Reworking the phrase 'the best way to make more money is to stop losing it', the easiest way to ensure we have a good team working for us is to stop losing them. In the UK we have a shrinking working population, a growing skills shortage and a tendency on the part of many employers to assume they will always be able to fill vacancies. Competition for the above average or 'best' employees is likely to become increasingly fierce.

The Chartered Institute of Personnel and Development's (CIPD) 'Annual Labour Turnover Survey' discloses that over 50% of all recruits leave within 2 years and 75% leave within 6 years of joining.' The Hay Group's research in 'The Retention Dilemma' indicates that:

  • employee turnover has increased by 25% since 1996;

  • the main causes of voluntary termination of employment are a lack of leadership and a lack of a career path; and

  • the cost of labour turnover can equate to 40% of an employer's annual profit.

    Many personnel practitioners conclude that 50% of employees are capable of operating at one level higher than they do operate at. Whilst a proportion will not wish to move higher or take on more responsibility, this can only lead to wasted effort and an increased labour turnover.

    With a shrinking workforce, labour retention can be said to be one of the major challenges for employers in the 21st Century. The secret of retention may lie in the greater and widespread creation of teams by those in charge acting more like leaders than managers. In the past, insufficient attention may have been paid to providing leadership to companies and their employees who increasingly demand greater involvement in the planning and conducting of the Organisation, and greater consultation regarding decisions etc.

    To be effective as leaders, directors and managers need certain skills in dealing with those who report to them, and without whom they cannot achieve any of their aims or the aims of their Organisation. Would-be leaders should:

  • listen actively;

  • encourage;

  • advise;

  • delegate; and

  • support.

    Taking the initials of these five requirements, an effective director/manager creates, and LEADS a team. 'Leading' implies a far more dynamic and people-orientated role than 'managing'. Such a role is more widely sought by those who wish to be led rather than managed and it is interesting that the Hampel Committee, in its report on improving Corporate Governance, does not mention management in its definition of what creates prosperity.

    Thus: 'People, teamwork, leadership, enterprise, experience and skills are what really produce prosperity. An effective Board [of directors] should lead and control the company'.

    More simply as successful entrepreneur Julian Richer states in 'The Richer Way', 'the way to succeed in business is to develop your staff'. This may mean a rethinking of priorities, particularly on the part of directors for companies used to the requirements of Company Law which requires them to put their shareholders first. But as the UK's most successful entrepreneur, Sir Richard Branson (voted the 'leaders' leader' in a June 2004 poll) states:

    'For us our employees matter most. It seems common sense to me that if you start off with a happy well-motivated workforce, you're far more likely to have happy customers. And in due course the resulting profits will make shareholders happy.'