How great can the great companies to work for really be?

Every year the Sunday Times publishes the results of a survey to discover the 100 best companies to work for. I love this survey and keep the supplement for weeks comparing and contrasting the performance of the different firms.

I’m particularly interested in staff turnover and it’s fairly easy to compare each one with its sector peers. What amazes me is how poorly these, the best organisations to work for, perform.

Taking all organisations with more than 250 employees, the average turnover is 18%. I know what you’re thinking and I couldn’t quite believe it myself so I checked again. 18%.

I then looked at this figure for each of the broad industry sectors represented. Interestingly, Professional services (consulting, law, accountancy) and financial services (insurance, banking, etc) dominate, with 48 of the 120 companies I looked at. That raises interesting questions in itself, and I’ll return to it later.

The best performing sector is Not-for-Profit at 11%. This doesn’t surprise me; charities attract values driven people who are motivated by the cause they work for. More surprising were the next two sectors – construction and manufacturing both of which have average staff turnover of 14%. Now I’d have thought industries dominated by blue collar, casual, temporary and part-time employees would have higher turnover than most. Maybe there are fewer opportunities to move for these people than for those in white-collar roles?

The worst performers were recruitment and retail, both with an average of 30% turnover. I couldn’t help but smile at the recruiters. There they are, after all, supposedly trying to help the rest of industry to achieve a happy and stable workforce, and yet they lose almost a third of their own people each year.

So what does this all tell us? Perhaps not much. The question to ask must be: What is the optimum staff turnover? We need to balance the cost of recruitment and staff turnover against the benefit to an organisation of introducing new blood. The Chartered Institute of Personnel and Development reckon that it costs around £5,000 to recruit a manager or professional employee. Let’s say that the average for all workers is something like £2,000. In that case, organisations with between 250 and 5000 employees are spending, on average, a little under £300,000 a year while the larger companies are spending around £5m on their recruitment. If 10% turnover was considered optimal then companies ought to be able to almost halve these figures.

And what about the domination of financial and professional services firms in this survey? Well, it’s a largely self-selected group in that organisations are nominated, mostly by staff members, and no doubt following a quiet suggestion, or as part of HR policy. The 220 organisations that made it to the final lists were whittled down from a massive 691 that originally registered to enter! Not such a great achievement when you look at it in those terms is it?

One Response to How great can the great companies to work for really be?

  1. Andy D says:

    Nationwide would be a case in point, they come near the top of the list of best company to work for but…When you join first join you don’t get a pay rise at the end of the first year and you can’t get graded at better than good (same thing applies when you get promoted)Nice way to motivate your new employees!

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