Tag Archives: Reputation Risk

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Why Employees Quit—And How to Keep Them

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Why Employees Quit

Employee turnover creates tremendous risk—resources are lost in recruitment and training, productivity lags with insufficient staffing, intellectual property can be exposed, and no company wants to get a reputation as a place where no one can stay very long. Further, the implications for workers comp, lawsuits and insurance extended to employees can cause headaches long after a desk has been cleared out.

A few recent studies highlight some of the biggest factors contributing to employee turnover resultant human resources risk, and what managers can do to keep staff and avoid risk.

Why Employees Leave

A new “exit survey” conducted by LinkedIn among members from five countries found that top reason workers left their jobs was because they wanted greater opportunities for advancement. In a related study from the social network, the number one reason employees who were not actively seeking a new job would be willing to leave was for better compensation or benefits. Regular performance reviews and assessments that open up opportunity for advancement in both responsibilities and salary can help keep employees engaged—and prevent feeling they have to stray to stay on top.

Room to Improve

Another recent study from LinkedIn found that 69% of human resources managers thought that employees were well aware of internal advancement programs. Yet only 25% of departing employees said they knew about these opportunities. In fact, of those who stayed within the company and found a new position internally, two thirds found out about the opportunity through informal interaction with coworkers. Strengthening formal retention and advancement programs and improving awareness of these initiatives may go a long way toward getting employees to use them.

Why New Hires Quit

One in six employees quits a new job within six months — and 15% either make plans to do so or quit outright within that time frame, according to Time. HR software company BambooHR found that the primary factor was “onboarding problems”—in other words, HR or managers are failing to properly orient new hires and integrate them into the workplace. This may seem silly, but they could have reason to feel this is a fatal flaw: research from John Kammeyer-Mueller, associate professor at the University of Minnesota’s Carlson School of Management, found that there is only a 90-day window for settling in. If your new employee is not caught up to speed by then, you may see them walk out the door.

Getting Employees to Stay

CareerBuilder surveyed thousands of workers recently to gain insight into why they decide to stay or go. Of those who plan to stay at their jobs, the top reasons they did not want to leave included: liking the people they work with (54%), having a good work/life balance (50%), being satisfied with the benefits package (49%), and feeling happy with their salary (43%). Of those who are unhappy, however, 58% said they plan to leave in the next year. Making sure these bases are covered is a strong step to keeping your top talent at their desks.

Check out the infographic below for more of LinkedIn’s insights into why employees leave, and what you lose when they go:

CVS Announces Plan to Stop Selling Cigarettes

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CVS to Stop Selling Cigarettes

On Feb. 5, CVS Caremark Chief Executive Larry Merlo said, “We’ve come to the decision that cigarettes have no place in an environment where healthcare is being delivered.” The company, he announced, will remove all cigarette and tobacco products from its 7,600 pharmacies nationwide by Oct. 1. The move is expensive, with up to billion in projected lost sales.

But CVS is betting on the long-run gains from doubling down on brand reputation and helping customers to live—and shop—far longer.

President Barack Obama personally took the time out to praise CVS, saying in a statement that the move will help wider efforts to “reduce tobacco-related deaths, cancer, and heart disease, as well as bring down healthcare costs.”

“CVS is now one of a small group of companies that have realized that their reputation is the most valuable asset they have and that building a stronger reputation by avoiding risks to that reputation can create a significant competitive advantage,” said Paul Argenti, professor of corporate communications at Dartmouth’s Tuck School of Business, in a column for the Harvard Business Review. “From the White House to the American Lung Association, CVS has received kudos for what seems to be a focus on shared value with society rather than the reckless pursuit of revenue at any cost.”

While CVS stock initially dropped the day of the announcement, shares have since risen 2.3%, success further bolstered when the country’s largest drugstore chain reported 2013 revenue of $126.8 billion—up 3% on healthy growth for drug plans and in-store pharmacies offset by weak growth in front-of-store sales.

“Its profit comes increasingly from health plans, which aren’t keen on carcinogens,” Jack Hough wrote in Barron’s. “Consider: CVS’ tobacco decision is expected to subtract six to nine cents from its yearly earnings per share. But a prescription deal with the Federal Employee Health Program, which expires at year’s end, is worth 16 cents to 21 cents a share, estimates investment bank Mizuho Securities. For CVS, a good chance at renewal just became better, and there’s plenty more business to be won.”

In Forbes’ CMO Shift blog, brand consultant Scott Davis wrote:

The $2 billion decision to boldly dump tobacco sends CVS’ boldest signal of commitment to the brand and to where it sees its future growth; it’s an unprecedented move and one that is wickedly smart. CVS is putting its money where its brand is, betting that this first mover advantage will pay off. I say “first mover” because no one truly owns health and wellness. Sixteen thousand health and wellness apps were downloaded last year.

Over $1.4 billion was spent by people trying to learn more about the topic. The overall category is heading to $1 trillion in the next 3-5 years and the timing is right for someone to step in and lead the dialog and become the Amazon of health and wellness. Why not CVS?

Indeed, CVS has spent considerable time and money extending the legacy of pharmacists as community health experts by adding over 800 MinuteClinic walk-in facilities. In doing so, the company has become the largest U.S. pharmacy healthcare provider.

The chain’s competitors are also branching into anti-smoking efforts as they expand their role in the wellness market. Walgreens recently unveiled a partnership with GlaxoSmithKline Consumer Healthcare to launch a free, Internet-based smoking cessation program called Sponsorship to Quit.

