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Retention Gurus Say Their Business Case Is Stronger Than Ever

October 21, 2004

Bill Catlette and Richard Hadden, authors of Contented Cows Give Better Milk, were among the first experts to argue that being asought-after employer leads to higher employeesatisfaction, higherretention rates, greater efficiency, better customer relations and ultimately higher profits.

    Workforce Management talked to Catlette and Hadden about their latest findings.

    What have companies been coming up with lately as strategies to retain employees?

RH: It's not the things that have never been thought of before that hold the most promise, but rather the things that have been thought about but not applied enough.

There's a lot of low-hanging fruit. Some employers confuse recruitment and retention. If someone is unsatisfied with another employer, if they're frustrated or bored, you can get them to jump ship by offering outrageous signing bonuses or luxury cars--but they don't seem to have any retentive power. They'll get people there, but not keep them there. And I'd venture to say that most of the companies that have thrown these things up have done so without even considering the hard numbers.

    There's a lot of talk about "building a sense of community for employees." Is it just a touchy-feely thing? What's the cost and payoff involved in creating a community?

RH: If people feel like they're part of a workplace, then they're going to have more resistance to leaving. They're not just leaving a job, they're leaving a community, and it takes a little bit more of a tug for that to happen.

East Alabama Medical Center does an outstanding job of retaining their employees. Nursing has north of a 50 percent annual turnover, on average. At last count, East Alabama Medical Center was running closer to 12 percent for its nurses, and that's driven by leaders at every level. Their CEO, Terry Andrus, comes in early every morning so that he can spend time doing what everyone in the hospital calls "TA's rounds": he spends at least an hour every day, without exception, walking around, talking to people, listening--mostly listening. That's enabled him to lead this hospital for 20 years and do remarkable things in terms of patient care and employee commitment. And it costs absolutely nothing for managers to be out there, spending time, talking and listening. The higher up in an organization you go, the less it's done and the more important it is.

East Alabama also has the Cornerstone Society, an employee-run program to assist employees in times of crisis: a fire, a serious illness, an accident. The only resource the hospital gives to it is a full-time employee to manage it. They receive money through voluntary payroll deductions from employees, and some fund-raisers. The society averages about $125,000 a year. And people contribute vacation and sick time for those who really need it. Bill and I were at a meeting at East Alabama a few years ago, and some HR character said, "Well, how do you keep that from being abused? How would you make sure that process is administered fairly? Because it seems like some people would have more tragedy in their lives than others." I think Terry Andrus wanted to throttle the guy. He said, "We do the right thing, and it always comes back to us."

    Have they run the numbers on it?

RH: I bet Terry Andrus would resist that. But he knows he's got the only public hospital that's ever been listed in Fortune's 100 best companies to work for.

BC: They do monitor their patient-satisfaction data very carefully, and they have empirical data that suggests there's a very strong correlation with their success in dealing with employees and with patients.

    Synovus Bank in Georgia also tends to appear on lists of great places to work; what's its strategy?

RH: One thing I know about them is their profit-sharing plan. That's something that's attractive for some organizations and not others, and a lot of it has to do with how the company is performing. Their profit-sharing and 401(k) can add up to about a 21 percent bonus for employees, even--and especially--for rank-and-file employees. Their take is that it has to make a major difference; they know they can't offer a $500 bonus and have people get excited. And they've done very well; their stock went up 50 percent from 2002 to 2003.

    You discuss Chick-fil-A and its corporate culture in Contented Cows. Has it changed since its founder, Truett Cathy, moved out of the spotlight and turned command over to his son Dan?

RH: They continue to hold very tightly to their mission; they've gotten even better at what they do, and how they relate to their employees. And it seems to be paying off: just last month, they won a "Customers First" award from Fast Company magazine. They make sure their operators have very strong leadership ability because they know that drives their retention, and turnover is one of their heaviest costs. If they can keep it to a third to a fourth of their competitors’, that allows them to make more money. And, more than any other fast-food company we know of, they seem to care that their individual team members know how their work affects the overall operation.

Chick-fil-A is very proud of their scholarship program; to date, they've given more than $18 million in scholarship funds.

I told them, "Most of your employees are teenagers and seniors. I can understand that at Intel or GE or Bank of America, places that hire college grads, there might be a scholarship program, but you know that most of your scholarships' beneficiaries will not come back to Chick-fil-A." They say that part of their mission is to have a positive impact on society, and therefore it qualifies under their charter. They also have found that it causes these teenagers, who otherwise will work for three or four months at a restaurant and then move on, to stick around for two or three or four years.

Because it's a closely held private company, it's hard to know how the numbers go, but I'm sure they see this as a very, very worthwhile investment.

    Why wouldn't other chains adopt the same sorts of employee-relations ideas that have worked for Chick-fil-A?

RH: I don't think any of the other fast-service food organizations have been willing to apply the same high standards to their managers, or commit to the kinds of values and missions, that Chick-fil-A has. They don't see that it's in their immediate self-interest; they're playing to the quarterly numbers, and not willing to take the long view of it.

    Has the reliance by many companies on contingent employees changed relationships between employees and managers?

BC: Absolutely. For the longest time, organizations that relied heavily on part-time and casual employees almost looked at those folks as being second-class citizens--in terms of compensation, benefits, training--and my goodness, we've paid a price for it. As if a part-time employee couldn't piss off a customer, or have an accident, or injure people!

We're finally starting to get beyond some of that. Starbucks, for instance, has a lot of part-time people, and they're as serious about getting them trained and on board and competent, and knowing what's going on at Starbucks, as they are with full-time employees.

    A number of companies used the promise of training and "learning environments" to recruit employees a few years ago, but when the economy went sour, training programs were among the first things to go! Are there organizations that are still using training to help with employee retention?

RH: The credit-card company MBNA believes in training; they know how much they invest in training and what their return-on-investment goals are. They tell young college graduates that they're going to learn something specific about investing, finance, banking and so forth.

Another example is Intel, with whom we've done a fair amount of work in the last year or so. They're very serious about training, especially in technical areas. They know that the greatest source of their competitiveness is their ability to maintain bench strength in those technical research areas, and they provide a lot of support for people to increase their education. If you want a technical career with Intel, you know you're going to get some of the best technical training in the world.

    What other unconventional ideas for employee relations--that really work--have turned up recently?

RH: There's a small community bank in St. Augustine, Florida, that Bill and I have worked with, called Prosperity Bank. They've got a really neat culture, driven by the nature of the leadership of the company. They have a volunteer program: everyone in the bank can do four hours of volunteer work a month on bank time and get paid for it. The employees really like that, and they have a pretty high participation rate. And if you volunteer for 16 hours in a quarter for one organization, they'll contribute $100 in cash in your name to that organization.

    But the cold, hard, capitalist bottom line: how does that affect the bank?

RH: Well, it's the fastest-growing bank in the state of Florida right now; their business is clearly moving ahead pretty well. They want to appeal to customers, and also to their employees.

BC: What amazes me is that, with the hundreds of speeches and seminars we've done to talk about the business case for treating people right, I don't think we've had even one soul dispute the business case.