Improve Profitable "ROE" with Retention
"R.O.E.: Return On Employee -- A measure of corporate business
performance as determined by the gross revenue achieved per
staff employee."
by Phil McCutchen Marketing Manager, VCG, Inc.
As the definition above points out, ROE (Return On Employee)
focuses on your staff, the people who generate the revenue that
makes your operation profitable. For any business with
above-average employee turnover, ROE is a critical component of
success that is too often neglected by management. For the
purposes of this article, we'll focus on the staffing industry;
temporary employment and recruiting agencies that provide
important personnel-related services to the business community,
yet typically suffer from above-average staff employee turnover.
We will show you the challenges and offer some tips and
techniques to improve the turnover situation and thus, ROE. In
our analysis of available operational data, the average ROE for
commercial staffing firms is a bit under $400,000. We've also
seen some firms (many of them VCG staffing software clients)
with ROE's that exceed that by 50% or more. Why do some staffing
and recruiting firms settle for average or less, while others
excel? One key to success is staff employee retention. According
to data from the ASA 2002 Staffing Industry Compensation Survey
by Mercer Human Resource Consulting Inc., the average annual
turnover for staffing industry jobs was 48 percent. In fact, in
previous years, turnover was as high as 70% for some positions.
As might be expected, the impact of such high staff turnover --
for whatever reasons -- can be tremendous. One case study in
"Continuity Management" by Hamilton Beazley, chairman of
Strategic Leadership Group, an Arlington, VA-based consulting
firm, pointed out the potential cost with this true story. A
large company delayed a major product launch by nine months as
it struggled to resolve a technical issue. The delay allowed a
competitor to introduce a similar product first, gaining a
competitive advantage among customers. As a result, the firm's
product never reached its projected volume and revenue
potential. In investigating the launch, it was discovered that
the solution to the technical issue that caused the delay
already existed as the firm's intellectual property based on
research that had been done 15 years earlier! Knowledge of that
research was lost due to staff turnover. Total cost to the firm
in duplicated research and lost revenue was $1 billion. Similar
losses happen on smaller scales every day, and that includes
your staffing firm -- all because 'head knowledge' was lost.
Such quantifiable losses however, are just the most easily
quantifiable part of the problem. Among the more obvious issues
of turnover are: