Strategies for Cutting Turnover
Print Issue: May 2006
DURING THE INITIAL STAGES of its involvement in World War II, the United States faced the daunting challenge of placing millions of former civilians into military positions that fit their abilities and temperament. The U.S. Army turned to industrial/organizational psychologists (IOPs), who developed a system for measuring a person’s skills and matching them to the right job. It was so effective that it remains the basis of the system in use today.
Security managers and contract guard service companies can benefit from this accumulated wealth of industrial/organizational knowledge to more accurately match job candidates to assignments that suit their interests and abilities. In so doing, they may be able to make headway against one of the industry's biggest problems: security officer turnover.
The national annual turnover rate for security guards is estimated to be between 100 and 300 percent, according to the Service Employees International Union, the nation’s largest private security officers union. That means that most guards leave a job within a year, and sometimes within four months.
To put that in perspective, a medium-sized security firm with enough work to employ 1,000 guards, but which suffers from a turnover rate of 150 percent, must employ about 2,500 people over the course of the year to meet its annual workload. Likewise, the same firm ends up employing guards with an average tenure of about five months—hardly enough time to develop expertise at their post before they leave and are replaced.
The consequences of this revolving door of guard personnel are numerous. For one, sending a constant parade of different guards to a customer can cause service problems or significant unease that may trigger the cancellation of, or failure to renew, the contract.
Another problem is low morale, a corollary of high turnover. Not only does morale affect performance, but professional studies have found that one of the most important security threats for organizations is disgruntled current and former employees. The more turnover a company has, the more potentially unhappy current and former staffers it has. And these malcontent security guards—who likely have keys, pass codes, and knowledge granting them access to critical areas within the client firms their employer has been hired to protect—represent a serious security vulnerability.
Then there is the direct cost to the company of continually having to replenish its work force. The U.S. Department of Labor estimates that the cost of turnover is 25 to 33 percent of the annual salary of each employee who quits, while global outsourcing and consulting firm Hewitt Associates puts the number at 150 percent.
Assuming that guards are paid $9 per hour, their yearly salary (excluding benefits) would equal roughly $18,000. Using the conservative Department of Labor cost-of-turnover estimate, it would cost a firm approximately $6,000 to replace each departing officer. A firm with 1,000 officers and 150 percent turnover would have to hire 1,500 replacement guards over the course of the year. That would cost the security guard company approximately $9 million per year—a direct hit to the bottom line.
Any firm that can keep turnover at a moderate level will have a sizeable competitive advantage over others in the industry. So what can be done?
As a consultant I have worked with a number of organizations in service-dependent industries. Many of these companies, such as retail and restaurant franchises, have many thousands of front-line employees who directly interact with customers. The difficulties these firms face in retaining their employees are very similar to the challenges inherent in keeping security officers, yet they have more favorable retention statistics.
For example, according to Nation’s Restaurant News, McDonald’s Corporation had turnover of “crew members” (cooks, drivethru operators, etc.) of between 90 and 100 percent in 2004. That was down more than one-third from a few years previous, when turnover was more than 150 percent. Security managers can expect similar results if they focus on the problem and find ways to address it.
Get help. The first step may be to acknowledge the need for outside expertise in developing a program for reducing turnover. As Peter Block notes in his book Flawless Consulting, the most successful problem-solving teams are collaborations between insiders who know the company intimately and consultants who specialize in strategies to help the company attain its goals.
One potential source of expert advice is the local university, which may have an industrial/organizational psychology program or, if not, an organizational behavior/management department. If there is no one there who is able to deal directly with the problem, they may know someone who can.
The strategies to reduce turnover will generally be divided into two categories: preemployment and postemployment.
Preemployment. Preemployment turnover reduction strategies are aimed at preemptively eliminating candidates who are at high risk of not lasting long on the job. This type of screening can come in two forms. First, hiring agencies can unveil a realistic preview of the available position that causes all but the most dedicated candidates to remove themselves from consideration. Second, agencies can actively weed out candidates using selection measures such as personality testing and biographical data.
Realistic job previews. It is becoming more and more common for IOPs and human resource professionals to recognize that job interviews are a two-way street. In other words, while the hiring organization is assessing the candidates, the candidates are assessing the hiring organization and the job. One sign of this shift in understanding is the development of the Realistic Job Preview (RJP).
An RJP is simply an attempt to provide accurate information, pro or con, about a particular job to all job applicants. This includes not only what the duties of the job are (such as walking a patrol or checking ID badges) but also what the job is like (tedious, tiring, or action-packed) and what the working conditions may be (nocturnal, outdoors, or exposed to heat or cold).
