Newspaper article THE JOURNAL RECORD

Firms Wage War against Turnover

Newspaper article THE JOURNAL RECORD

Firms Wage War against Turnover

Article excerpt

Benchmark HR Solutions had built a strong record of recruiting employees for start-up high-tech companies, growing in five years from two guys with an idea to 90 employees in four cities, from Salem, N.H., to Atlanta.

Then, abruptly, founders Bill Bench and Mike Lawin began losing some of their best recruiters, hired away over the past year by other start-ups that promised them stock options -- hot-economy perks that New Hampshire-based Benchmark didn't offer.

"Starstruck," said Bench, 39, of those who left. About 10 in number -- he won't be precise -- the departing workers said they liked working for Benchmark, but the lure was strong. "They were attracted by potential personal wealth they might build," he said.

So Bench last month launched a counterweapon to stanch further attrition. It's a "virtual" pool of pre-IPO stock options, representing equity shares clients have paid Benchmark as part of their fees for services. As these companies go public or are acquired, Bench says his employees will share in the proceeds.

Employee defections can be costly. Benchmark's experience bolsters the argument made by human resources professionals that retention programs, while expensive, are cheaper than scrambling to fill jobs unexpectedly.

Direct costs for hiring and training a replacement for a key position run between 20 percent and 30 percent of the annual salary, specialists estimate. A survey by Abbott, Langer & Associates of Crete, Ill., last January listed the average salary for a recruiter nationally at $47,500, and more in Boston and other urban markets.

The price goes up when one counts the extra effort needed to keep operations running and to assure customers that service won't suffer, not to mention the lost opportunities to develop new business.

"We would be reticent about engaging new clients if we didn't have the resources to serve them," Bench said.

Employee replacement costs also hurt corporate earnings and stock value, according to research by Sibson & Co., a Princeton, N.J., consulting firm owned by Nextera Enterprises of Lexington, Mass.

For four high-turnover industries -- specialty retail, call center services, high-tech, and fast-food -- Sibson calculated an average 38 percent loss in earnings and market value in 1999. For specialty retailers, where the sales-clerk turnover rate is 97 percent, earnings and share-value losses were put at 50 percent. In fast food, with 123 percent annual turnover but much lower recruitment and training costs, the impact on earnings was calculated at 16 percent.

Seymour Burchman, a principal in the company, said turnover is especially hard on companies selling services in the home. Newly hired home-services technicians have three times as many order cancellations as experienced workers, mostly "because customers are more comfortable when they see familiar faces. …

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