6 Proven Ways to Reduce Costly Employee Turnover
Brands targeting the teen market have a business model to produce and price goods inexpensively, anticipating the mentality of “disposability” that exists within their target audience. Sadly, many businesses work from that same mentality in their approach in hiring employees. And, unlike a pair of shorts from Forever 21, replacing employees is very costly.
Billions of dollars are spent every year in the recruitment and replacement of employees. Individually, it costs between $4,000 and $14,000 to replace an hourly employee, and upwards of $40,000 to replace a manager. Tangible and intangible costs include the failed employee’s salary and benefits; advertising, recruiting and interviewing expenses; wasted management time dealing with the failing employee; cost of time required for other employees to handle failed employee’s mistakes; and more.
It costs up to $14k to replace an employee & $40k to replace a manager.
While some leaders have an employee turnover mentality, thinking that’s just the way business goes, others realize that human capital is the ROI that keeps increasing over time, if hiring is done right to begin with.
Here are the ways to reduce employee turnover by doing it right:
1. Clearly identify the role.
Before you simply “get a butt in a seat,” take the time to clearly identify the role. Has it changed since you last wrote the job description? Get the right people in the room and together identify the 3-5 key accountabilities of the job. What must this position do to help progress in your organization? This is a critical step that will only take about an hour to execute.
2. Determine what superior performance looks like.
Using only the key accountabilities you’ve established, and not your personal bias about how the previous candidate did the job, ask the group you’ve assembled the following questions:
What kind of internal motivation would generate excellence in the job?
- Is it a job for life-long learners?
- For revenue generators?
- For big hearts?
What core competencies would make the job easy?
- Does the candidate need to exercise flexibility every day?
- Personal accountability?
What behavioral style would excel at the job?
- A person who is task oriented?
- People oriented?
- Gets quick results?
- Makes thoughtful decisions?
What thinking patterns would the candidate need?
- Intrinsic value of people?
- Systems rule?
- Pragmatic action?
Spend another hour identifying what the perfect candidate would look like if he or she walked through the door.
3. Train your interviewers.
Jerry Rollins of Sage once asked a group of successful executives to raise their hands if they had received formal training in interviewing. Only about 20 percent raised their hands. If your hiring managers have a turnover mentality, or are hesitant to ask for help in how to hire, they are going to bring in whomever they like best, not necessarily the person who is the best for the job. Managers will bring in a mini-me or someone they think is most like a past employee who was great at the job.
High-turnover organizations spend significantly more resources to recruit and replace workers than smart organizations, which invest more in employee retention. There will be turnover regardless of what you do, and it will cost you to bring in a consultant to improve your interviewing process. However, you’re going to pay more in the long run when you choose poorly in the first place.
4. Onboard with excellence.
Have you ever had a job where, on day one, they toss you in a room to view videos, then sit you at a desk and say, “We want you to hit the ground running”?
Your reaction was probably: “Can you be a little more specific about the race I’m in? And who my teammates are? And exactly where I’m headed?”
Create a clear plan for the entire first month for this brave new person who has joined your team. Carefully review relevant elements such as key accountabilities, the job description, the performance review process, individual expectations, team expectations and the organizational vision. Have a mentoring and/or buddy system in place so the new hire feels welcome and included in the team right away. Carve out time for real conversations periodically on how things are going.
The more you invest in employees’ early success, the stickier they’ll be in engagement and retention with your company.
5. Develop and measure performance.
As cliché as it is, the idea of working “on your business rather than in your business” is really valuable advice. I’d take it to the next level and encourage you to support your employees by working with them on their roles rather than in their roles.
Companies that intentionally manage their cultures significantly outperform those that don’t. This means taking the time to check in and have authentic conversations about what’s going well and what’s a frustration for your employees. Provide a variety of ways for them to develop their soft skills, not just their hard skills. When they’re amazing at something, encourage them to mentor others. Review key accountabilities, successes and misses, at least quarterly.
6. Assess don’t guess.
Companies use accounting systems for their revenue and CRM systems for their customers, so it makes sense to use a talent management system for your employees. What gets measured gets accomplished. If you can measure what denotes superior performance in the position, you can hire the person who is best aligned with that specific role, in your company and in your culture.
What gets measured gets accomplished. Assess don’t guess.
The truth of the matter is, your company is going to pay on the back end for any poor hires on the front end. It doesn’t make sense not to take advantage of the tools that are available to improve your hiring and promoting processes. Formalizing your talent management system and consistently applying its steps will provide real, tangible profit to your bottom line.