Get real: Honest job previews can cut employee turnover

Employee turnover is an expensive process. Human resources experts estimate the cost of turnover to range between 93 percent and 200 percent of an exiting worker's annual salary, depending on the employee's skill level. Small businesses, where the loss of one employee is often deeply felt, are hit especially hard by turnover. One way to control these costs is to take measures to be sure the recruit isn't disillusioned after his first week. A needy employer might be tempted to oversell a job to an applicant, but this can backfire. Experts say honesty is the best policy, and one way to present a clear snapshot of the job is to provide a "realistic job preview."

Years ago, when Denver-area realtor Ed Flynn owned a Dairy Queen, he became so fed up with teen-worker turnover that he started interviewing job prospects with their parents present. That way, kids couldn't tell Flynn they weren't allowed to work late on a school night — Mom and Dad had been present when that job detail was initially shared.

Across the continental divide, Dr. Greg Stilwell of Durango, Colorado has started to invite prospective employees in to spend a day — with pay — watching his current employees manage the administrative side of his medical practice. "It gives people a feel for the work they'll be doing and how they fit in with the rest of the office," explains Susie Stilwell, the doctor's wife and sometime CPA. "In a small business, that's what makes or breaks the office," she adds.

Dr. Stilwell calls his job-shadowing process a "working interview," but some industrial psychologists might consider it a form of "realistic job preview" or RJP. Studies show that RJPs raise employee retention, which in turn cuts recruitment costs and productivity losses. Whether the truth about an opening is terrific, terrible, or merely ho-hum, honesty is the best policy for hiring employees who'll stay on the job.

Labor Pains

U.S. Bureau of Labor statistics on voluntary turnover show that during the time period of September 2003 to August 2004, about 20 percent of workers walked off the job. That's an overall average. For the period cited, only 13.70 percent of workers in durable-goods manufacturing quit, while 21.40 percent in professional and business services left employers, and 47.30 percent of those working in accommodation and food service positions tossed in the towel.

"Based on my personal experience, I'd say turnover is higher for small businesses," says Bill Boothby, a veteran of both corporate life and small-business ownership, and a counselor for the Small Business Administration's Senior Corp of Retired Executives in Denver. Boothby adds that loss of a skilled employee can have a "much more dramatic impact" for a 10-person firm than for one with 500 workers.

At the same time, "small businesses have a more difficult time replacing people, especially technical people," he says. "You can't match yourself against the big guys," adds Enrique Garcia, another Denver SCORE counselor and semi-retired restaurant owner. Turnover is costly for any organization, and it's not just recruitment costs that add up. Peter Hom, professor of management at the W. P. Carey School of Business, has studied lost productivity incurred when social service workers left mental health agencies in Arizona and greenhorns stepped in.

"A newly hired behavioral technician won't be able to see as many clients as someone who is more proficient in the job," he says. He determined productivity losses for such personnel changes by calculating the lost revenue from reduced client-contact hours managed by the new hire. Still, Hom says turnover costs are "difficult to get a handle on."

Along with the obvious outlays, such as help-wanted ads, relocation expenses, training expenditures and other hard dollars spent, there are a host of hidden expenses, such as productivity lost to managers who must screen resumes and interview candidates, administration costs for processing separations and new hires, hits to customer service — the list goes on and on.

According to Hom, human resources experts estimate the cost of turnover to range between 93 percent and 200 percent of an exiting worker's annual salary. It all depends on the employee's skill level. This circumstance makes turnover all the more dire for small businesses. According to the SBA, small businesses employ 41 percent of high-technology workers — scientists, engineers and the like — and these small-business workers produce 13 times more patents per employee than people working for large patenting firms.

Unfortunately, fieldwork recently conducted by Leadership IQ, a Washington, D.C.-based research and training company, found that 47 percent of "high performers" are actively looking for new jobs at any given time, and another 44 percent are "passively" looking, which might mean they're checking out monster.com or posting resumes online. Workers today have much more access to job-search resources than workers had 20 years ago, SCORE's Boothby says.

"If they're even the least bit disenchanted with a company, they have the ability to look for a job" through online employment sites, he explains. Worse, they may be using the current employer's time and computer to do it. Such factors make employee retention especially urgent, which is one reason Hom joined forces with colleague Rodger W. Griffeth to produce a book entitled "Retaining Valued Employees." In it, the team offers "practical prescriptions" for cutting turnover through proven methodologies. One is the "realistic job preview." On average, RJPs boost job-retention rates by 8 percent, the research shows.

