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: