Reduce Turnover and Build Higher Profits
June 11, 2007
If you’ve ever lost a good employee, you know it hurts both emotionally and financially. While you probably never wanted to add up all the costs associated with the loss, if you did, you’d realize they include not only the loss of that person’s experience and knowledge, but also a cost in terms of employee morale and customer satisfaction.
Then there are the expenses that can more easily be quantified - the administrative work related to termination, job vacancy and replacement (including the time and expenses associated with recruiting applicants; interviews; testing; administrative expenses; medical exams and/or drug testing and orientation/training).
The Harvard Business School found that replacing an employee is likely to cost twice the person’s annual salary or wages. The U. S. Deptartment of Labor estimates the cost of replacing a worker to be one-third of the person’s annual income. At only $6 an hour, that still adds up to $3,600 for every person that walks out the door.
Bottom line: High end or low, losing a good employee is expensive and losing a great one can cause major damage to the organization.
On the other hand, when employers successfully reduce employee turnover, profits increase. Specific results vary widely, but, in one study, reducing turnover by just 2 percent improved profits by 4 percent.
For these reasons, every em-ployer, no matter how large or how small, needs to have an employee retention strategy. If you don’t want to get caught in the position of trying to close the barn door after the horses are out, employee retention deserves your attention today.
One way to develop a retention strategy is to make a list of the people you don’t want to lose and next to each name, write down what you are doing or will do to ensure that person stays onboard.
The key to this process is to realize that what gets you out of bed in the morning is not the same as whatever it is that motivates your employees. Let’s take a wild guess and say you’re a Type A, overachieving entrepreneur - you love the challenges of owning, building, and running a business. Conversely and necessarily, your employees are not. So, what are their motivators?
For the past 10 years, the results of surveys on this subject have pretty much been the same. Workers want:
• Open communications/good relationships with bosses and co-workers.
• Opportunities to learn and grow.
• Interesting work.
• Work and life balance.
TRAINING IS THE KEYTraining - continuing education in the form of on-the-job or off-site training - is the one solution that addresses two of the four needs. Training is all about learning and growth and training keeps work interesting.
It seems simple enough, yet few employers have a retention strategy and even those that do don’t always include ongoing training in the mix. This is usually because the organization is so caught up in urgency that management fails to realize the importance of learning and career development not only to the employees, but to the success and survival of the organization as well.
According to business guru Stephen Covey: “Just 20 years ago, manual labor represented 70-80 percent of the value added to goods and services. Today, it’s knowledge work that represents 70-80 percent, while manual labor is more like 20 or 30 percent. We have moved into an information/knowledge-worker age in an unbelievably rapid fashion.”
Besides reducing turnover and boosting profits, training programs normally lead to an increase in job satisfaction and morale, increased employee motivation, increased efficiencies in processes, and an increased capacity to adopt new technologies and methods.
One way to offer training is through full or partial tuition reimbursement. Another is to make use of state and federal government training programs that may be inexpensive or even free. There are books, training films, online courses and Webinars, teleconferences, and training specialists who will come onsite. If funding is an issue, give your best people 10 minutes in the weekly meeting to show and tell others how they do what they do. Job rotation or cross-training is another great, low-cost way to keep work interesting for everyone.
If vendors and suppliers offer training programs, make good use of them. While you probably count on your equipment manufacturers to keep everyone up to speed when it comes to sales, installation, and service, there are hundreds of other subjects that can satisfy your employees’ need to learn and grow as well as the organization’s ability to not just survive, but to thrive:
• Communications: Can ad-dress the increasing diversity of today’s workforce and client base.
• Computer skills: Computer skills are becoming a necessity for most jobs.
• Customer service: Helps employees understand and meet the needs of customers.
• Diversity: Diversity training usually includes education about how people have different perspectives and views and includes techniques to value diversity.
• Ethics: Today’s society has increasing expectations about corporate social responsibility.
• Human relations: The in- creased stresses of today’s workplace can include misunderstandings and conflict. Training can help people to get along in the workplace.
• Management skills: Can include employee recruiting, selection, retention, motivation, dealing with difficult people.
• Quality initiatives: Initiatives such as Total Quality Management, Quality Circles, benchmarking, etc., require basic training about quality concepts, guidelines and standards for quality.
• Safety: Safety training is critical when working with heavy equipment, hazardous chemicals, food, etc.
• Sexual harassment: Sexual harassment training usually includes a careful description of the organization’s policies about sexual harassment and inappropriate behaviors.
Break the task of developing ongoing training programs into smaller, logical steps.
Determine your needs. What kind of training programs will best address current and future company needs or will provide the biggest payback?
Choose quality instructors and materials. Who you select to conduct any training will make a major difference in the success of your efforts, whether it’s a professional educator or simply a knowledgeable staff member.
Clarify connections. Some employees may feel that the training isn’t relevant to their jobs. Help them understand the connection early on, so they don’t view the training sessions as a waste of time. Award completion certificates at the end of the program.
Deliver on-site training in small bites. One to two hours per week gives people the opportunity to practice what they learn on the job right away.
The best way to learn is to teach. Have those who go to off-site schools or sessions, teach your other employees upon their return.
Measure results. Decide how you’re going to obtain an acceptable rate of return on your investment. Determine what kind of growth or other measure is a reasonable result of the training you provide.
Training capitalizes on the mind’s amazing ability to continue to learn and grow over our entire lifetime. With the right kind of training, OK employees can become good employees, good can become great, and great become even greater. Better yet, ongoing training benefits employees and the organization in equal measure.
Publication date: 06/11/2007