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The HR Data Labs® podcast is dedicated to Human Resource professionals hearing the latest thoughts of innovators and experts from around the world of business focusing on HR Process, Technology, Regulations, Data and Analytics. Sometimes we may get passionate or a little carried away, but we are always fun and insightful. Podcast website at http://hrdatalabs.com. HR Data Labs is a registered trademark of David Turetsky. Reg. U.S. Pat. & TM Off.
HR Data Labs podcast
Ann Kuss - Minimizing Turnover's Financial and Psychological Costs
Ann Kuss, CEO of Outstaff Your Team, joins us this episode to discuss common causes for employee turnover in organizations, the impact it has on remaining team members, and strategies to reduce turnover while managing its stress on the team.
[0:00] Introduction
- Welcome, Ann!
- Today’s Topic: Minimizing Turnover’s Financial and Psychological Costs
[5:16] What are the most frequent causes for turnover in the tech industry?
- Why limited growth opportunities often cause for turnover
- Gender difference in resignation patterns
[13:07] What are the financial and psychological costs of turnover?
- Loss of institutional knowledge and team cohesion
- Measuring productivity losses from employee departures
[23:11] What are some effective retention strategies that can reduce turnover?
- Building an adaptable retention system
- Keeping employees engaged and interested through meaningful challenges
[31:22] Closing
- Thanks for listening!
Quick Quote
“Sometimes employees are not looking for that next-level thing, and from a manager’s perspective, getting them unstuck can be a challenge.”
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The world of business is more complex than ever. The world of human resources and compensation is also getting more complex. Welcome to the HR Data Labs podcast, your direct source for the latest trends from experts inside and outside the world of human resources. Listen as we explore the impact that compensation strategy, data and people analytics can have on your organization. This podcast is sponsored by Salary.com, your source for data, technology and consulting for compensation and beyond. Now here are your hosts, David Turetsky and Dwight Brown!
David Turetsky:Hello and welcome to the HR Data Labs podcast. I'm your host. David Turetsky alongside my co-host, best friend, partner in crime, here Salary.com, Dwight Brown. Dwight, how are you?
Dwight Brown:David Turetsky, I am doing very well. How are you?
David Turetsky:I'm okay. I'm okay, but I'm outstanding now, because we have with us a really wonderful guest. Ann Kuss. Ann, how are you?
Ann Kuss:Wonderful. Thank you for having me here.
David Turetsky:You're very welcome to have you here as well. You're coming to us from an exotic location. Where are you today?
Ann Kuss:I'm in Budapest, Hungary, which is Central Europe.
David Turetsky:Yes, love Budapest. And why don't you give our listeners a little bit about your background?
Ann Kuss:Sure, I'd love to. So my name is Ann. Nice to meet you all. I'm the CEO of Outstaff Your Team company. So we're a staffing agency, and I like to call us a boutique staffing agency, because we go deeply into our clients requests to help them build their teams. So in my role as a CEO, I work with a lot of people. And I think that's the driving force of every business, because when you have the right people for your business, they give outstanding results, you grow and achieve your goals. And another thing that I love to do is mentoring junior specialists to basically be a link to open up a window for them to the big business and opportunities that they may have. So these are my two passions, growing my team and mentoring the younger specialists.
David Turetsky:That's awesome. It's always great to have the mentor relationship with people, especially the younger folks, to watch them grow, and then to see them succeed. Hopefully they get to listen to you. Hopefully they take it in.
Ann Kuss:True that.
David Turetsky:But Ann, we ask each of our guests one fun thing that no one knows about Ann Kuss?
Ann Kuss:Oh, that's a good one. You know, for years I was a proud night owl, so I was finding my productivity peaks in late evening and night. Maybe one of the side effects, because I'm working extensively with the US folks, so maybe that's a thing. But another thing is, I was always skeptical about, you know, those articles that are raving about the morning magic, the benefits of waking up early and seizing the world. But then in 2024 I got a dog, and everything changed. So basically flipped my routine upside down, and now I'm the morning magic person, because I'm up at 5am every day we spend at least an hour outdoors with with my little French Bulldog, and it's become, I would say, my sacred time to unplug, to get the thoughts, to meditate. And I think it's a perfect way to kick start your day, to be energized. And I really recommend it to everyone.
