In some industries, a high rate of turnover at the entry-level is expected. Fast food, telemarketing, security, leisure and hospitality, accommodation, and food services usually rank highest, though in what order usually depends on who you ask. The bottom line, however, is that turnover can be very costly, and yet many business owners and managers have come to accept it as an inevitable part of their respective industries. To a great degree, such acceptance is a cop-out, since turnover doesn’t have to be as high as it often is.
Now, while some industries will experience a relatively high rate of turnover because the jobs they provide are low-skill and low-wage, that’s only part of the story. In larger companies, it’s often easier to just work with it, simply because the systemic changes needed to make significant reductions in turnover would be costly and time-consuming, and many of the upper-level executives who set policy frankly don’t care, since they don’t have to deal with the immediate problems caused by turnover. Another awful truth is in an economy teeming with unemployed people, the supply of new entry level workers is plentiful enough that for some industries, high turnover is acceptable, especially if the work requires little or no skill. Fast food chains, for example, have made an art of creating a workplace where the skill required is so minimal that almost no training is really needed. The food comes prepackaged with little more to do than heating and serving, so for them, turnover rates of 300% or more don’t matter as much.
However, for the entrepreneur in a small-to-midsized business (SMB), high employee turnover can present profit-shattering costs. Can you really afford to screen, interview, and train people every few months, or weeks? If it were possible to drastically reduce your turnover and increase your profits, would you be interested in knowing how?
First, let’s see what it’s costing you. Unless you’re filling a position that requires almost no training at all, a study by the University of Wisconsin showed that replacing even a $9.50/hr worker can cost more than $2000. In fact there’s a handy Turnover Cost Calculator right HERE.
So, then, what are some ways you can avoid losing good people?
1. Hire better people in the first place
One of the problems some of my clients over the years have had is a terrible tendency to just hire the wrong people. In some cases, it’s because they kept wages a bit lower than they could have been in the hope of protecting their profits, and in the end their turnover cost them more than if they’d raised wages by 10%. Especially in today’s job market, even a slight edge in your compensation can give you the leverage you need to be more selective.
Some of this problem also comes from having a limited pool of applicants. Yes, 10 years ago, Monster had the lion’s share of the job board market, but today’s recruiting landscape is far more fragmented: there are over 30,000 job boards. You can still get good results using one or more of the major ones, but the truth is you’re better off using a service that has access to multiple job boards so that you don’t need 300 different accounts (who has time for that?). Doing so will get more eyeballs on your posting, and usually such a service can be more targeted and focused, so you’re more likely to attract better candidates. Then there’s social media. About 15% of new hires today find their jobs through social media, with Twitter accounting for a whopping 11%. If you’re not already using social media in your hiring process, it’s time that you do.
2. Implement a more thorough screening process
This doesn’t have to be time-consuming. It can be as simple as including a mock task incorporated into the interview process to gauge their aptitude for the work being done. For security companies, I usually recommend a one page ‘test’ that evaluates the candidate’s observational skills. While it’s not the only suggestion I make, such a thing in and of itself can help to eliminate the lazy or unobservant candidate. For IT companies, giving applicants a concise coding challenge might work well. In any case, a practical, real-time assessment of ability to actually do the job is usually helpful, especially once you’ve got a larger pool to pick from after using the ideas from Tip #1.
3. Provide advancement and incentive opportunities
Some of your people could become frustrated if there’s no opportunity to improve their skill set or compensation. Access to training opportunities like seminars, workshops or certification courses will not just make the future look brighter for your employees, it will also make them more valuable (nd profitable) to you. I knew a man in Trenton, NJ who ran a small but very profitable print shop. One of the secrets to his success with his business was that he had implemented a profit-sharing program, graded according to the employee’s position and time with the company. Not surprisingly, his workers were not just productive, they were proactive in finding new business opportunities for the shop. The last time I spoke to him, his team had become so efficient, he was retiring, keeping only a minimal schedule while enjoying the best profits he’d ever had.
4. Offer flextime
Employee with children, for example, are likely to leave if they’re unable to balance family obligations with their schedule. Offering good employees the ability to work flexible hours and even telecommute can prove to be a great way to retain good talent.
5. Health and happiness
Some employers go beyond the common benefits package and introduce other perks. One company which had a lot of young people in its salesforce offered an XBOX to anyone who’d make 9 sales in one day (this also fits in with #3). Another offered discount vouchers for local health clubs, theaters, and more (and this can often be done at no cost). One company even offered early ‘quitting time’ on Fridays if the weeks goals were met, extra early if exceeded. With a little creatvity, you can make your company a more enjoyable place to work and boost your profits at the same time.