With the unemployment rate hovering around 3.7 percent since April 2019, finding and retaining quality employees has been the talk of the town across all industries because it has become a distinct challenge across the board.
According to the Bureau of Labor Statistics, the average employee stays at a company for about four years. As owners, we understand that the fewer years employees spend with a company, the higher our turnover becomes. That invariably means increased costs when it comes to recruiting and training to fill those freshly vacated positions, to say nothing of the time that current employees will spend not doing their jobs because they’re helping a new co-worker get acclimated as quickly as possible.
The Bureau of Labor Statistics further reports that customer service and hospitality sectors are among the industries with the highest turnover rates. These high turnover rates affect the profit margins of restaurants, hotels, and most importantly to us, ground transportation companies.
The bottom line is that high employee turnover negatively affects your profit margin, which is why it’s important to keep your employees connected. Longevity is the key to reducing turnover rates.
When calculating what high turnover could be doing to your business, consider the following factors:
• Cost of hiring, which includes advertising, screening, interviewing, and hiring, as well as time taken away from the regular duties of whomever is hiring the replacement
• Cost of training for both the trainer and the new hire, which also can affect the ability of the trainer to complete the rest of their tasks
• Loss of productivity for the time it takes to get the new hire up and running
• Possible errors as the new hire adapts
• Loss of engagement and cultural impact
So just how much does turnover cost a company in the long run? Recent data from Work Institute’s 2017 Retention Report estimate that it costs as much as 33 percent of a worker’s annual salary to replace them. When the formula is applied to the median employee’s salary of $45,000, the average cost of turnover per employee comes out to $15,000.
Clearly, lowering turnover must be the goal, but how do we go about ensuring that our employees are connected to the company, their position, and our clients? It’s easy if you remember the three Cs: Compensate, Communicate, Catalyze.
COMPENSATE. Compensation is not just the hourly rate and gratuities that our employees receive. It’s the whole package: spot bonuses, benefits, perks, schedule, and flexibility.
Verify that you are paying what is competitive in not only a certain role but also your market and area—and be careful if you decide to pay a new hire more than a current employee in the same position. This communicates to your employees that the negotiation skills, or the simple ask for more money, are more important than the work of the current employee. Additionally, it could lead to dissatisfaction down the road if you can’t afford to provide an increase to those new employees because you brought them in at the top of their range.
Tying compensation to performance is a very effective route. Putting together pay for performance plans will ignite the work of your high performers, give your average performers something to work toward, and make it easy to identify your low performers. Just be sure that the reward is clearly connected to your mission, vision, and company goals—and remember that different people are inspired by different motivators, so this is not an area where you want to take a one-size-fits-all approach.
COMMUNICATE. Communication is the key in ANY and ALL relationships. Many leaders boast of an open management style but rarely leave their offices when onsite, which can lead to employees feeling like they aren’t an important part of the business. I was recently onsite with a client, and I was so impressed that he knew every chauffeur, detailer, mechanic, and office member who walked past the conference room we were sitting in. He called them each by name and asked them something specific to them. Watching the faces of those employees light up truly showed the importance of open communication and personal connections.
Furthermore, clear communication allows companies to be more productive and to operate more efficiently, since everyone is on the same page. Employees shouldn’t have to wonder what their responsibilities are, what the company’s priorities are, and whether they are meeting expectations. We often use “team members” as a synonym for “employees,” but are we truly fostering a team atmosphere? When employees work together in harmony, and when each person knows his or her role on the team and fulfills it with a sense of accomplishment, employees are far more likely to gain satisfaction from their work because they’re focused on what they’re doing instead of scrambling to make sure everyone’s keyed into the goal.
CATALYZE. Provide the growth and development your employees need to remain connected to the company. By providing training and opportunities for advancement, you will keep more of your valued employees on your team. You will retain all the institutional knowledge they have, and you will show those employees how important they are to the company. On the flip side, if people aren’t challenged or if they don’t believe their skills and knowledge are improving, disengagement, complacency, and boredom can all take over.
For those employees who are underperforming, training allows you to help strengthen their skills, bringing them to a higher performing level. Having everyone on a team working at or near the same level allows for independent work and assistance when needed.
For those employees who are performing at or above average, training allows them to expand their knowledge base, providing the company with a pipeline of candidates for succession planning.
While the three Cs are certainly the way to help your employees stay connected, the true connections start with the leadership. Share your vision for the company and for your employees. Help your employees find reasons to feel good about their work, the company, its goals, and its mission, and you will see reduced turnover and higher employee engagement. [CD1019]
Christina Fiorenza is the HR Director for the LMG Group. She can be reached at christina@lmcpeople.com.