Dwight Brown:Meditating with your Frenchie
David Turetsky:Yeah, meditating with your dog as they're pooping.
Dwight Brown:Really? Did you really just take it there? What's wrong with you?
David Turetsky:When dogs go out on their walk, what do they do?
Dwight Brown:What's wrong with you?
David Turetsky:Mumber one and number two, right?
Dwight Brown:You don't have to call it out on the show. Oh, okay, so, but I have to know. So Ann, I have a I have a bulldog. I've got an English bulldog. So are the Frenchies as sassy as people say they are?
Ann Kuss:I think, yeah, totally
Dwight Brown:Yeah. They've all got attitudes, don't they?
Ann Kuss:Yeah, I think it's a big personality in a small body.
David Turetsky:Nothing embodies that more than a pug.
Dwight Brown:Look like I'm watching men in black looking at your pug right now.
David Turetsky:He is. He is the prototypical pug for those of you who cannot see us on the video, and he's actually talking into the microphone right now
Dwight Brown:I was gonna say I hear him. Aw!
David Turetsky:On cue! Thank you very much, Ripley! So Ann, our topic for today is one near and dear to most our listeners' hearts, which is, why should companies focus on retention: the financial and psychological cost of turnover. So our first question for you is, what are the usual or the most frequent causes of turnover of specialists in the technology world?
Ann Kuss:I would probably focus on tech community, because this is what we specialize in. It would be unfair to talk about, you know, lawyers or other people out there, because on a daily basis, we talk with hundreds of developers, engineers, quality assurance guys and so on. And we came down with 10, probably up to 10, top reasons why engineers and technicians would like to see where the grass is greener on the other side. So and the top one, you'd be surprised, because usually every manager thinks it's salary or compensation package or benefits, but the top one is actually the lack of growth opportunities. And that's a big one, because if you think about it, it includes everything that happens in the workplace, from management, from culture, from challenge and so on, so, so on purpose, etc. So if we break it down to, uh, more objective points, we'll, we'll go to the management part. This is a big one, because you know that there's a saying that you come for a job but you're leaving because of a manager. So, That part is crucial for lots of engineers. If they
David Turetsky:Oh, yeah, definitely. have a solid manager who works with them side by side and mentors them, that's already a winner. But sadly, that's that's the reason why they leave another part is indeed compensation and benefits, but I would probably emphasize that it's not the numbers themselves, because nowadays, the market aligns, and the companies are pretty competitive when it comes to giving offers to candidates. I think what we're failing at is communicating clearly what this compensation package depends on so what goals of the organization it aligns with, and how this compensation progression is tied up to the company growth as well. And then we have all sorts of things that are hard to measure, like work life balance, or, as we like to call it in 2024, work life fit! yeah,
Ann Kuss:The work environment, recognition is a big one, a communication with peers, and lately, job security, if we talk about recession and all the economic trends so, so yeah, all of this would be the top 10 for specialists to leave a company.
David Turetsky:Do you think that there's a difference between gender differences in those factors? Do you think that men versus women in the technology world face the same challenges?
Ann Kuss:Well, to start off, if we're talking about tech, it's still male dominated.
David Turetsky:Sure.
Ann Kuss:So the numbers we're talking about would be mostly about men. However, we see that there's about, let's say, depending on country to country, of course, and US being a pioneer here. So there are more female engineers currently. So depending on the sector, 30 to even 40% which is cool, I think. If we talk about more, let's say conservative countries, that would be up to 10 15% nowadays. So hardly represents the statistics. However, what we know is that women are less risk driven, so they care more about job security factor and stable compensation packages, while men are most prone to risk and therefore going for challenges and things of that sort. However, again, this is based on the statistic that we have in the industry that is male oriented for now.
