The news that New Zealand’s employee turnover is fast approaching high European levels might trigger an enthusiastic response by some industrialists. They might, for instance, believe that such flexibility delivers correspondingly greater ability to respond to changing market conditions. But behind the apparently beneficial effect of flexible labour market sits an iceberg-like expense that organisations should be concerned about.
Job change is very expensive. Excluding redundancy costs, the Washington-based Corporate Leadership Council estimates that direct expenses vary from 46 percent of annual pay for frontline employees to 176 percent for IT professionals and 241 percent for middle managers.
And then, there’s continuous job disruption. Comprehensive research by recruitment consultants TMP Worldwide found that vast swathes of New Zealand industry have staff churn above the internationally-recognised danger level of 15 percent year. Against the CLC’s warning that organisational “chaos” sets in when the proportion of employees annually with under one year’s experience increases beyond 45 percent, companies in our tourist industry, for example, see 37 percent of their staff come and go every year.
Health, medicine and pharmacy’s workforce is only slightly less itinerant with financial services, retail, advertising/marketing and IT companies seeing between 20 percent and 30 percent of their employees annually walk out of the front door. University general staff turnover is particularly high. Even the legal profession, food, Government, the media and telecommunications have annual staff churns above 15 percent.
University of Southern California’s Professors John Carlson and Alan Rowe calculate that project performance slipped to 52 percent of optimum output when they subjected learning cycle model to an interruption after 12 weeks over 50-week period.
The downsides
The downside doesn’t stop there. Staff churn means working groups become unstable, customer relationships are severed and the effectiveness of mentoring, job-rotation and cross-functioning teams declines as the main ways companies disseminate experiences. The other consequence – and the one with the most expensive potential price-tag – is the wholesale dispersal of an institution’s expensively-acquired knowledge and experience. Call it organisational memory (OM), practice, know-how, procedure, even history, this is an asset whose value marks the unique capability of the organisation and is arguably the most important ingredient of its durability. It cannot be re-hired, with new appointees generally expected to assimilate it by osmosis – impossible if there’s no one around to pass it on. Without it, new entrants must work with only the imported experiences of their earlier employers, whose way of doing things, corporate environment and market circumstances are always very different.
The result? An inability to learn from individual past experiences – and the familiar pattern of repeated mistakes, re-invented wheels and other unlearned lessons that plague companies. Institutional ‘forgetting’ or corporate amnesia contributes massively to productivity shortfalls.
TMP’s judgement is that this country’s employee turnover is “way too high” while Auckland University Business School warns that even annual staff shake-ups of 10 percent will affect productivity.
Companies traditionally try to solve the problem in two ways. First they overlap selected exiting and incoming employees. Widely regarded as expensive, the transmitted knowledge divulged from this choice is normally subject to the inherent short and selective recall of the departee and the equally indistinct innate later recall of the recipient. But the most popular approach is to try and reduce staff turn-over levels through incentives like higher salaries and improved working conditions.
Sovereign, the Auckland-based insurance company, has cut the turnover of its otherwise highly mobile IT staff to about 6.5 percent, compared with turnover rate of 18 percent elsewhere in the group. Merck Sharp & Dohme (NZ) has reduced its staff turnover from 22 to 11 percent in three years, while Woolworths (NZ) has cut its team turnover by 7.94 percent in four years, saving around $6 million.
These efforts are still above TMP’s generally recommended turnover level of “no more than 5 percent” and employee churn nationally continues to increase, with the University of Auckland’s studies showing that more than 80 percent of labour turnover is initiated by employees themselves. If levels reach UK heights, new entrants to industry can expect to have an average 11 different employers over 44-year working lifetime, implying employer tenure of around four years. The low organisational memory that this bestows imposes an ‘alzheimer’ effect on companies.
The answer
If high staff churns are an unavoidable feature of the modern workplace how, then, does an organisation minimise the effects of industry’s musical chairs? The answer lies in an experiential learning tool that, constructed professionally, can simultaneously capture OM in permanent format and also provide several other corporate applications. More rigorous than overlapping, the genre is known as Oral Debriefing, an application usually confused with the common-or-garden exit interview, formulaic, 20-questions process of trying to uncover reasons why employees leave. The exit interview is often done in questionnaire format, and usually generates short, mechanical and impassive responses. By contrast, the oral debrief embraces rigorous research and is designed to encourage detailed responses, its advantage being that individuals are generally better speakers than they are writers.
The spoken word is more efficient way of conveying the abstract and complex nature of elements like the nuances of corporate culture, management style and the often-obscure issues surrounding decision-making within groups. As such, it’s an efficient way of filling the tacit knowledge gaps that otherwise exist in the written record.
Debriefing programmes can be applied at regular intervals during an individual’s tenure, immediately after key projects, or when an employee retires or leaves to join another company. The former provides time-undistorted record to ensure that corporate knowledge and experiences are not forgotten down the years and that companies do not lose the benefits of hindsight.
Powerful tool
In slightly different format, the latter also provides organisations with powerful tool to quickly and efficiently induct incoming appointees. Both approaches require expert debriefing skills to extract the singular things that make an organisation tick, including the non-technical ‘how’ of getting things done and the detail of actual experience (episodic knowledge).
Pharmaceutical giant Glaxo Wellcome used the technique to overcome the problem of knowledge loss and induction. In its case, there were eight departures and 15 arrivals in just 18 months in key, 20-man planning department that was dependent on detailed understanding of the clinical and commercial aspects of all group compounds and their markets.
In addition to the routine settling-in period, each new entrant had to acquire the knowledge that exiting individuals took with them – time-consuming and expensive operation. Much of this know-how, which existed only in the minds of individuals, was typically held informally and, theoretically, passed over to newer appointees orally at joining and at appropriate junctures thereafter. Because of time pressures, the short and selective memory recall of departees and the fact that the knowledge was normally so difficult to characterise and document in conventional ways, little (real knowledge) was actually conveyed. The problem was compounded by the fact that the managers worked independently from each other, so there was little shared know-ledge of the
