Finding and Keeping Exceptional Employees
Part 1: The real cost of employee turnover
Not so long ago, good employees were easy to find and keep. Thats no longer the case. With todays fiercely competitive human resource marketplace, top-performing employees demand more than money and benefits to remain in a position for more than a short time. Stand in any break room or next to any water cooler and you will hear the same comments: I have needs I want my job, my boss and the company to meet ... Its not all about money; its about job satisfaction ... If Im appreciated and my needs are met, Ill stay. If not, Im gone.
Its more critical now than ever for jewelry stores to attract and retain top performers. One key reason relates to increased costs and decreased productivity. Research shows high turnover rates have a powerful negative impact on the bottom line. In fact, the inability to control turnover has contributed to the failure of many formerly profitable businesses.
Another reason is the correlation of longevity to value. In most cases, the value and productivity of top performers increases over time. The intellectual value of tenured individuals their knowledge of products and processes saves you time and money. Quite simply, they have the know-how to get things done, from creating effective displays to closing big sales.
Sadly, many owners and managers are wrapped up in the day-to-day struggles of running a business and grossly underestimate the true cost of turnover. Some costs are apparent (newspaper ads, overtime pay, recruiting services), while others are hidden (time spent on the hiring process, the relationship between store morale, turnover and productivity).
More than Money
Few managers know how to accurately measure the true value of an employee except through wages or salary. This is the most obvious yardstick, but we all know a top performers real worth cant be measured only by a paycheck. Though difficult to quantify, theres no harsher realization of true value than when an indispensable employee walks out the door, taking with him or her years of knowledge and experience.
What does turnover really cost? Many research organizations, think-tanks and individuals have devoted their lives to the question. Though answers are subjective and varied, theres some general agreement on how to calculate these costs for the retail industry.
Turnover results in hard and soft costs. Hard costs are easier to quantify and may include:
- Money paid at termination (severance, vacation, sick pay).
- Advertising for a replacement.
- Hiring a search firm or placement company.
- Temporary staffing.
- Time away from everyday functions to handle the hiring.
- Time required to orient and train a new employee.
Soft costs are more difficult to measure but often have an equal or greater impact than hard costs on the bottom line. They may include:
- Loss of general productivity and efficiency.
- Loss of intellectual assets and their benefits to the organization and its members.
- Increased levels of manager stress and frustration.
- Increased workload on the remaining staff.
- General loss of morale.
Choose one of the formulas below based on your stores culture, the nature of your employees responsibilities and other factors that influence their impact on profitability. You also may use a number between 0.5 and 1.5 that you feel better reflects the reality of your store and the employees value.
Example: A jewelry store loses three employees over 12 months; their salaries average $29,500. Assuming all three were average to above-average performers, the high-end benchmark would be the appropriate one to use. The true cost (hard and soft) of losing and replacing these individuals is $132,750 (3 x $29,500 x 1.5 = $132,750.)
What You Learn
Looking at turnover costs using benchmarks is beneficial in two ways:
- Managers and owners whove never thought about turnover costs are often alarmed and motivated to action.
- Businesses then develop new attitudes and strategies to reduce turnover.
Challenge yourself to take a hard and realistic look at what employee turnover costs you. Dont underestimate the value of longevity by considering employees only by their paychecks. Dont be afraid to discuss with your staff what makes them happy, how they feel rewarded. You may discover the best way to minimize turnover is far simpler than higher salaries: A thank you for a job well-done, a smile every morning, some active listening and honest caring all of these things can be powerful tools to help you and your store become a more satisfying and gratifying place to work.
Next month: How to create a workplace that encourages employees to stay.
David Peters is director of education for Jewelers of America Inc.
|How Much it Costs You
Years of analysis and research have resulted in benchmarks you can use to calculate the cost of turnover in the past year. These benchmarks appear below as simple mathematical formulas. Before using either formula, determine the number of individuals who left in a 12-month period and their average salary. In both formulas, A represents the number of people lost in a year and B represents the average salary of those who left.
This applies to organizations where most employees have limited direct impact on bottom-line profitability, such as fast-food restaurants, convenience stores and self-service discount retailers.
A x B x 0.5 = low-end cost of turnover in a 12-month period
This applies to organizations where most employees have high levels of direct impact on bottom-line profitability, including upscale department and specialty stores and luxury goods retailers such as jewelers.
A x B x 1.5 = high-end cost of turnover in a one-year period