David Turetsky:One of the things, though, Ann, that I think we're focusing on here in the US, and you mentioned that's
Ann Kuss:Absolutely! And this is one of the things that I'm kind of a leading position, is there's a lot more focus on females in the STEM careers, and so not even just in high schools, but in middle schools and elementary schools, STEM is really a gigantic focus for all gender roles, and that emphasis hopefully will drive a lot more participation by females into those areas, not just into the technology professional areas, but also into the management. And then leadership, and we've seen many companies who have technology leaders that are female, so we're actually making some progress there! But you're absolutely right. It's still kind of behind by a gigantic stretch, and still a very male dominated system. debating with, with our clients from Europe. So sometimes they would come to us and say, Could you bring in female engineers? I'd say, we would love to! We're just not finding them yet.
Dwight Brown:You just don't have them! Right.
David Turetsky:Well, is there that same focus, though, in the in the school systems, in European countries on getting more women in STEM?
Ann Kuss:Yeah, but there's definitely a shift we see. I mean, when attending various events, we see more and more focus on STEM being brought to women and more opportunities. So I think it's just a matter of time when this is going to catch up with the US.
Dwight Brown:I think there are even pockets within STEM where you're starting to see much more of a an equalization. That's probably a little too strong, but you know, moving toward equalization, like the cybersecurity arena it it seems like in cyber you are starting to see more women coming in where, like you talked about on the engineering side and some of those other areas of STEM that it's still so heavily male dominated. Hopefully we'll start to see a little bit more of that equalization start to take place across the board, but it'll take time.
Ann Kuss:Definitely
David Turetsky:Getting back to the topic at hand, though, do you see patterns of or do you see a greater emphasis on turnover for females in the technology world? Or is it, is it really just following along with the the overall trends in turnover?
Ann Kuss:I think it follows the overall trend, though, yeah, as we we understand female are, female parting probably is a bit more honest about their intentions, so they're more prone to, let's say, sorry. That's a frenchie we were talking about.
Dwight Brown:Sassy boy! I gotta see him!
David Turetsky:We'll put a picture in the podcast notes of what the Frenchie and the pug look like.
Ann Kuss:Put it in there. Yeah. But if we're talking about female groups, so surprisingly, they're more honest about their intentions. I guess it is something to do with emotional intelligence part. So managers have less hard time to pull out again their goals and align them easier with the business. So so that would be the, let's say the thing that we noticed lately,
Announcer:Like what you hear so far? Make sure you never miss a show by clicking subscribe. This podcast is made possible by Salary.com. Now back to the show.
David Turetsky:Let's roll on to our second question, which I think kind of hits it all out of people's hearts when it comes to turnover, which is the financial and psychological impacts of turnover.
Ann Kuss:Yeah! So that's a big one, because if we're talking about turnover, typically, we all think numbers, right? For an average company, it takes about what, six months to break even on a new hire, which is a lot.
Dwight Brown:There's so much, you know, I think that really
David Turetsky:Right
Ann Kuss:So we're talking about direct costs, like the recruitment expenses, like compensation of people who onboard, train newcomers, severance packages, exit costs, etc, plus indirect costs on lost productivity, team dynamics, et gets forgotten a lot of the times. And in looking at the cetera. But if we talk about the psychological part, that's also a big factor. And one thing that I like to emphasize with our clients and potential clients, is that the knowledge retention is a big factor, because you can't really measure an effect when you have a great engineer, a senior one that had turnover aspect, we we focus on other parts. But you know, when accumulated a huge, vast amount of knowledge over the years with your company, and if they leave, you know that that goes elsewhere. So it's important to take it all into account. And for instance, if we talk about knowledge retention, there has to be a knowledge base and the strategy of knowledge retention you see, when you see your cubicle mate leaving, and then in the company, how it passes over to other specialists, and if we talk about psychological part of turnover that also takes a toll on loss of team dynamics when they're unable to meet the deadlines that you set as a business so that all impacts the your other cubicle might mate leaving, and you're having to numbers in the end. So, so in order to to hit the numbers, you need to have a solid foundation, meaning the psychological part of it too. take on their workload, and
Dwight Brown:like you say, you're starting to fall behind
David Turetsky:exactly on deadlines, or if the turnover is due to things like layoffs or firings, you know, everybody's, everybody all of a sudden gets nervous, and there's that psychological aspect. So even if people aren't leaving because of the manager, there's all of those psychological aspects of turnover are out there, but either get forgotten or swept under the rug.
