Ann Kuss - Minimizing Turnover's Financial and Psychological Costs
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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 Teretsky and Dwight Brown. Hello and welcome to the HR Data Labs podcast. I'm your host, David Teretsky, alongside my co-host, best friend, partner in crime, here at Salary.com, Dwight Brown.

Dwight, how are you? David Teresky. I am doing very well. How are you? I'm okay. I'm okay, but I'm outstanding now because we have with us a really wonderful guest, Anne Koss. Anne, how are you? Wonderful. Thank you for having me here.

We're very welcome to have you here as well. You're coming to us from an exotic location. Where are you today? I'm in Budapest, Hungary, which is Central Europe. Yes, love Budapest. Anne, why don't you give our listeners a little bit about your background? Sure, I'd love to. So my name is Anne. Nice to meet you all. I'm the CEO of Staff 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. 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 and

Hopefully they get to listen to you. Hopefully they take it in. True that. But Anne, we ask each of our guests one fun thing that no one knows about Anne 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 hours.

Maybe one of the side defects because I'm working extensively with the US Hulk. So maybe that's a thing. But another thing is I was always skeptical about, you know, those articles that are reading about the morning magic, the benefits of waking up early and soothing 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 5 a.m. every day. We spend at least an hour outdoors 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 kickstart your day, to be energized. And I really recommend it to everyone.

Meditating with your Frenchie. Meditating with your dog as they're pooping. Really? Did you really just take it there? I did. What's wrong with you? When dogs go out on their walk, what do they do? What's wrong with you? Number one and number two. Right? You don't have to call it out on the show. Yeah.

Oh, okay. So, but I have to know. So, Anne, I have a bulldog. I've got an English bulldog. So are the Frenchies as sassy as people say they are? I think, yeah, totally. Yeah. They've all got attitudes, don't they? Yeah, I think it's a big personality in a small body. Most definitely. Nothing in the body is not more than a pug. Yeah.

Looked like I'm watching Men in Black looking at your pug right now. 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. I was going to say, I hear him. Has it on cue. Thank you very much, Ripley.

So, Anne, our topic for today is one near and dear to most of our listeners' heart, which is why should companies focus on retention, the financial and psychological cost of turnover? So our first question for you is, what are usual or the most frequent causes of turnover of specialists in the technology world?

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, 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 employees.

culture from challenge and so on, purpose, etc. So if we break it down to more objective concepts,

we'll go to the management part. This is a big one because, you know, there's a saying that you come for a job, but you're leaving because of a manager. Oh, yeah, definitely. That part is crucial for lots of engineers. If they have a solid manager who works with them side by side and mentors them, that's already a winner. But sadly, 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 recall it in 2024, work-life fit, right?

Work environment. Recognition is a big one. Communication with peers. And lately, job security. If we talk about recession and all the

So, yeah, all of this would be the top 10 for specialists to leave the company. 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? Well, to start off, if we're talking about tech, it's still male dominated. Sure.

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. One of the things though, Anne, that I think we're focusing on here in the US, and you mentioned that's kind of a leading position, is there's a lot more focus on females in STEM careers. And so not

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 areas.

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. Absolutely. And this is one of the things that I'm debating 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 anyone yet. Right.

Well, is there that same focus, though, in the school systems in European countries on getting more women in STEM? Yeah, but there's definitely a shift. We see, I mean, when attending various events, we see more and more focus on STEM education.

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 U.S. I think there are even pockets within STEM where you're starting to see much more of an equalization

That's probably a little too strong, but, you know, moving toward equalization, like the cybersecurity arena, 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, it's still so heavily male-dominated.

And hopefully we'll start to see a little bit more of that equalization start to take place across the board. But, you know, it'll take time. Definitely. 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 really just following along with the overall trends in turnover? Yeah.

I think it follows the overall trend. Though, yeah, as we understand, female part 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. We'll put a picture in the podcast notes of what the Frenchie and the pug look like. Put it in there. Yeah, but if we're talking about the female group, so surprisingly, they're more honest about their intentions. I guess it is something to do with emotional intelligence part.

Some managers have less hard time to pull out, again, their goals and align them easier with the business. So that would be the thing that we notice lately. 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.

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. Yeah, so that's a big one because if we're talking about turnover, typically we all take numbers, right? For an average company, it takes about, what, six months to break even on your hire, which is a lot. Right. So...

