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These articles by Melinda Sherwood were published in U.S. 1 Newspaper on August 11, 1999. All rights reserved.
Employee Turnover: Calculating the Costs
The notion of the "replaceable employee," the
cog in the wheel, is officially an anachronism in today’s workplace.
For years, people have been hearing rumors about the high cost of
employee turnover, and now Kepner-Tregoe, the international research
firm at 17 Research Road in Montgomery Township, has compiled a study
quantifying those costs. Relying on detailed surveys of nearly 1,300
managers and workers, and utilizing the Turnover Costing Model developed
by the Saratoga Institute, Kepner-Tregoe has calculated that replacing
a typical information systems engineer, for example, costs a company
$34,000. Make that $40,000 to replace a mid-level manager, or nearly
$103,000 for a journeyman machinist.
In a 100-plus page monograph entitled "Avoiding the Brain Drain,"
Kepner-Tregoe gives several reasons why businesses lose big when they
lose just a single employee. A new hire, according to the study led
by Peter M. Tobia, director of Kepner-Tregoe’s Business Issues
Research Group, only works at a fraction of experienced employees.
That means loss of customers, which in effect means additional sales
expenditures to win back customers. The drain on organizational memory
and worker morale can’t be measured in numbers, but it’s a very real
Kepner-Tregoe’s survey asked managers and workers in several different
industries to make realistic assessments of several workplace issues.
Kepner-Tregoe also identified 11 companies as "retention leaders,"
companies that know how to keep their best workers. Among them: Corning,
Hallmark Cards, Johnson & Johnson, Hewlett-Packard, Motorola, Steelcase,
Companies that attract and keep employees do not use financial "carrots,"
or hire roaming masseuses, either. According to the study, most people
leave a company because they don’t feel valued by the organization
or feel there is no room for advancement. Keeping your employees,
then, really comes down to basic management skills: an open dialogue
between upper management and mid management, mid-management and workers,
and investing time in your employees. Kepner Tregoe suggests companies
do the following:
should think of employees as being on a continuum — a career path
— and help them meet those goals within the organization by supporting
their performance at every point along the way. Institute uniform
standards, allocate appropriate resources, and get feedback from workers.
and employees alike demonstrate integrity and follow ethical codes
of behavior. The company should do whatever is necessary to demonstrate
that employees are important — even if that means putting their
money where their mouth is.
High performers often leave jobs because of conflict with a supervisor.
Create "alternate avenues" to circumvent an immediate supervisor,
maintain an "open door policy," and establish a proactive
employee relations department.
employee pockets — age, gender, job class, length of services,
and department — to discover where problems typically occur. Then
find a way to keep employees.
according to the study, for the whole business. You can tie rewards
to performance, but you should offer more than just stock options.
Indulge an employee’s creative urges, for example. Offer them opportunities
to learn more and escape from the daily grind. Hallmark Cards, one
of the retention leaders, offered creative retreats for its employees.
Put people needs at the top of business priorities.
Kepner-Tregoe at 609-921-2806.
— Melinda Sherwood
You have a modest home, a 401K plan, and $300,000 in
life insurance. You don’t call yourself rich, but in fact, your estate
could be worth far beyond what you expected. "It’s not uncommon
to see individuals walking around with a total estate of a million
or more," says Scott Borsack, a partner at the law firm
of Szaferman, Lakind, Blumstein, Watter & Blader PC at the Quakerbridge
Executive Center. "No one feels wealthy at that number because
some of it you can’t touch."
It is your inheritors who may see most of the money — very briefly,
perhaps. If you write a simple will, says Borsack, who specializes
in tax, trusts, and estates for the law firm, you risk losing half
of that money to taxes and court proceedings. You can learn how to
plan your estate more carefully at a free seminar on Thursday, August
12, at 7:30 p.m. at the Princeton Hyatt. Call 609-275-0214. The Hyatt
seminar will be repeated Tuesday, August 17, at 7:30 p.m. and it will
be offered Thursday, August 19, at 10:30 a.m. at the Holiday Inn,
A Brooklyn native, Borsack earned a BA in economics and political
science from Brooklyn College, Class of 1984, before receiving a law
degree from Case Western Reserve University in Cleveland in 1987,
and a masters of law and taxation from NYU School of Law in 1991.
Estate law varies, says Borsack, according to the size of the estate.
There are three general categories: individuals with estates under
$650,000, those with estates of $650,000 to $1.3 million, and those
whose estates exceed $1.3 million.
Some commonly overlooked tricks to keeping those estates intact:
allows each citizen to pass $650,000 on to another free of tax. Husbands
and wives together can pass $1.3 million free of tax. "A lot of
married couples fail to use the credit," says Borsack. "They
write a simple will that says `I chose to leave everything to my spouse,’
and their failure to use the credit could cost the children hundreds
of thousands of dollars." On a $1.3 million estate, $248,000 to
assumes there is no estate tax paid on the death benefits of a life
insurance policy," says Borsack, "but if the survivor hasn’t
consumed that balance and wants to pass it on to the next generation,
they’re only going to be able to pass on 45 cents on the dollar."
Unless the money is in a trust. "Trusts don’t die, and because
they don’t die, they don’t pay any estate taxes," says Borsack.
"On a $1 million dollar policy you can save $500,000."
tied up in accounts, such as a retirement account, in case you or
your spouse becomes sick and unable to govern financial affairs. Otherwise,
it’s a court hearing to have the sick party declared incompetent.
"But if the individual takes the time to write up a durable power
of attorney, someone could step in and access the retirement account,"
says Borsack. "The cost is incredibly modest and in comparison
to the cost for a guardianship proceeding it seems almost free."
overlook, says Borsack. "If you put a hundred people in a room
who had estates between $650,000 and $1.3 million, less than five
would know about the unified credit," says Borsack. "Congress
doesn’t go around advertising the existence of this benefit. They’re
not in the business of doing that. But we are."
— Melinda Sherwood
Shake the hands of CEOs in New Jersey’s fastest growing
technology companies at the 1999 New Jersey Technology Fast 50 on
Wednesday, August 18, at 8 a.m. at the Sheraton at Woodbridge Place.
More than 200 people are expected to attend the awards ceremony, which
recognizes the state’s 50 fastest-growing technology-based companies
based on revenue growth between 1994 and 1998. The program is sponsored
by Deloitte & Touche LLP, First Union National Bank, the Nasdaq-Amex
Market Group, New Jersey Technology Council, Regional Business Partnership,
and University Heights Science Park. For more information and reservations
contact Dillon Waltner at 973-672-0120. Cost: $35.
To be considered for the New Jersey Technology Fast 50, entrants had
to be headquartered in New Jersey, manufacture a technology-related
product, and reap revenues of at least $50,000 in 1994. The 50 fastest
growing companies have already been selected, but their rankings won’t
be announced until the ceremony. Many are from Central Jersey, including
Ariel, CommTech, Cytogen, Hexaware Technologies, i-STAT, Medarex,
MultiModal, Novasoft Information Technology, PD-LD, Sensors Unlimited,
T/MAC, and Total-Tel Communications.
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