A client called me in to give him a talent assessment of his leadership team.
This was about a 50 million family owned business, growing very quickly. It was an interesting project. While conducting the interviews I observed that they were doing a lot of hiring. The business was growing but the amount of hiring seemed out of proportion to the growth.
I discovered that the business did not measure employee turnover. They just accepted that they had to keep hiring because people kept quitting.
So I did a simple analysis and discovered that the employee turnover was over 50% for their main category of employees. That means that they had to hire 50% more people every year than they actually needed to accomplish their business goals. That is crazy!
I did a little more digging and found problems with pay, work environment and most important management skills or better stated, a lack of good management skills.
It is costly to hire, train then replace people on your team. It can cost upwards of twice an employee’s annual salary to find and train a replacement. In this company, 50% turnover was costing them almost double their labor costs. Reducing turnover will reduce their labor costs, reduce training costs, reduce the time and cost of hiring and most important improve morale and the ability to get something done.
Seems pretty important, doesn’t it? Yet this company and many other companies do not measure turnover and even if they do, they don’t do anything about it.
Such a costly waste of time, energy and money.
It is important to measure turnover monthly and annually to see if you are having issues. If your turnover is higher than you can tolerate, you should figure out what is going on. Is it management skills, something in your environment or are you hiring the wrong people? Only by understanding the reasons behind turnover can you begin to address this insidious and costly problem.
Here are some tips to reduce turnover:
- Hiring the right people is the single most important way to reduce employee turnover. Interview candidates carefully. Have a solid hiring process that ensures you understand the answers to the 3 most important hiring questions: Can she do the job? Will she love the job? And will she get along with the team?
- Pay attention to employees’ personal needs and be flexible where you can. Get creative with work schedules or day care needs. Flexibility goes a long way but it costs very little compared to the cost of employee turnover.
- Bolster employee engagement. Say thank you. Make your workplace fun. Be sure managers respect and recognize employees regularly.
- Give employees room to grow with challenging positions, training and developmental opportunities that they value.
- Be sure everyone on the team understands the vision and goals for your business. Don’t make assumptions that they know what you are thinking.
- According to many surveys, the number one reason people leave a company is because their boss is a jerk. If you even sniff out a boss who is a problem, address it immediately with coaching, training and reinforcement.
Employee turnover is a signal that there is a problem in your business. Measure it then figure out what is going on. We are always here for you if you need some help.