We're talking about direct costs like the recruitment expenses, like compensation of people who are on board, train newcomers, severance packages, exit costs, etc. Plus indirect costs on loss productivity, etc.

team dynamics, et 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 accumulated a huge, vast amount of knowledge over the years with your company. And if they leave, you know, 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 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 knowledge.

Loss of team dynamics when they're unable to meet the deadlines that you set as a business. So that all impacts the numbers in the end. So in order to hit the numbers, you need to have a solid foundation, meaning the psychological part of it too.

There's so much, you know, I think that really gets forgotten a lot of the times in looking at the turnover aspect. We focus on other parts, but, you know, when you see your cubicle mate leaving and then your other cubicle mate leaving,

And you're having to take on their workload. And exactly like you say, you're starting to fall behind 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, right.

There's all of those psychological aspects of turnover are out there, but either get forgotten or swept under the rug. Definitely. To that point, Dwight, when we start thinking about even a technology organization where there are deadlines, there are deliverables that have to be made, you need to then start thinking

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. I, I having worked in a development world, I know that

And I was using the agile method. So our productivity, our throughput, 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. Like half a year on average for you to get back to it.

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 going to find something else. And then it's just the rock keeps tumbling down the hill. And it's hard to right the ship with that. The domino effect. Yeah, exactly. And so, and has this been quantified? Do you actually study this?

Is there a true financial measure that you can put on the loss of productivity from that increased turnover? Well, the loss of productivity were 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 already hits you financially. There are various costs. Again, depending on a company and its size, there will be different numbers, but we can say it's

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 in to 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.

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 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 the 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, yeah.

I think now expense is going to get higher for turnover rather than in 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... I think you're right because, first of all, the 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 reacted to the elections right now, the Bitcoin spike, everything. So right now in this volatile market,

We cannot, let's say, predict that the salaries are going to be the same for the next quarter, not to say about the year. So all that adds up. And of course, you're going to have higher costs onwards, including all the things that you put into a new hire again.

Again, you're paying the other team members to take the workload, etc. So yeah, I totally agree with you. That's probably even higher than traditional approach to calculating the cost of replacing an employee. 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 Tretzky say that? 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. Well, I guess 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. Oh, really? Yeah. Oh, wow. That's great. That's good. So some of the companies we meet actually understand the shift which is happening when somebody's leaving and somebody has to take that load for a while. And

Thankfully, there are companies like that. But yet, very often, that's omitted, I would say, not for good reason. Are you talking about a stay bonus? Are you talking about a retention incentive? Or are you talking about a real increase in pay?

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. Yeah, I do too. I've never heard that before. 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. Exactly. That you're going to get otherwise. 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 forward slash HRDL consulting to schedule your free 30 minute call today.

Well, 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? 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 your organization. So let's take a case. Let's imagine that you're a product company 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 are included into decision-making, et cetera. 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 U.S. Bureau of Statistics, the middle specialist lasts about four years in a role. So let's take that as an example in an ideal setting. So let's think that a middle specialist is to last four years in your 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, these days. So if we understand that, okay, the 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. Um,

And we arrange, again, the system of knowledge sharing so that when the next, let's say, 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, KPS, whatever your business practices. 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. 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 to 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 your organization better.

Then comes 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 extend that period for as long as possible. So give them enough challenges to succeed, to basically be engaged into, and the next task is to understand when the

The last part comes when they are already past learning everything they could. So there is nothing more to do. No challenges. 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. 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, 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, 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 to,

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?

Absolutely. And, um, we need to, uh, understand that it can go. They're coming for me. And that's, that's that noise you hear. Sorry. Um,

No, I'm kidding. The cops will be here soon. Where's the punk? We have to hide. 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. It can go both ways. It can go vertically or horizontally because for some sponsors,

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 and they feel very motivated. And we see that as a success story in many cases. So yeah, it's more about the company strategy, what the company decides. If you

This life cycle is good for them, and we move on, or we take people to new directions at either vertical or horizontal. And sometimes it can be a challenge because I think people get comfortable where they are, and they may not even have that realization that they've sort of talked 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. Absolutely. And another challenge is, you know, if you're a small organization, if you're a startup. Yeah. 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. Well, this has been delightful, Anne. 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. Thank you for having me. It was a delight. Dwight, thank you. Thank you. Appreciate you being with us today. And I'm definitely looking forward to our next conversation. Thank you all for listening. Take care and stay safe.

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