How're You Gonna Keep 'Em Down On the Firm?

STEP #1: Calculate the Real Cost of Turnover
Hot as the opportunities were, and efficient as the company had become at prospecting for customers and employees, it seemed that IHS was leaving money on the table. But how much? Number-huggers that they were, Rabinowitz and Durham knew that it cost the company $3,000 a head to bring on new hires. That included $2,500 to recruit staffers and an additional $500 to process their paperwork, including paying state unemployment insurance, which Rabinowitz refers to as the "retention tax."

But he and Durham also began to wonder whether turnover was affecting more than acquisition and acclimation costs. Employee departures often have veiled effects on a company's top and bottom lines, such as decreases in customer satisfaction, worker morale, and overall company productivity. Not to mention the drag on managers' time. "We were getting pressure from internal staff," recalls Rabinowitz. "What were we going to do about all these people leaving? Our recruiters had to spend more and more time dealing with people who wanted to leave. When were they supposed to have time to recruit?"

Playing out those numbers in greater detail than ever before, Durham and Rabinowitz calculated that if they could nudge their average employee's tenure from 3.5 months to just 3.8 months, they would see a direct impact on their bottom line to the tune of $60,000. Get the average up to 7 months, and they'd uncover $275,000. And if they could somehow achieve an average stay of 18 months, they'd add a tantalizing $2.9 million to their net. As for the top line, Durham and Rabinowitz gauged the opportunities that the company had missed owing to insufficient staffing. Durham estimated, for instance, that had IHS been better able to retain its staff, its head count could have been as high as 250, rather than 160. So without a significant increase in overhead, IHS could have been nearly twice as large, pulling in $20 million in annual revenues versus $11 million.

But that growth would require a greater effort and expenditure than the pair realized. "We came to the conclusion that we could spend some money on this," says Durham. The two weren't sure exactly how much they would spend--nor could they have predicted that the cost would run upwards of a half million dollars. From their own experience, they believed it would be wise for them to hunt down external expertise, as they had for their direct-marketing and psychological-testing efforts. "It's easy to think that because you have experience, you know what to do," says Rabinowitz. "But the real geniuses in this world say, 'Do I really know?'" Through a recommendation he received from an entrepreneurial peer group, Rabinowitz hired Joyce Gioia of Roger Herman and Associates, a firm based in Greensboro, N.C., that specializes in employee retention.

STEP #2: Capitalize on What You're Already Doing Well
Truth be told, the turnover problem didn't come as a total shock. In exit interviews, Rabinowitz had long been hearing that employees felt no special allegiance to IHS. (Ironically, the most personalized attention employees received was when they were leaving.) And the company had made only a few haphazard efforts to address that malaise.

One such attempt was the long-standing "pin program," wherein employees with a two-year record of exceptional customer service could receive a silver IHS pin and a $500 bonus; three-year veterans received the pin in gold and a bonus of $2,000. Rabinowitz had also instituted a program he calls the Wall of Fame, whereby customers could acknowledge top-performing analysts, whose pictures would be placed on the company's Web site and whose names were entered in a monthly drawing for $500. In early 1996, Rabinowitz had also hired Tammy Dowling as his assistant. Her mandate: to handle employee complaints. "We were dealing with problems reactively," he says. "By the time we heard about them, the problems were too far gone for us to make a difference."

Rabinowitz had worked on help desks for more than five years, so he knew that such positions were frequently thankless, high-pressure jobs, conducive to burnout. Callers were none too patient about getting their problems resolved. And despite the comprehensive knowledge and customer-service skills the job required, help-desk positions were typically low-respect slots, offering no sense of permanence or career progression. Between assignments, analysts were very often simply let go. Help-desk personnel usually felt like--and were treated like--temps, merely marking time until a "permanent" position came along and often giving as little as one day's notice when they found one.

Compounding the problem, most IHS help-desk staffers worked at customers' sites, so they naturally felt more a part of the customer's culture than that of IHS. "I used to get calls from people saying, 'Everyone at Johnson & Johnson just got a raise. Why didn't I get one?'" recalls Rabinowitz. "We just gave them their paychecks." Even those paychecks were imprinted with a name employees didn't identify with: Leveraged Technology.

Rabinowitz and Durham knew that competition for help-desk staff was increasingly fierce. Annual surveys indicated that average salaries had reached $35,000 nationwide, and IHS was attempting to keep pace. But looking over the company's own data--there were always data--Durham noticed that most people who left didn't choose "more money" as their reason, instead opting for "other." When Durham asked the statistician to break down that category further, it turned out that people left because they didn't view their job at IHS as a full-time, permanent gig. Durham was very encouraged; that was a shortfall he felt the company could address. "It meant there were things we could do without necessarily giving them more money," he explains.

 PREV  1 | 2 | 3 | 4 | 5  NEXT