Ann Kuss:Definitely
David Turetsky:To that point, Dwight, when we start thinking about even a technology organization where there are Like, like a half a year on average. deadlines. There are deliverables that have to be made. You need to, then start to add those other people's productivity into yours. And you need to start, you know, getting getting a handle on what were they doing, and how can I pick it up and deliver on it, as well as delivering on the things I was going to be delivering on, you know, you mentioned the, you know, the stress that that brings in. Having worked in a development world, I know that you know our and I was using the Agile method so our productivity, our throughput, our our speed, was reduced significantly every time someone left and even when we hired somebody, it took months, if not quarters, to get back to the productivity where we were at previously. Yeah.
Dwight Brown:Yeah, and I mean, and along with that, there ends up being a snowball effect, because everybody starts to feel like that. And it's like, forget this. I'm out of here! I'm gonna find something else. And and then it just the rock keeps tumbling down the hill, and it's, it's hard to right the ship with that.
David Turetsky:The domino effect.
Dwight Brown:Yeah, exactly.
David Turetsky:And so, and has this been quantified? Do you actually study this? You know, is there a true financial measure that you can put on the loss of productivity from that increased turnover.
Ann Kuss:Well, the loss of productivity we're yet to count, I mean, within our organization, but if we can talk about the overall costs that are more obvious today. So for instance, the replacement cost would be about 75 to 200% of employees annual compensation, which which already hits you financially.
David Turetsky:Sure
Ann Kuss:There are various costs. Like, again, depending on a company in its size, there will be different numbers, but we can say it starts with $1,400 for a small company to onboard a new employee, and grows exponentially for an enterprise company given the amount of resources they have to put into attract talent. So the numbers are really striking, but I think we're yet to get deeper into the productivity, financial part of it. So thank you for the idea, because that's probably going to be one of our next researches.
David Turetsky:Well, one of the things we used to talk about in the past is, well, if we're going to lose somebody, maybe there's a financial benefit to us, because maybe we'll be able to get somebody cheaper, and then when we replace them our financial cost, you know, will, our costs will go down. Nowadays with pay transparency, when you start listing that job. And we all know that, especially for technology jobs, the markets move so quickly, you're probably going to pay more. You mentioned that it could be 75% to 200% for replacement costs. But, you know, really, it could be higher than that now, because you're probably going to be paying probably more, at least same or not much more, because the market moved as well as pay transparency forces us to now make sure that our rates are more equalized across the groups. So I think, I think now expense is going to get higher for turnover, rather than the past, when we used to be able to replace somebody who had a significant amount of experience with somebody cheaper, you know, maybe right out of school. I don't think that's the case anymore. Well, maybe I'm wrong, but
Ann Kuss:I think you're right, because first of all, the pay transparency is there, yes, so we need to account for that. Secondly, the market definitely moves on. We have so many changes happening. I don't know, beginning of the year, the end of the year, you saw how the market. It's reacted to the elections. Right now, the Bitcoin spiked, everything. So right now, in this volatile market, we cannot, let's say, predict that that the salaries are going to be the same for the next quarter, not to say about the year. So, so all that adds up!
