Unemployment is down and your workers see a growing demand for their services in the job market. Find ways to keep the best of your crew happy.
In addition to the national unemployment rate, the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) calculates something each month called the quit rate, which is the percentage of employees who quit their job in a given month. Over the course of 2016, that number hovered around 2 percent.
The BLS reported 2.9 million people quit their jobs in October, which is in line with prerecession levels.
This higher quit rate indicates a rising confidence in the workforce. Workers feel confident about taking their chances and leaving one job for another job. This may be a positive economic indicator for the country, but for an individual company a high quit rate is anything but positive.
If you’ve ever been blindsided by an employee quitting, you’ll understand why that’s just the kind of situation big companies like Wal-Mart are trying to avoid. Recently, the Wall Street Journal reported that Wal-Mart and other megacompanies analyze data to determine which employees are most likely to leave a job. The goal is to provide managers warning so they can take action before an employee gives notice.
The high cost of quitters
To identify employees most likely to quit, data experts look at several factors, including how long an employee has been on the job, how far they commute, past performance reviews, employee surveys and personality tests. While not 100 percent accurate to a person, the data paints a picture of what motivates employees to move on. One company actually assigns each worker a retention predictor score.
Why go through so much trouble? Because quitters are expensive. Recruiting, hiring and training good employees is costly. In addition, an employer loses the contributions an experienced employee was making to the bottom line even after they’ve been replaced.
While there are a lot of variables, in general it costs about 20 percent of an employee’s salary to replace them. For an employee making $40,000 a year, it could cost $8,000 to hire a replacement.
Some specific cost factors involved in replacing an employee include:
- The cost of advertising the position, and the loss of the time you spend interviewing, screening and hiring.
- The cost of training the new employee how to do the actual job, plus the time spent educating them on company policies, procedures, benefits, etc.
- Lost productivity. It can take a new employee as long as two years to reach the productivity of an experienced employee. Newbies are just not as productive as veterans.
- Work mistakes and customer service errors made by new employees.
- Long-term training costs. It’s not just the initial job training. A business may invest 10 to 20 percent of an employee’s salary or more in training every two to three years.
There’s also an immeasurable effect on a company’s culture. When one employee leaves, it can cause others to have misgivings about their own job satisfaction, which lowers productivity.
Running a smaller company, you probably don’t have the need (or funds) to hire a consultant to determine how likely each of your employees is to quit or to administer personality tests. But you can take steps to improve employee retention and prepare for when an employee inevitably surprises you with a two-week notice.
Keep tabs on employees
Don’t assume all your employees are happy until they tell you they aren’t. To help keep employees happy and in your employ, pay serious attention to them. Keeping a dossier on each employee can help.
An employment dossier is a frequently updated file on each employee that includes their accomplishments and mistakes, any conflicts they’ve had with you, other employees or customers, any promotions or pay increases they’ve gotten, and any other pertinent information.
Glancing through these files occasionally can keep you from being surprised by a resignation. You may even want to set benchmarks or schedule raises for employees and keep track of this information in these files.
This kind of dossier is helpful if an employee asks you for a raise or tells you they are thinking of leaving. You can look at their file and assess the employee’s time with your company. You can see that they’ve had issues with the same customer for the past year and try to find a solution. Or you can see that they are due for a raise in two months and remind them of that in hopes it will convince them to stay. Or, in some cases, you might review the file and realize there is no longer any growth potential for this particular employee with your company and wish them well.
Romance your employees
Radio talk show host Clark Howard commented on a recent broadcast that there’s one really easy way to keep employees, and it doesn’t involve hiring outside consultants. Companies that have really loyal employees, Howard said, simply treat people really well. They don’t just talk about respect and care; they show respect and care.
And the rewards come back to these employers not only in having loyal employees, but loyal customers as well.
“Romance your employees,” Howard says, “so your employees romance the customers.”
That doesn’t mean sending your employees roses (though some may appreciate that). It means paying them fairly, giving them a pat on the back for a job well done, being flexible and understanding when it comes to their scheduling needs, springing for an occasional lunch or box of doughnuts or holiday party, and listening to (and really hearing) their concerns.
And if you’ve treated your employees well and one still leaves for a better opportunity, conduct a thorough exit interview to determine if there was something you could have done differently. If an employee is tired of commuting 75 miles each day to work and takes a job five minutes from his home, there probably wasn’t anything you could have done to make him stay. If an employee hasn’t had a raise in seven years and leaves for slightly more money, yeah … You might have seen that one coming.