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Rod SmithOver the years, I’ve been called upon to be a guest speaker on various topics at various events. In one instance, I was asked to research and share material on the topic of “How having an established and experienced employee base impacts the internal control culture within the workplace.” You can imagine, after serving in this field multiple decades, having taught classes on controls, accounting, finance, economics, business management — even fraud prevention and detection — it’s safe to assume I’ve amassed a lot of material. In this instance, I felt like it was best to simply share the data and let the audience decide themselves on the benefits of an established and experienced employee base, versus me trying to steer or influence them. I’d like to share some of that information with you, as I believe you will find it as compelling as I did.

The information that I presented was gathered from several reports, journals, books, blogs, and articles – stretching over 25+ years.

First, let’s talk about the current work climate. David Williams and Mary Scott from the Harvard Business Review conducted recent research that revealed more than 40% of workers in the workforce are planning to look for new jobs within the next year. While that number alone is alarming, what they shared next was even more so – 69% of workers confessed they were already passively looking. Along with that article, I found an interesting one, “The Real Cost of Losing an Employee” by Gabrielle Smith in a blog for PeopleKeep, a health benefit resource for organizations. Smith shared that more needed to be considered when losing an employee, such as onboarding costs, recruiting costs and errors in lesser experienced workers.  On top of that, managers would have to screen new employees for customer service issues, potential fraud and theft as well as consider the training costs, cultural impact and loss in productivity as the job was being filled.  From these articles and a few more,  I put together a slide that indicated the longer an organization can retain a good employee, the more the organization generates enhanced stability from within. The impact of retaining an employee for at least four years helped the organization with:

  • Increased moral
  • Accelerated experience and knowledge
  • Ramped up support systems
  • Increased effectiveness and efficiency – saving costs (more production, too)
  • Prevented fraud and/or theft
  • Provided a better foundation of business operations– it was stable, not only for the organization, but for customers
  • Increased reliability (especially related to reporting) and communication
  • Safeguarded assets (employees took pride and cared about the organization – they were vested)
  • Provided compliance with applicable laws & regulations (policies & procedures as well)
  • Accurately promoted and successfully worked toward the overall mission
  • Increased Customer retention (as well as developed an entirely new customer base)

The data also showed the impact of having a well-trained/qualified long-term employee base. It showed there was an immediate impact on the effectiveness of the overall internal control system – the following five components work to support the achievement of an entity’s mission, strategies, and related business objectives*:

  1. Control Environment
  2. Risk Assessment
  3. Control Activities
  4. Information & Communication
  5. Monitoring

*(You can learn more about these objectives at https://www.coso.org/Pages/default.aspx)

The research showed that having established personnel was essential in establishing the foundation for sound controls within the organization. Various models from management and human resource studies showed that having an experienced and reliable workforce inherently helped organizations provide better business-specific knowledge and awareness. For example, employees that have served in roles for longer periods demonstrate the ability to recognize if certain activities didn’t follow proper policies and procedure, therefore preventing losses or embarrassment by stopping unallowable activities before they were executed. Moreover, established employees clearly recognize when other individuals are towing the line or challenging rules or regulations in attempt to justify their rule breaking, or selfishly getting their way as opposed to supporting the organization’s greater mission. Through appropriate communication lines, established employees properly guide less experienced employees to do things “the right way”.

Another article I reviewed showed the important role long-time employees play in connecting employee goals to larger company goals. For goals to be meaningful and effective in motivating employees, they must be tied to larger organizational ambitions. Employees who don’t understand the roles they play in a company’s success are more likely to become disengaged. Achieving goals is often about making tradeoffs when things don’t go as planned. Being able to understand the bigger picture to make those tradeoffs when things go wrong is essential in an organization’s success. No matter what level the employee is at, he or she should be able to articulate exactly how their efforts feed into the broader company strategy. And the more a company invests in employees the more that returns back to the company.  Statistics say that employees that are employed longer are more engaged and know their specific purpose.

So, in the end, much of the research proved that the longer good employees are retained, the more it inherently increases controls. In order to retain those individuals, organizations had to invest in: on boarding and orientation, coaching/mentorship, work life balance, benefits, hiring the right candidate, engaging in meaningful communication, provide wellness programs, performance feedback, rewards/recognition, and training.

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