Professional studies covering RJPs have shown that, when done correctly, they can go a long way toward combating turnover. Why this is the case is not well understood. Some organizational scientists believe that information gained by applicants during an RJP allows them to decide if the job is right for them. Workers who think they won't like it generally don't pursue the process.
Others proffer more complex explanations for the effectiveness of RJPs. Some believe that turnover, much like politics or the stock market, is an expectations game. These theorists believe that RJPs lower the expectations that individuals have when they accept a job, which makes it easier for the organization to meet those hoped-for standards, thus avoiding employee disappointment and discouragement.
Anyone who does take the job has a clear understanding of what it will entail and is, therefore, less likely to be surprised by aspects of the job that might have otherwise caused that person to quit. Still others believe that RJPs convince individuals that an organization is being honest with them and has their best interests in mind, and that approach makes them feel more committed.
In 2004, ADT Security Services faced a turnover problem among its sales force. ADT turned to the consulting company Aon to help it tackle the dilemma. According to a case study presented on Aon’s Web site, a comprehensive recruiting and retention strategy was incorporated, including the use of an RJP. Detailed statistics regarding the results of the program are not publicly available as yet, but the initial outcome appears to be positive. The RJP is causing candidates who are a poor match for the job to remove themselves from the hiring process.
Personality testing. Personality testing has long been used in the public safety and law enforcement fields. For example, police officer candidates are routinely given personality tests. This practice has begun to find its way into the private security industry.
The hiring organization using such a test is most interested in the presence of clinical psychological problems that would make a guard or officer unfit for duty. To make this assessment, candidates are often given the Minnesota Multiphasic Personality Inventory-2 (MMPI-2) or other similar tests. (Companies giving tests must, of course, make sure that they conform to all applicable state and federal laws about hiring, such as the Americans with Disabilities Act, which addresses when medical tests can be given, among other issues. Companies should consult legal experts before beginning any new testing program.)
While these tests are very good at identifying individuals with abnormal personalities, they are not intended to identify candidates prone to turnover. On the other side of the spectrum, certain personality tests such as the Myers-Briggs Type Indicator (MBTI) and other “typology” exams may be appropriate for self-discovery, but they have not been recommended by professionals for selection purposes due to a number of technical problems.
Another category of tests is designed to help companies assess personality types. Many of these are based on theories called Five Factor Personality Models (or the Big Five). The Big Five theories divide all personality traits into the following categories: 1) conscientiousness; 2) openness to experience; 3) extroversion; 4) agreeableness; and 5) emotional stability (a.k.a. neuroticism).
Many of these personality traits have been found to correlate with turnover. For example, studies have shown that emotional stability has a correlation with turnover between 0.25 and 0.35. This means that by using a measure of emotional stability to screen out applicants prone to turnover, it may be possible for organizations to reduce their turnover by about nine percent.
Although this doesn’t sound like a huge reduction, if we refer back to our fictitious 1,000-guard firm, a reduction in turnover of nine percent amounts to a dollar savings of $810,000 per year.
A bonus in using the Big Five model is its brevity: Each category usually features fewer than 50 questions, compared to the hundreds of items on the MMPI. Administration and recruitment are subsequently less expensive. In addition, the MMPI requires a trained psychologist to interpret the results for each individual test. The interpretation of results for the Big Five is usually more straightforward. A psychologist may be required to set up the initial system, but afterward knowledgeable human resource professionals can operate it smoothly.
Biographical data. The use of biographical data (called bio-data), such as past work experience and education, to determine a candidate’s suitability for the job is common. Applications and résumés are good examples. However, most organizations fail to use bio-data to its fullest extent. Many organizations simply use applications to get a feel for someone’s experience or as a means to contact past employers or references.
With a more refined approach, it is possible to develop a somewhat basic calculation that puts value on certain aspects of applicant histories. By plugging each applicant’s information into this equation, it is possible to predict with some accuracy which candidates are most at risk of turnover.
Postemployment strategies. Postemployment turnover-reduction strategies are those used to encourage employees to stay once they have come on board. While more reactive than prehire strategies, these strategies can be effective when implemented thoughtfully and applied consistently. Among the strategies that fall into this category are organizational socialization, supervisor training, and higher pay.
Organizational socialization. Fostering commitment to an organization is a powerful way to counter high turnover rates and sundry other counterproductive work behaviors. There are several ways to foster commitment to an organization, but one of the most straightforward is to make sure that all employees first go through complete organizational socialization training, or orientation.