David Turetsky:Right
Ann Kuss:And of course, you're going to have higher cost onwards, including all the things that you put into a new hire, again, onboarding, again, you're paying the other team members to take the workload and etc. So yeah, I totally agree with you that's that's probably even higher than traditional approach to calculating the cost of replacing a new team
David Turetsky:And we all know that we always increase people's pay for that additional responsibility, right? That's a joke. We don't. I was just kidding. Yeah, for those of you who are listening and going, why did Turetsky say that? It's it's not really a joke. It's really kind of hard that when people leave, everybody has to share the load, and their compensation does not change. It really is true. It stays the same. The stress gets more as we've been talking about, the workload gets more, the pressure gets more, and we're getting paid the same, and there's that stress that takes away from that value of the job that we used to have so.
Ann Kuss:Well, I guess. And that depends on the organization, because we've met various approaches. Some companies do like to have interesting bonus policies and so on. So I would say we're not that hopeless here. Yeah! So some, some of the companies we meet actually
David Turetsky:Oh, really? understand the shift which is happening when somebody's leaving and somebody has to take that load for a while. Thankfully, there are companies like that, but, but yet, very often that that's that's minute, I would say not for a good reason. Are you talking about a stay bonus? Are you talking about a retention incentive? Are you talking about a real increase in pay?
Ann Kuss:I'm talking about bonuses to the team members who take up the load of the employee who left and for the time being, while the replacement is searched for so they take on some of the tasks of a previous employee, and therefore they get bonuses. Again, sometimes, not always, but we've seen cases like that, and we applaud that.
David Turetsky:Yeah, I do too! I've never heard that before.
Dwight Brown:It seems like a good way of doing things. I mean, granted, it increased cost, but it, you know, probably more than offsets the cost of the turnover
David Turetsky:exactly
Dwight Brown:that you're gonna get otherwise. So
David Turetsky:Hey, are you listening to this and thinking to yourself, Man, I wish I could talk to David about this. Well, you're in luck. We have a special offer for listeners of the HR Data Labs podcast, a free half hour call with me about any of the topics we cover on the podcast or whatever is on your mind, go to salary.com/hrdlconsulting to schedule your free 30 minute call today. Well, and that brings up our third question, and it's a great way of starting this question, which is, what are some other retention strategies that might help reduce turnover? And what practices can you offer our listeners that might help them with their retention issues?
Ann Kuss:That's that's a good one, and I recommend looking at retention strategy as a system that you perfect all the time. First of all, we need to understand the life cycle of an employee in the organization. So let's take a case. Let's imagine that you're a product company or working on a stable product that is scaling and needs maintenance. So if we're talking about the case, most probably you have a backbone of I don't know, a few great senior engineers that are highly motivated. They're included into decision making, etc. So they're strategic people in your organization, and most probably, you would have a good number of talented middle level engineers that would do daily operations and bring a good chunk of work done. So in that case, you need to clearly understand that both of these people would have a different life cycle in their role. And let's determine, for instance, according to US grow statistics, the middle specialist lasts about four years in a role.
David Turetsky:Wow.
Ann Kuss:So let's take that as an example in ideal setting. So let's think that a middle specialist is to last four years in the organization. Because, let's face it, we can't wait for a person to be with a company for 20 years. I mean, there are cases like that, but, you know,
David Turetsky:Very rare these days.
Ann Kuss:So if we understand that, okay, a middle level specialist is coming to us. He's going to be with us for four years, ideally. And within this time, they have their goals, and our task is to align the company goals with theirs. This way it works, and we arrange again, the system of knowledge sharing so that when the next let's say, a person comes in, they're entering this phase and continue onward. So in order to make that happen, first of all, determine your life cycle. Understand what are the touch points, the most important touch points, and this is when you put the strategy on top of your deliverables, like OKRs, KPIs, whatever your business practices.