Overall U.S. cigarette sales fell 31.3% from 2003 to 2013, according to Euromonitor International. Many health officials hope that the move will help continue to decrease the number of smokers and smoking-related deaths in the U.S. “I think CVS recognized that it was just paradoxical to be both a seller of deadly products and a healthcare provider,” U.S. Centers for Disease Control and Prevention Director Thomas Frieden told Reuters.

Working to build and maintain a strong reputation also boosts the bottom line. Studies from Argenti and a range of other researchers suggest that companies with a strong reputation enjoy price advantages, being able to negotiate lower prices with suppliers and higher charges to customers. They can also recruit better employees, have more stable revenues and, “when something bad happens, they are given the benefit of the doubt by their stakeholders.” Further, “highly reputed companies are more stable, which means they have higher market valuation and stock price over the long term and greater loyalty of their investors, which leads to less volatility,” according to Argenti.

Convenience stores account for 75% of cigarette sales nationwide, so the tobacco industry has yet to express concern about prospective losses from drugstore sales. But Dr. Richard Wender of the American Cancer Society said CVS’s move would have an effect. “Every time we make it more difficult to purchase a pack of cigarettes, someone quits,” he told Reuters. So far, CVS is betting on that for patients’ health, and its own.

Does Reputation Really Impact the Bottom Line?

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Last month, the American Customer Satisfaction Index released its latest figures for 190 major brands across all industries. The finance and insurance industries got some good news: satisfaction increased across the sector in 2013. But a careful look at some of the “worst” companies in the survey reveals a trend that may call into question some traditional wisdom on one key risk: reputation.

As Eric Chemi points out in Bloomberg Businessweek, a comparison between these satisfaction scores and 2013 stock returns – factoring in only publicly-traded companies with at least a full year of trading data – shows that customer service scores have no relevance to stock market returns. In fact, when Chemi added a regression line, he found that stock returns actually decreased as satisfaction scores went up.

Customer Satisfaction vs. Stock Returns

The slope is minimal, so there is no statistical relationship between the variables, but the trend itself is curious. Clearly, other factors account for the market success of a publicly traded company, and reputation may impact a company’s bottom line off the NYSE floor. This chart does illustrate, however, that good guys do tend to finish last in even the broadest groupings.

2013 Performance

So, if reputation doesn’t necessarily impact one major metric of a company’s success, is there a secondary market for being liked? Does reputation make or break other metrics, like net profits or market share? Given that many other studies seem to suggest that reputation does have a negative effect on stock prices, there is likely more at work here.

Pixar Rides the Waves of SeaWorld Backlash

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SeaWorld ExhibitA small documentary released this summer has created a reputational riptide for SeaWorld. Blackfish, directed by Gabriela Cowperthwaite, combines park footage and interviews with trainers and scientists to explore the impact of keeping killer whales for entertainment – and, ultimately, examines the possible factors that led one such whale to kill three people in captivity. The film has outraged animal rights activists and casual audience members alike with footage of brutal whale-on-human attacks at the parks and haunting tales of a natural order torn apart to keep 12,000-pound animals in captivity. SeaWorld’s attempts to head off criticism by emailing an itemized rebuttal to critics has drawn widespread publicity, but many have interpreted the move as defensive and further damning.

This week, it became clear that Pixar has taken note of the movie – and the backlash. The animation studio decided to rewrite part of the upcoming sequel to Finding Nemo that referenced a SeaWorld-like facility.

The plot is reportedly still in flux for Finding Dory, currently scheduled for release in November 2015. Ellen DeGeneres is set to star as Dory, an amnesiac blue fish who cannot remember who raised her, according to the L.A. Times. Initial plans for the movie saw characters ending up in a marine park for fish and mammals. But now, the aquatic center will be differentiated from SeaWorld by giving the animals the option to leave.

With theatrical release over two years away, Pixar could probably do nothing and still avoid the cloud of negative press hovering over SeaWorld as a result of Blackfish. Cowperthwaite confirmed that she screened Blackfish on the Pixar grounds and told the L.A. Times that employees appeared deeply “impacted” by the documentary, but she would not comment on any connection between her film and Finding Dory. The change may be an emotional response – having seen Blackfish opening weekend, I can personally attest that it’s a moving documentary that made me develop a real interest in orcas and the conditions for both animals and trainers at SeaWorld.

But Pixar’s move is also a clear attempt at mitigating reputational risk.

By getting in the plot change now, the company turns the tide on conversation about using aquatic animals for entertainment and preempts any ties between their blockbuster-to-be and the current controversy over cruelty. Further, adjusting the plot demonstrates an engagement with their subject matter and concern for their audience. From a studio known for their silence on any projects in the works, this very public adaptive response is a definitive publicity win – and a great example of proactive risk management.

SeaWorld Entertainment Inc. reported earnings of $77.4 million in 2012, and total revenue rose 7% from 2011 to over .

4 billion, according to the Orlando Sentinel, and the company launched an IPO in April 2013 with a valuation of $2.5 billion. Attendance also grew last year, as more than 24 million people visited one of the chain’s 10 parks. It’s a big fish to hunt. But after grossing just over $1 million in limited release over the last month, Blackfish has managed to become a harpoon in the company’s side.

CNN recently picked up Blackfish and will air the documentary in October, so we can only assume there will be further uproar this fall.