This type of intervention teaches new employees what they need to know to function appropriately as a member of the staff. This differs from teaching them job skills; the focus is on organizational and people skills. These include the organization’s mission, the proper work attitude, and more mundane details, such as the date on which payday falls.
Starting a new job is always stressful, and a good orientation program can help to reduce that stress and help the employee to become acclimated more quickly. Ushered in with such red carpet treatment, newcomers get a sense that the company is committed to easing them comfortably into their new surroundings. A well-designed orientation program may also help newcomers fend off any curmudgeon workmates with bad attitudes and poor work habits.
Supervisor training. A large-scale study conducted by the Gallup Organization, and discussed at length in the book First, Break All the Rules by Marcus Buckingham and Curt Coffman, found that the top reason employees quit their job was not low pay, lack of benefits, or the work itself, but rather conflicts with their supervisors. Many individuals form opinions of their organization based on their interaction with their immediate supervisors. To them, that front-line management is the organization. Thus, bad relationships between supervisors and subordinates mean high turnover.
To combat this problem, it is vital to invest in the development of good management. I have worked with a number of organizations on developing training for managers and supervisors. These courses stress interpersonal skills, communication, and motivational skills, all key elements in fostering a benign atmosphere and a loyal and higher-performing group of front-line employees. But all the teachings are worthless unless managers and supervisors understand why the training is important and apply it to their jobs.
Higher pay. Despite the fact that pay is not the main reason that individuals leave their jobs, it can still have a major impact on turnover. Certainly the nature of the security business dictates that competitive bidding leaves little room for paying guards extravagantly. However, as already explained, turnover is a cost that comes right out of the bottom line. If an organization can bring its turnover under some degree of control, it can direct those savings toward slightly above-market salaries and benefits. Doing so may further reduce turnover, yielding yet more savings that can boost profits.
Using some of that money to raise wages gives the organization a competitive advantage over those paying less. The firm then attracts more and better applicants who will be more inclined to stay, which allows the firm to be even more selective about whom to hire, thus reducing turnover even more. And that more stable, more satisfied, more experienced staff is likely to result in happier customers, increasing the company's reputation for good service and likely resulting in new business.
Another, though more controversial, way to raise wages and reduce turnover is through uniform labor standards. Service Employees International Union spokesman Andrew McDonald says his organization’s security guards posted at commercial office buildings in downtown Chicago have a turnover rate of only 25 percent thanks to uniform labor standards that grant employees higher salaries, family health insurance, and paid vacations. “The rule in the industry is that people are transferred all the time, they don’t have much control over their schedules, they aren’t treated well on the job,” McDonald says.
“By creating uniform labor standards, you allow companies to stop competing over who can do the job most cheaply, and start competing over quality of service.” A particularly satisfied customer—and one of the largest —is the Chicago Building Owners and Managers Association, which has pointed to improved service and reliability, McDonald says.
Incentives. But wages are not the only factor, as noted earlier. There are also other ways to reward staff loyalty. A number of organizations for whom I have consulted, as well as others I am aware of, use reward programs to promote retention.
The timing of the rewards can be keyed to the company’s specific needs to most effectively ensure results. For instance, after scrutinizing its turnover data, perhaps a firm discovers that it is losing employees during their first few months on the job. But perhaps the firm also finds that if it manages to retain its people for six months, the likelihood that they will stay on for at least a year rises dramatically. In such a situation, the firm could offer incentives in the form of gifts or bonuses to encourage employees to remain for the initial six months, heightening their probability of completing a full year. The monetary cost of the incentives is outweighed by the resulting reduction in turnover. Of course, the company should also examine why it loses people during that initial time frame.
In that vein, to deal with turnover a firm must know both its cause and when it tends to occur. Examination of turnover patterns, coupled with the findings of exit interviews, can allow a firm to determine its best intervention strategy.
Despite the seemingly unconquerable high rate of departures in the security field, forward-thinking managers can enhance retention by using the strategies discussed here. Organizations that take the time to understand and reduce turnover will be the ones to survive and thrive.
Edward Bitzer, M.A., is a staff researcher at Los Alamos National Laboratory, where he works on organizational security issues. He has provided consulting for a number of Fortune 500 companies, large government agencies, and police forces regarding turnover and related issues.
The views expressed in this article are those of the author and should not be ascribed to Los Alamos National Laboratory, or the U.S. Department of Energy.