…your employees shouldn’t be.
In order to increase your profits, you must know the “costs” of turnover. Unfortunately, I can almost guarantee that your QuickBooks, Peachtree or any other accounting system does not readily produce this information. The cost of turnover is substantially higher than your recruiting costs. In addition to the recruiting and interviewing costs, you have the training time, lost productivity associated with a new employee, etc. Depending upon the type of position being replaced, it is estimated that turnover will cost you 65 percent to several hundred percent of the beginning annual compensation. Once you have computed the cost of turnover, I can assure you it will become a high priority for your business.
Your goal should not be 100 percent retention— it should be 100 percent retention of the key employees. Let’s face it, unless you are very lucky, you have an employee that would be better off working for your competitor. One of the greatest challenges facing any business today is retaining the best employees. A recent poll of employees at more than 700 companies of various sizes found the number one reason for turnover was not the paycheck. Instead, these workers rated having a quality supervisor as more important than wages and fringe benefits. In other words, workers leave their boss, not the company. If a talented employee leaves, your business loses, your customer loses and, most importantly, your other staff members lose. Active communication, performance enhancements and letting a few go can lead to fewer unwanted resignations.
The easiest and least expensive method of reducing turnover is actively listening or truly paying attention to what your employees are saying. With all of the headlines focusing on economic turmoil and uncertainty, it is especially important to be in tune with your employees’ attitudes, thoughts and concerns. Communication can be the single most effective weapon against turnover. Lack of communication with your employees can leave them feeling as if they are in the dark. This is not a comforting place to be and it is one that breeds insecurity and rampant thoughts of gloom and doom. The average person left in this vacuum begins to think the worst. “I am no longer valued.” “Cutbacks are coming and I might be the one.” “I better look for another job before I am left in the cold.” Once the negative thoughts begin, it is virtually impossible to reverse the tide. Unfortunately, you may encounter a situation in which one of your best employees is hired by the competition leaving you and your remaining employees to suffer the consequences.
Providing valuable feedback to your employees, and not just criticism, goes hand-in-hand with listening. I highly recommend you try and observe your employees doing something right on a daily basis. The only way your employees will know whether or not they are meeting your expectations and contributing to the success of the organization is with specific and timely feedback from management. One of the most fundamental methods of retaining, training and developing employees is through performance evaluations and feedback. Employee feedback should occur on a daily basis and be integrated with listening and coaching activities. An old adage states, “People respect what you inspect.” If a person’s performance in a certain area is important to you, it will become important to that individual if he or she sees you measuring it and reacting to the results. While the formal appraisal process is necessary, you will find that the day-to-day counseling and training will be one of the most effective tools to increase productivity and reduce employee turnover. When the formal performance review is conducted, your goals should be no surprise to the employee.
It is also important to consider that training is not limited to your employees. In fact, you should be at the top of the list for continual training. What skills do you need to improve to become a better supervisor? The goals of your business will assist in determining the “soft skills” necessary for growth. For instance, if your business is expected to grow through acquisitions, then the soft skills of promoting a community environment and overcoming resistance to change will be necessary. Whatever you have in mind with regards to the goals of your organization, a strong and persuasive communication style will be necessary to steer the ship. Developing these skills in you and/or your management team will be a great investment as they relate to the savings associated with the retention of key employees.
Of course, keeping the non-productive, recalcitrant employee on staff is very costly as well in terms of hindering production and overall negativity. No matter how astute and accomplished a motivator, communicator and leader you are, you will, at one time or another, employ the worker that truly needs to be terminated. Remember, the longer you procrastinate, the more it costs you. Not many supervisors enjoy terminating employees, but it is a necessary evil of the position. After all is said and done, you are doing your company a favor by making room for a productive employee, and you are doing the terminated employee a favor by allowing that individual to find a position more suitable to his or her needs. As Hal Lancaster said, “Getting fired is nature’s way of telling you that you had the wrong job in the first place.”
So, how do you win the turnover game? Generally, it takes time, effort, practice, tolerance and patience with typically no additional outlay of money. It is recognizing that every employee is an individual with unique personalities, dreams, wants, strengths and areas for improvement. To be a successful supervisor, you must tailor your approach to each staff member. The old theory of treating all alike to be fair is only appropriate for the lazy boss. You must be innovative, creative and an excellent communicator and motivator in order to be effective. If you do not exhibit these qualities, plan on being satisfied with continual turnover and mediocrity.