Ric Payne's Blog

The number one issue facing business today is finding, hiring and retaining productive team members.  According to Terri Kabachnick in I Quit, But Forgot to Tell You 75% of the demand for new employees is to replace departed ones rather than accommodate growth in the business.  She also mentions that disengagement amongst employees is rampant with nearly two thirds saying they are disengaged and a staggering 84% of executives, managers and associates stated that they like what they do but not where they do it.

Research done by Fred Reichheld and his team at Bain & Company indicates that high profit performing companies have two characteristics in common:

1. A high percentage of repeat business from customers that’s reflected by a high Net Promoter Score
2. Low levels of team member turnover.

It is interesting that these two characteristics literally define Southwest Airlines, a company which has a very high NPS and (perhaps because) a very high degree of team member engagement and therefore retention.

In an industry where most companies struggle to make a profit in any year, Southwest has been profitable for 35 consecutive years and has produced the highest return to shareholders of any company in the S&P 500. In 2002 Money Magazine noted that $10,000 invested in 1972 to worth $10.2 million by 2002, that’s an average compound growth rate of 25.97% per year. This is remarkable and especially so for a business in such a highly competitive industry where differentiation is difficult at the best of times and where each firm’s strategy is so transparent.

Herb Kelleher, the charismatic founder and until June 2001, its President & CEO, realized very early in the game that the key to the company’s success was its ability to attract, retain, develop and motivate its team members. No other airline holds a candle to Southwest.  Many have tried to copy its operating business model but none of them have been able to emulate their people system.

On a recent flight I noticed an article in their in-flight magazine called Spirit which talked about the process they use to bring on board new hires. Southwest has experienced an employee turnover rate of less than 5% for most of its life—that’s simply unheard of in most businesses especially these days. But the people at Southwest consider even this number to be too high for a business in which people are the key to its profitability—do any other businesses you know of have a similar reliance on its people?

The article talks about their OnBoarding process for integrating new hires into the company.
They have events such as “LUV @ First Bite New Hire Luncheons” and their “Sponsor a New Hire” program that includes amongst other things their annual Duck Derby.

The key to their success to hire for attitude and train for skills and let’s not forget, they LUV to have fun and include their customers in it. But believe me they are serious about business which explains why they’re hugely profitable and have consistently led the airline industry with the lowest ratio of complaints per passengers boarded.

If you’re interested, you can view a scanned image of the article.  It would make a great catalyst for you to talk to your team and/or your clients about initiatives you could put in place to address the talent war that you’re engaged in.

And if you’d like to let your team members self-assess their own level of engagement you can download The Engagement Quiz.  This would be a great tool to get some dialog going in your firm about what needs to be done to enhance productivity through improving the level of engagement.  Kabachnick’s book is well worth reading.

Popularity: 10% [?]