Quick: Which industry has a higher turnover percentage, public accounting or fast food?
If you guessed fast food, you’d be right. But barely. Fast food and hospitality turnover averages 45 percent per year. CPA firms average 16-30 percent, until you factor in involuntary turnover, in which case, depending upon the size of your firm, it can jump to a whopping 44 percent!
The people-profit connection
When a fast food employee leaves their job, the costs are nominal. Not so within our firms. To illustrate, we’ve calculated the cost of turnover at a fictitious 125-person firm in Austin, Texas. To estimate the turnover costs of each position, we’ve used generally accepted salary ratios, e.g., 50 percent of an entry level associate, 1.5X for a senior associate or manager, and 3X the salary of partner.
Of course, retaining talent keeps your replacement costs lower. It also may increase your firm’s profitability, as Table 2 demonstrates.
Our preference for recruiting—our ignorance about retention
In our experience, most firms focus far more on recruiting, bringing people in the front door, and not enough on retention, dead-bolting the back door. What about your firm? Here’s a simple quiz to help you determine where your firm falls along the continuum:
- How many full time employees are assigned to recruiting at your firm? Most firms have at least a one person designated for this function.
- How many full time employees are assigned to retention at your firm? At most firms, no one is tasked with this. It falls on—and often between the cracks of—human resources and managers. When everyone is responsible for retention—and no one is measured—it doesn’t happen.
- What’s your annual recruiting budget? Most firms can name this figure budget to the dollar, because it has its own line item in the budget.
- What’s your annual retention budget? This needs to be calculated in terms of what’s included in the budget. Does it include training and development? Staff parties? The annual employee engagement survey? The fact that few firms have actually thought through which items belong in their retention budget highlights the disjointed way in which they plan for and track retention.
Refocusing on retention
By this time, you probably can see that retaining employees keeps attrition costs low and may increase your firm's profitability. You just don’t know quite what to do or how to start developing a retention plan with a clear definition of success, clear metrics, and a budget. In our experience, there are four keys to employee retention. Each key unlocks a fundamental door to building an employee brand that your employees can buy into.
What’s an employee brand?
Whether you realize it or not, you have a brand as an employer. It falls into one of four quadrants: plastic, “zzzzz,” Teflon, or aces. So you can get a clear picture of what we mean, we’ll use commonly known consumer brands to illustrate our point.
Plastic Brands. These brands utilize effective and engaging advertising messages to sell or market concepts. As consumers, we either know the ads are not entirely accurate, or we are ultimately confused as to what the product or service is because we are distracted by the catchy nature of the ad:
- Fast-food chains trying to position themselves as healthy and promoting an active lifestyle. The ads may be engaging, but the message is hard to believe.
- The screaming chipmunks/animals ad during the 2008 Super Bowl. Was this for cars, an animal welfare organization, tires, insurance? While the ad was extremely engaging, we forget the product or service because we were simply laughing too hard. (By the way, the ad was for Bridgestone Tires.)
- Tobacco advertising that makes it look “cool” to smoke. While they use proven tactics to get our attention, we all know that smoking is just not part of a “cool” lifestyle.
Teflon Brands. These brands sell a true and accurate message using a medium that is relatively boring and uninteresting. These brands have a hard time telling their story because nobody pays attention to what they are saying:
- Most financial services firms fall in this category. When was the last time you saw an engaging ad for Vanguard Funds, or Northwestern Mutual?
- CPA firms, law firms, and other professional service firms often use this tactic. How about the pictures of the partners standing in front of a bookcase with a dark walnut finish and a laundry list of services in the bottom half of the ad?
Zzzzzz Brands. We don’t know many of these, because the message is inaccurate and we know it, and the medium to reach us is ineffective. “Confused” brands usually end up here:
- Think Sears and other struggling department stores. We have no idea what they are going to do next—do we go there for hard goods or the latest line of designer linens. The customer experience is extremely inconsistent, and we don’t know what they stand for. We only go to these stores when we need to buy our holiday gifts.
