We all spend so much time and energy into luring the right candidates in to work for the hourly positions we have available in our businesses. As we all know, it is no longer simply posting a "Help Wanted," ad in the local newspaper to attract people to work at our companies. Today, we have to use connections on social media, offer multiple perks geared toward the various generations, interview thoroughly to ensure we are getting the right person for the job, and conduct drug testing and background checks. Only then do we make the job offer.
Once they're on board, we sign employees up for their health insurance benefits and other company benefits and begin training the new employee to learn the ends and outs of their position. We also begin the tedious and time-consuming task of pushing forms in front of the new hire to fill out. In fact, according to the US Department of Labor, there are numerous forms an employer must make sure the new employee fills out before starting in their new role with the company. This paperwork must be maintained with the employer, in the employee's file, throughout the employee lifecycle. Additionally, the Internal Revenue Service requires specific forms be completed by employees and kept on file with the employer too. Some studies show that turnover can cost up to 50 percent of the employee's salary.
The costs for all of this work to bring on one new employee adds up quickly, so obviously losing employees to turnover can be quite expensive. Some studies show that it can cost up to 50 percent of the employee's salary. Others indicate, at least for hourly employees, that the costs can run between 30 to 50 percent of the employee's annual salary. The annual overall turnover rate in the US in 2018 was 26.3 percent according to the Bureau of Labor Statistics. That figure includes all levels of employment, including hourly workers. The average turnover rate in the retail industry is roughly 60 percent, and in the restaurant industry, about 107 percent. But great companies, like Chick-fil-A, Zappos, Amazon, and many others are experiencing much lower churn rates because they follow specific steps for reducing turnover.
The Center for American Progress found that the average costs to replace an employee for high-turnover, low-paying jobs is roughly 16% of the annual salary. Assuming a package handler is making $9.50 to $14 an hour, plus benefits, and assuming a six to eight hour workday, it comes to roughly $80 per day. If there are 260 working days in a year, that comes to $20,800 annually, or $3,328 to replace an hourly worker (16% multiplied by $20,800). Turnover costs for other hourly positions are even greater.
Steps to Reduce Churn
A recent Forbes article found that McDonalds restaurants has actually built their business on high employee turnover. McDonalds has optimized their systems to train employees to do a good job and then leave in less than a year. They are excellent at training workers. A McDonalds employee with six months on the job is still more productive than someone is the first month of work. The company believes that if they can get another month from its workers before they leave, then the productivity difference is huge.
While you may not have the luxury of enduring high turnover as McDonalds does, you can take steps to keep your employees for a lot longer, and reduce the cost impact that high churn may cause. In fact, a study conducted using 34,000 respondents by Work Institute, found that 75 percent of the causes of employee churn is preventable. We just have to take certain steps to increase productivity while reducing turnover.
Here are five steps you can begin implementing today to begin to turn your churn into greater employee retention.
1. Improve Your Interview Process
Most companies still use the standard approach to interviewing employees: ask why they want the job, what their strengths and weaknesses are, what is their past experience, and so on. This is still a good idea so that you get to know the candidate and it is also helpful to somewhat gauge how they will perform in certain customer service roles. But to help reduce employee churn, try developing a hands-on type of interview. In other words, during the interview, have the employee perform some of the tasks they are being hired for to demonstrate their skills, talents, and knowledge. This will give you a better picture of the candidate and will give the candidate an idea of what the job entails. Also, make every effort to do this during busy times of the shift so they get a glimpse of the rapid pace in the restaurant or retail setting. Caution: either pay them for this "test task" or make it known up front that they are not on the clock during this short interview period.
2. Strive to Engage Your Employees
Employee engagement is one of those slippery terms used by human resources professionals to bring attention to the need for developing ways to get employees to love what they do. Engaged employees are better employees. To get them engaged, show them how much their work means to the company. Explain how every step in the process of their job has an impact in the overall experience of the customer and the business. Find ways to make your employees feel a connection to what they are doing and how it serves a purpose, and not just going through the motions for the paycheck.
3. Develop Great Leaders
It's been said that most people don't leave their jobs, they leave their managers. A recent Gallup study uncovered that fifty-two percent of voluntarily exiting employees say their manager or organization could have done something to prevent them from leaving their job. Focusing on improving the skills, particularly the communication skills of your managers and leadership team, can help to reduce your company's churn rate.
Managers and leaders should provide continuous feedback to their employees, giving them kudos where warranted and providing constructive coaching and feedback when they falter. It is simply a matter of actually being human with employees and working along side them as opposed to being seen as dictators barking orders. Let employees see the human side of your leaders and managers.
4. Invest in Your Employees
Zeynep Ton, author of the Harvard Business Review article, "Why 'Good Jobs' Are Good For Retailers," stated in his article that, "Highly successful retail chains have demonstrated that bad jobs are not a cost-driven necessity but a choice. And they have proven that the key to breaking the trade-off is a combination of investment in the workforce and operational practices that benefit employees, customers, and the company ... I believe that the model these retail- ers have created can be applied in other service organizations ... [such as] hospitals, restaurants, banks, and hotels." In other words, although costly in the short run, investing in employees can provide huge payoffs in the long run through greater performance and lower turnover.
Take the initiative to provide an education for the employee. This doesn't mean you have to send them to college, but it does mean you explain how their job fits into the success of the business. In addition, offer training for other departments in the company. If yours is a restaurant, provide classes on bartending, catering, customer service, sales, cooking, etc. Invest time (and money!) into employees and watch them blossom. This attention to them creates a sense of loyalty and helps to reduce the chances of them leaving the company anytime soon.
Another way to invest in your workforce, according to a recent Society for Human Resources Management (SHRM) article is coaching, which is the case at Louisville, Ky.-based Yum! Brands (the parent company of Taco Bell, KFC and other restaurants). All 130,000 corporate employees are given midyear development plans and 360-degree reviews to help them identify skills to improve. Managers have a key role in the development process, providing coaching to employees to help them stay on their development plans and improve their knowledge and skills.
5. Solicit Suggestions from Your Workforce
This may not seem like a great step for reducing churn, but it actually helps to increase engagement and loyalty—two things needed to help reduce turnover. Your employees are a wealth of information, experiences, thought processes, ideas, and dreams. Tap into this extremely valuable wealth of resources to get ideas on how to improve the business. Create a suggestion box and read through employee's suggestions once a week. Ask your staff to take the first hour of their shift to brainstorm ideas for solving a particular customer service issue or sales display item. Don't just ask them questions, but truly use what they provide and give them feedback on how their ideas did or didn't work in a situation. They'll appreciate you and the business more than ever.
You Can Reduce Churn
Begin this month to apply these five steps and watch for a reduction in your company's churn rate. It's been proven that these work. Even if you only implement one or two for now, it will make a tremendous difference in your rate of retention, and possibly improve your hiring rate since word of mouth experiences spread faster than ever before in today's employment marketplace. You can reduce churn with a little effort and at minimal costs. Do it now before your competitors do.
Workstream (www.workstream.is) is an end to end hiring software built for the hourly workforce, cutting in half the time to hire and on-board workers, via SMS / text communication, automated workflows, online document signing, and more.