Warts and all

RJPs combat the very human human-resources error of sugarcoating a job description for prospective employees. "Generally speaking, a new job is typically oversold to newcomers, creating inflated job expectations. Once they begin work, newcomers often find that their new job does not live up to their lofty expectations. As a result, they become disenchanted and leave," Hom and Griffeth write.

That's where RJPs come in. The job previews should be designed to reveal a true picture of positions and companies — not just the glorious parts but also the mundane, or even the undesirable. RJPs can be written documents, face-to-face presentations, or even online, click-through slideshows, which is how telecommunications giant BellSouth displays them. The delivery vehicle isn't necessarily as important as the realism and honesty conveyed.

The purpose of an RJP: to avoid on-the-job reality shock for the new kid on the block. Large organizations create RJPs by gathering input from many employees. "When you work with a big company, you do a lot of interviews and surveys to verify job descriptions," Hom says. "Smaller firms might have to apply different methodology." Hom did find one way to recreate the many-faceted inputs that big companies are able to produce during job-description creation.

He developed a generic RJP for the Arizona Society of CPAs by interviewing more than 100 accountants at nearly four dozen firms. Other smaller companies might also tap such professional association resources to see if they have similar data. Job shadowing is another way small companies could offer RJPs, Hom says. So is peer involvement in the interview process. By having a peer employee deliver the position details, companies can provide the opportunity for one person to candidly share information that might not make it into a written job description.

Hom also points to "expectation-lowering procedures" or ELPs as a means of cutting job disillusionment. He cites one study in which a group of new hires was introduced to the notion of reality shock and unmet job expectations, then invited to remember how they experienced unmet employment expectations in the past and how they coped with the disappointment. "That simple intervention proved beneficial," Hom says.

In this study, only 3 percent of employees who'd been through the ELP had quit after six months on the job. Six percent of those hired using RJPs had left, and 22 percent of the control group had turned in their resignations. One thing to avoid in RJPs is being overly negative, Hom cautions. He points to an Army RJP that offered a very negative depiction of boot camp. "They found it was not as effective as having a balanced view," he says.

Ties that bind

RJPs aren't the only employee-retention tool in Hom's toolbox. Another is related to how solidly people are embedded in their jobs and communities. According to Hom, several links can bind an employee to a position. Hom applies the word "sacrifice" to the pluses that employees would lose if they left. These include a claim on the best office, first dibs on vacation time, the good parking spot — or formal perks such as extended vacation benefits or tuition reimbursement.

Community ties such as close affiliations with church, youth groups, local relatives and other emotional tethers may also make one employee more likely to stay than another. Fit with the local environment is important, as well, Hom says. For instance, a person who loves the outdoors and fly-fishing may be well suited to a job in Montana and not want to leave that if a headhunter offered a job in Chicago.

"Most turnover people look at an employee's connection to the job, the boss and other employees," Hom adds. "It seems ties with the community are important, too." Such ties might be something employers could look for when conducting employee searches. It is important to remember, too, that job interviews go two ways: The job candidates are conducting interviews as well. That's one reason Hom calls RJPs a "valuable, time-proven technique."

RJPs — and their corollary, ELPs — may work so well because they allow job candidates to go into the new office with their eyes wide open. "Job previews allow people to make an informed choice," Hom says, adding that the RJPs let candidates decide if the job is a good fit, and if it's not, they can opt out before more money has been spent on them. Of course, opting out may not be the response employers are hoping for.

And, in fact, research does indicate that RJPs could run the best and brightest job candidates out the door. RJPs increase the candidate job "rejection rate, or what human resources people call the 'yield,'" Hom says. Despite the fact that RJPs might make businesses lose some high-quality candidates, Hom advises businesspeople to weigh such risks against revolving-door workers. "If you seduce people into a job, and they quickly leave, that will cost you," he says. "RJPs reduce turnover, so you'll avoid those expenses," he concludes.

Bottom Line:

• Turnover costs plague big and small businesses alike. Depending on skills and proficiency, the cost of replacing an employee can be as much as 200 percent of the leaver's salary.
• On average, 20 percent of employees quit in a year.
• When wooing job candidates, employers often sugarcoat job descriptions. The danger? New hires suffer reality shock, then leave, leading to more turnover costs.
• Realistic job previews have been found to cut turnover an average of 8 percent.