David Turetsky:Right
Ann Kuss:So that has to be tied up to progression of a particular engineer. Let's say his goal is to grow to a senior in your organization. Cool! You can make it happen, achieving the goals together so and you can see if that particular employee goes to the next, let's say role, like a senior guy that is going to manage a lot of processes for you, or let's say he moves on something else he or she. So that's one part determining life cycle, and then determining those touch points during that life cycle. There is a point where we like to call it the cycle in a role. So somebody enters a new role, they will probably pass through four stages. First, when they have this unconscious incompetence, when they're just familiarizing with everybody, trying to figure out the processes, then oh, they realize, oh, there is so much I actually need to know to perform in this role, not because they don't know Python or PHP, but because now they understand the matrix of the organization. Then comes in the third and the best phase for the company, when they are consciously competent, they know how to achieve success in the organization, how to bring the best value. And your task is to to extend that period for as long as possible. So give them enough challenges to succeed, to
David Turetsky:Right basically be engaged into. And the next task is to understand when the last part comes, when, when they are already past the learning everything they could. So there is nothing more to do. Right. No challenges.
Ann Kuss:You need to catch that early to understand. Okay, are we moving this person to the next level, or we say goodbye at this point, because there is nothing we can do for each other. So,
David Turetsky:And let me dive into that for a second, because for those of us who've worked in the technology world, we know that boredom really does come across as decreased productivity, decreased motivation, as well as loss of engagement. And one of the things I tried to do was I tried to give, especially in the Agile world, I tried to grow their responsibility by not just coding this area, but also looking at the other areas. There's QA, there's UI, there's other pieces, there's middleware, there's other things they can go into in order to be able to move around. So does someone who does straight coding, do they want to go into the database side? Do they want to go into the QA side? Do they want to go into the product management side and ask them to look at those other areas. And if they say, No, no, no, I don't want to do any of that stuff. I want to keep coding. All right. Well, is there a different product with a different set of challenges you can take them to, can you go into the architecture side of it, which, you know, is a little different? So try and extend them, try and give them challenges to recreate that sense of sense of enthusiasm and that learning. Or to your point, before, do we just say that four years is enough? Let them go. We have all their documentation of their knowledge transfer. You know, everything they've done has unit tests on it. Everything they've done is documented. They can leave, and we don't have to worry about that loss of knowledge. We can bring in somebody else, they can pick it up and go from there. Is that, do you think those are strategies that might be useful as well?
Ann Kuss:Absolutely. And we need to understand that it can go either
David Turetsky:They're coming for me, Ann. That's that's that noise you hear
Ann Kuss:sorry
David Turetsky:The cops will be here soon!
Ann Kuss:The idea is, like you said, that's what we see with many companies. That's what we advise also to the clients that we have that it can go both ways. It can go vertically or horizontally. Because for some specialists, some are ambitious. They want to go up and, you know, explore other areas. Some are good where they are. They want a challenge, but within, let's say, their reach. So it's absolutely okay to switch them to another product. They feel very motivated, and we see that
Dwight Brown:And sometimes it can be a challenge, because I have, as a success story in many cases. So yeah, it's more about the company strategy, what the company decides if this life cycle is good for them and we move on, or we take people to new directions at either vertical or horizontal. think people get comfortable where they are, and they may not even have that realization that they've sort of topped out, and there's not they're not looking for that other, that next level thing. And so, you know, as from a manager perspective, being able to help them get unstuck and help them see and that that can be a challenge. Sometimes it's, it's not an easy thing. So you're always going to have that contingent there
Ann Kuss:Absolutely! And another challenge is, you know, if you're a small organization, if you're a startup,
Dwight Brown:yeah
Ann Kuss:you might sometimes. Okay, you have so many things burning up at the same time, so you need a Universal Soldier who's ready for that challenge, or you just don't have what else to give them, because you're just starting. So yeah, it's about again, finding the right people for your organization.
David Turetsky:Well, this has been delightful, Ann. I think what we're going to have to do is bring you back and talk a little bit more about these issues around the technology world. I can come up with a million ways I want to take this conversation forward, but to stay within the context of retention strategies, I think we've covered a lot of ground today. So thank you very much for being here.
Ann Kuss:Thank you for having me! It was a delight.
David Turetsky:Dwight, thank you.
Dwight Brown:Thank you. Appreciate you being with us today, Ann. I'm definitely looking forward to our next conversation.
David Turetsky:Thank you all for listening. Take care and stay safe.
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