customer loyalty scores, and also higher retention of employees in marketing, as well as among drivers and night warehouse employees. In fact the satisfaction/ engagement scores explained 46 percent of the change in pre-tax operating income among the 147 SYSCO operating companies one quarter later. In other words, the satisfaction/engagement scores were a leading indicator of each operating company’s financial performance the following quarter. That is why operating executives pay such careful attention to those scores.
Now consider the financial impact of the management practices that underlie the satisfaction/engagement scores on employee retention. Fully 75% of SYSCO’s operating costs are people related expenses. That implies about $3 billion of expenses every year. SYSCO has about 10,000 marketing associates, and the fully loaded cost of losing one of them through voluntary turnover is about $50,000.
Fully loaded costs of employee turnover include separation, replacement, and training costs (Cascio & Boudreau, 2011). The financial impact of improving their retention rate from 70% to 80% exceeds $10 million of savings annually, that is, in terms of costs avoided. Over a seven-year period, SYSCO improved its marketing associates’ retention rate from 70% to 82%, for a total opportunity savings of $70 million.
Next, consider delivery associates, who drive SYSCO’s trucks to deliver groceries to its customers. Delivery associates are very critical to SYSCO’s success because they know the customers, who rely on them to get their groceries on time and in good condition. To do this, the company must have the same person going to the same customer on a regular basis. Over the same 7-year period, SYSCO was able to move the retention rate of its delivery associates from about 65% to 85%. The fully loaded hiring loss for delivery associates is about $35,000. That’s almost another $50 million in savings over 7 years.
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Finally, the company saved an additional $20 million by improving the retention of night warehouse workers over the same time period. For SYSCO investors, since every $5 million represents a penny per share, that’s about 14 cents per share based on improved retention of marketing associates, 10 cents a share based on improved retention of delivery associates, and 4 cents a share based on improved retention of night-warehouse workers. When was the last time you saw an HR programme evaluated in terms of payoffs for investors?
Conclusion
The potential of cost-benefit comparisons of employee attitude-behaviour relationships is enormous. The examples presented here illustrate that such relationships do exist, they clearly have significant financial implications for operating executives, and they have meaningful, actionable implications for human resource management practices. In short, just because work-related employee attitudes are “intangible” does not mean that they are “unmeasurable.”
Measurement alone, however, is not
sufficient to drive real organisational change. The ultimate test is simple: Do the measures improve decisions about talent where they matter most? The first step is to break through the traditional perceptions of many managers that decisions about talent cannot be systematic because talent measures are so “soft”. The examples presented in this article show clearly that such is not the case. Begin with a logical model that shows the connections between work-related employee attitudes and financial outcomes. Then use data, as SYSCO did, to show the powerful linkages in the model. When operating executives can see how data on work-related employee attitudes affect strategic business outcomes that they personally care about, then you can be rest assured that the data will drive true strategic change.
March 2012 | Management Today 65
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