Staff turnover can cost companies dearly. Learn about one telecommunications giant's best-of-breed staff retention approach and the many ways it's paying off for both the staff and the company.
Last year, when most companies were laying off 15 to 20 percent of their workforces and announcing hiring freezes, Qualcomm held staff reduction to under 5 percent and actually created 1,500 new jobs.
The San Diego wireless telecommunications company, which ranked eighth on Fortune’s 2001 “100 Best Companies to Work for in America,” says the key to avoiding big layoffs is tied to a strong employee-retention program. Last year, that retention effort involved revamping unneeded and duplicate job positions, with internal staff filling half of the 1,500 newly created positions.
But role revamping isn’t the only key to staving off layoffs. Employee loyalty and the company’s commitment to employee needs obviously play a strong part. Few of Qualcomm’s employees want to leave, and if they do so, it’s typically due to a life change, such as deciding to leave the workforce to raise children or begin an entrepreneurial effort. The $31 billion company’s voluntary turnover rate was 5 percent in 2000, and dropped to 3.9 percent last year. Qualcomm employs 4,767 U.S. workers.
“Qualcomm has always been a company where growth and development opportunity and challenging positions exist,” said David Reichel, director of compensation. “They have been part of the company from day one.”
Benefits package contributes to strong retention
More than any single factor, treating the workforce well has earned Qualcomm the loyalty of its employees, Reichel said. A driving factor of that loyalty, he added, is the company’s well-planned and executed package of benefits.
Among the perks are on-campus fitness centers, including weight machines, free weights, and aerobic exercise equipment. Some locations even have lap pools, tennis courts, NBA-sized basketball courts, and volleyball courts.
Then there are company-hosted events aimed at helping employees build camaraderie: an annual talent show; a “No Talent” corporate Olympics, which includes events such as a mail-cart relay; and company-sponsored philanthropic efforts, such as the company’s “Headstart for the Holidays,” a program that matches up company employees with hundreds of needy children over the holidays.
While these activities may appeal more to the younger employees who might view life at Qualcomm as an extension of their college experience, there’s also something in the benefit package for the more mature workers—flexible work hours.
One Qualcomm employee revealed that from 10 a.m. to noon every Tuesday, he leaves work for a two-hour figure-skating class. While it has nothing to do with improving the employee’s job performance, the company recognizes that such activities help employees grow personally, and Qualcomm actively encourages these types of off-the-job activities, which include scuba classes and ski-resort getaways.
Communication, staff development is crucial
Qualcomm’s employee retention efforts aren’t all focused on fun and games, however. The company has devised communication plans to keep employees apprised of company performance and business objectives.
Technology plays a critical role in communicating corporate messages to the ranks. For instance, on Qualcomm’s intranet, employees can learn about employment benefits, job openings, and the latest product initiatives. They also get a first look at the annual stockholder presentations via online video presentations given by the COO and CEO.
Qualcomm employees also appreciate the company’s commitment to employee education and the company’s responsiveness to needs. The strong two-way communication benefits Qualcomm, said Reichel.
“This is an area where we consistently get lots of great feedback from our employees.”
Although not required to do so, employees can get hands-on experience by working on cutting-edge technology or may plan formal training objectives with managers, who make sure the training plans are mapped to company business goals. Those who choose the latter spend an average of 40 hours a year on elective educational advancement, which could involve classroom time or much more informal activities, such as reading a book on a technology topic. Qualcomm pays for the employees’ hours spent on such initiatives.
“In a real basis, we’re demonstrating to the employees that we have a plan and they have a plan [for career development and training],” explained Reichel.
Salaries need to stay competitive
Competitive compensation packages—salary, bonuses, stock options, and the traditional health and retirement package—are another tool that Qualcomm says helps keep employees onboard.
Each April and October, employees receive formal performance appraisals tied to raises, bonuses, or stock-option grants. Raises are structured to stay competitive with the market—if the market shows that workers' salaries have grown six percent in the year, then employees can expect a 6 percent merit increase, according to Qualcomm. Typically, 90 percent of the company's employees receive a raise each year.
Additionally, half of the employees get a bonus every six months: Each department receives a bonus pool based on the department’s percentage of overall company payroll. Bonuses are then awarded based on a manager’s discretion, and typically range from 2 to 4 percent of annual salary for entry-level workers to as much as 15 percent for senior-level directors.
The benefit of the programs
As it’s using various approaches, Qualcomm isn’t sure at this point which retention strategy is having the strongest effect.
Reichel pointed out that each year, Qualcomm scores slightly higher on nearly every question that employees answer as part of the Fortune Top 100 program. Ninety percent of Qualcomm employees agreed in 2001, for example, that the company was fair and its management teams were effective.
Perhaps part of its employee-retention success is also because, despite the accolades Qualcomm has earned both inside and outside its doors, the company continues to seek new and better ways to boost retention and keep employees happy.
Most companies realize that high turnover rates can incur high costs, both in recruiting new employees and training them. Consider the traditional formula used to compute the direct cost of employee attrition: When a professional employee resigns, the employee’s departure will cost a company the equivalent of 18 months of that staffer’s salary. So when a $40,000 salaried network admin bids farewell, replacing that staffer will cost $60,000. Hourly workers cost about a half-year’s salary.
The cost encompasses lost productivity; recruiting new employees, whether by advertising, referral bonuses, or headhunter fees; and potential overtime by other staff members to complete the former employee’s projects.
And those are just the direct costs. The indirect costs of losing an employee, which are more difficult to calculate, also play into the equation: Increased absenteeism, time lost to health issues, and of course, mental attrition—most disgruntled workers are giving their minimum right up to the day they leave.
By Qualcomm’s example, it’s clear that strong retention programs can help keep both the direct, and indirect, costs related to staff turnover at a minimum and create a positive work environment for all involved.