- How about Kodak or Polaroid? They have failed to keep pace with the times, and are trying to play catch up. They’ll try anything to get our attention, but we keep getting different messages, and we aren’t sure which is the right one.
Aces Brands. You want your brand to be here, but it is extremely hard to attain “aces” status. These companies deliver a consistent and unique message that is effectively delivered and backed up by experiences with the product or service. Apple, Toyota, Target, BMW, IKEA, and Harley-Davidson come to mind. We know, without seeing the logo, whose ads we’re looking at. We’ve come to expect a consistent, winning experience from their brands. We know that the next thing they do will be consistent with their image, and, based on our previous experiences, we’ll probably like it.
How to strengthen your employee brand and retain talent
We’ve found that there are four cornerstones to effective brands, and your employee brand is no different. Thinking about the consumer brands in the “aces” category, they have absolutely conquered these four areas and deliver on them every step of the way. In order for you to build and deliver an effective employee brand, you will need to have made solid and consistent progress in each of these four areas.
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Foundation and direction. Building a strong employee brand that will retain talent is a bit like building a house: it requires a detailed blueprint and strong foundation. Firms with strong employee brands have:
- Partners who are focused on employee retention as a key metric
- Metrics to hold partners, directors, managers and supervisors accountable for retention
- Consequences for partners, directors, managers and supervisors who are talent repellants rather than talent magnets
- A commitment—verbal and written—to be a great place to work
2. Culture and environment. Do your new hires need to guess at what your culture is all about? Is there a maze of political hoops people need to jump through to get something done? Is trust apparent? Is there leadership, or is it just management? How about the work environment—is it collegial, team-based, and collaborative, or individualistic, disjointed, and segregated by practice group?
Having a statement on your culture is a first good step toward creating a consistent and desirable employee brand. Many firms feel this is an unnecessary and even silly step, but going through the process of developing it brings many of the strengths and weaknesses of the culture to the forefront. This also allows you to identify the true “culture keepers,” as well as those who destroy what you’re trying to accomplish. You can also evaluate new people, practices, and other firm opportunities against your culture to determine if they will be a match. But without a written statement, it’s hard to measure and manage against your culture.
3. Visual cues. Once your eyes are open to the concept of employee brands, you can’t miss firms with strong ones. When you walk into their offices, visit their Web sites, and attend their state-of-the-firm meetings, you see a consistent set of visual clues that point to their employee value proposition. Google does this with those ubiquitous lava lamps in the company’s primary colors: they’re in the lobby, in employees’ offices, on the Web site, and serve as a totem for the “Do No Harm” values espoused by the company’s founders.
Having strong, integrated visuals at your firm shows a level of professionalism that makes employees proud to be associated with you. Conversely, when your Web site, lobbies, conference rooms, employee work areas, recruiting materials, and marketing collateral are disjointed and uncoordinated, it’s akin to being physically disheveled.
4. Verbal cues. Is the culture and environment saying one thing, but people are muttering other things? What you say gets heard, and if it is not in line with your overall employee brand, you have a problem. Are partners condescending? Are managers oblivious of people issues? Do people say “that’s not my job?” Or, do you hear retention language, supportive comments, and motivation toward a common goal? When the managing partner speaks to the firm, does he or she clearly support the employee brand, or are you not sure?
This is perhaps the hardest component to measure and manage, but if the root of the employee brand is clear and accurate, it can be effectively supported verbally.
Making it happen at your firm
In summary, if you want to develop an effective and winning employee brand, you will need to really focus on it. Just like a growth or recruiting goal, retention needs a plan, concerted effort, leadership, a budget, and a combination of human resources, marketing, and the commitment of the firm’s leaders. Any of you who have undergone a comprehensive firm re-branding effort knows that it takes time and money to make it happen. Your employee brand is no different.
You know that an effective employee brand will pay dividends in terms of a strong and desirable culture, greater profitability, easier recruiting, and an improved environment. So, identify your strengths, prop up your weaknesses, build a plan and timeline, implement and manage and measure your results. With a targeted effort, you will begin to see a positive ROI!
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