This is the age of human capital -- and of tight labor markets. Companies have finally realized that competitive advantage resides mostly in people, and that finding and keeping good managers and employees is a strategic necessity. But how do you attract and retain the best and the brightest when the competition for people is so brutal?

To make matters worse, two demographic time bombs are quietly ticking away. The baby boom generation -- nearly have the workforce -- is growing older, and many boomers have no intention of sticking around doing the same job till they turn 65. Yet the age cohort behind the boomers is one of the smallest ever, and so can’t begin to pick up the demographic slack. Result: finding and keeping good people will be even tougher in the future.

The Drivers
According to research over 20 years by the Saratoga Institute, a division of Interim Services, 85% leave for reasons other than pay, including:
• Poor supervisor skills and attitudes
• No perceived growth opportunity
• Inability to speak freely about one’s concerns
• The job itself

Nearly all businesses are looking to do more with less resources, and do it better, cheaper and faster. Note the third item -- driving out fear and building trust is one way to create an environment where innovation and creativity can flourish. And that is where supervisor and manager performance significantly impacts the culture of the organization.

The Power of Poor Supervision
In more than 20,000 recently conducted exit interviews of employees leaving the company, poor supervisory behavior was reported as the predominant reason for people quitting. Number one. If employees ranked their supervisor’s performance as excellent, only 11% were likely to look for another job in 12 months. In contrast, 40% of those who rated their supervisor’s performance as poor, will look for another job in 12 months.
Most organizations have spent the last few years trying to keep up with the “fringe benefit mania.” We see countless reports in the media boasting that companies must provide more and more extraordinary benefits to keep employees happy. But in the meantime, many companies have overlooked one of the most basic components of employee satisfaction -- supervisor performance.

The Good News
The financial math of reducing turnover by just a few percentage points should make the most cost sensitive CEO jump to invest to improve retention -- it’s a business “no brainer”. According to the Saratoga Institute, a leader in human capital measurement, companies spend an average of one and a half times a person’s salary per turnover, which on average totals $50,000 per employee lost. Lose 10 people = lose $500,000
One of the drivers in retention strategies is training and development opportunities. Example: 1000 employees. Those companies that provide training will experience turnover of 12% / year which equals 120 people. A company that provides no training may have turnover as high as 41% on average. Based on average turnover cost of $50,000, the savings equals 410 - 120 = 290 times $50K equals $14.5 MILLION. The good news is that strategic partnerships that invest in retention strategies produce significant returns on investment.

Trust Me
There is a psychological sense of community in companies who have high retention, low turnover among their high potentials. These components include:
• Trust in their employer
• Climate and work environment
• Relationships with Supervisors and Co-workers
• Opportunities to Contribute and Grow
• Collaboration is Evident

The wave of downsizings, reduction in forces, that began in the mid-’80’s has eroded a lot of trust. Many people have come to realize that the key idea is to be “employable” versus employed, and taking personal responsibility for their own career management and professional development.
Supervisors and managers need a wake-up call: mentor. Get yourself in training. Train your people. Talk with your key people about their careers. Then, listen to them. “There go my people -- I must find out where they are going so I can lead them there.”
Financial pressures of performance today must involve human capital management, measurement, and intelligent investing. The cost of ignoring this new retention reality is just too high to continue if a company wants to compete effectively.

Author's Bio: 

Charlie Breeding is President of Performance Improvement Institute, an Internet Information provider, publisher and professional speaking, coaching, consulting and training firm. Mr. Breeding is a graduate of the US Military Academy, West Point and has worked in the Performance Improvement area for over 23 years – fifteen years with Dale Carnegie Training, and two years with FranklinCovey. His clients include colleges/ universities, non-for-profits, small, medium-sized and large organizations such as AT&T, Chrysler, and Lucent Technologies. For organizations, more information can be obtained at www.thePEPcoach.com and for individuals, go to www.breedingtrust.com. PEP = Productivity, Execution & Performance. His second book, Breeding Trust will be published in 2008.