who voluntarily quit a position, layoffs, retirements and discharges. While the rate of employee turnover did not change significantly from May 2011, the rate for June of 2010 was 2 percent.

Industry Turnover Rates

The U.S. Bureau of Labor Statistics reports labor turnover rates according to industry and shows a 6.9 percent turnover for employees working in the construction industry in June 2011, which experienced the highest level of employee turnover. Government agencies and employers experienced the lowest level of employee turnover, with a 1.4 percent labor turnover rate. Employers in the arts, recreation and entertainment industry show a 5.4 percent turnover of labor during the same month.

National Quit Rate

The percentage of workers who quit a position in June 2011 in private industry was 1.7 percent. Government agencies experienced a 0.5 percent rate of employees quitting a position during the same period. According to the Bureau of Labor Statistics, the finance and insurance industries as well as government employers showed a decline in the number of quits in June 2011 while the education industry showed an increase.

Retention Rate Calculation

The employee retention rate can indicate how well your business maintains employee satisfaction. To calculate the employee retention rate, start with the total number of employees on staff at the end of a period — monthly, quarterly or annually. For example, if you have 200 employees at the end of a quarter, and 25 of those employees left the business during the same quarter, subtract 25 from 200. Divide the result by the total number of employees, and multiply the answer by 100 to get the retention rate. In the example, the employee retention rate is 87.5 percent. Compare the retention rate in one period to the rate in other periods for an indication of how well you are retaining your employees.

(Source) http://smallbusiness.chron.com/average-employee-retention-rate-18799.html

The Value of Tacit

It would be inappropriate for me to discuss the details as to why LM lost out on millions of dollars because of my leaving.  What I can say is that my situation is not unusual. Companies are losing this kind of talent and money all the time and they just don’t realize it.   When organizations calculate “total value” or “total rewards” for benefits or costs of an employee they are not reversing those calculations and looking at how much the employee is of value to the organization.  They don’t do this because they don’t know how much a function or a capability from a role is worth.  They don’t do this because a lot of times they don’t know what their employees do.   That’s right!! I said it… they don’t know what their people actually do! 

Human resources can track the job title, role, responsibilities and costs of human capital but there is generally no feedback from an employee assessment back to the HR information system that updates the system to tell what the employee is actually doing.  In fact, it is likely that in a lot of cases when a leader or manager is asked what their people do, they have to inquire themselves first.   If you don’t know what they do and you don’t know how much they are worth to an organization how could you let them go?  If you let them go, how much did it cost the organization to lose them?   I am not talking about “employee potential value”, I am talking about “Employee REAL Value.”

Food for Thought

If you are an organizational leader, can you say that you know how much any one individual in your organization is valued or of value to the organization?  Do you have a measure for this?  Certainly you may feel that YOU are of value to the organization.. right?  How much are you worth (not in dollars earned for you) but in REAL dollar value to your organization?   How much would your company stand to lose if you train someone for a few years and they get up to speed and become an expert in their field, get educated both paper and organic and decide to walk?   How much have you already lost because you didn’t know this information?    It seems to me that the newer generations are less loyal to any one company and that they will be willing to bounce from place to place as they see fit, how much will this behavior cost in the future as tacit information becomes more of a premium?

The Final Point on the UNKNOWN VALUE OF..

http://www.npr.org/2013/06/19/184827651/animal-csi-inside-the-smithsonians-feather-forensics-lab

Carla Dove is a forensic ornithologist, the last one…. If you read the article above you can get more details but the bottom line is

Dove’s keen eye and knowledge of feathers have come from more than two decades of practice. She’s the only person in the country with these skills, and she worries about the future of this kind of analysis.

“Unless I have someone to follow me around, and do some research on the microscopic structure of feathers, I think that one of these days the whole expertise in this field is going to go away,” she says. These days, she says, students are more interested in “instant satisfaction” and cutting-edge technology.

Dove inherited her lab from the only other U.S. scientist to do this work: Laybourne, who was already in her 80s.

Dove says she has yet to find the person who will take over when she retires — the special ornithologist who can continue the work in this unusual feather forensics lab.

We don’t know (or even attempt) to measure the value of certain areas of our work.  In this case,  there is no Carla Dove men-tee.  Maybe we will get lucky and she will find someone to follow in her footsteps or maybe her tacit knowledge will go the way of the lost tribes.  Regardless, ignorance is costly and introduces previously mitigated risk and loss.