People Quit Bosses, Not Jobs
Start by thinking back to the last job you quit, why did you leave? Think back to the one before that, why did you leave that one? Think about a job that you stayed at for quite a while, what made you stay?
Think about those answers and tell me this: could any of your answers have changed if you had a different manager? Unless you only ever left a job because you moved to a new place or stayed at a job long term that you hated for whatever reason, you likely said yes.
Bosses have a huge impact on what makes you love or hate a job. Did your last boss throw insults around like a parade float throws candy? Did your last boss provide opportunities to develop your professional skills? Did your last boss expect you to be available 24/7? Did your last boss send you a card while you were off work for a week on bereavement leave?
Whether you believe it or not, bad management is directly responsible for employee happiness and retention.
Industry Turnover
Have you ever found yourself saying “it is a high turnover business”, “we are always hiring because this industry has low employee retention”, or something similar?
It is not uncommon for companies, or even entire industries, to accept these statements as truth. Accepting high turnover as standard for your company is detrimental for two main reasons:
1. It is expensive. Statistically, it costs roughly 16% of an employee’s annual salary when that employee quits. If you are consistently employing entry level positions ($12/hour or about $25,000 annual salary for full-time workers) it would cost you roughly $4,000 each time you have to replace that position. This number comes from the time you spend advertising for that job opening, reviewing applications, conducting interviews, and training the replacement employee as well as the overtime you may have to pay to have another employee replace that employee’s work while the position is empty.
2. It lowers employee morale. When employees are constantly leaving and new ones are being hired, existing employee morale takes a hit. One of the things employees value most in a job is the people they work with. Watching their coworkers become unsatisfied with a job before leaving can influence the way the existing employee feels about the job. In turn, the next person to be hired will find a lack of satisfied coworkers enabling the cycle to continue further.
Breaking the low morale cycle and cutting down on turnover costs is not easy. In fact, it can eventually cause a business to fail.
Let’s take a look at some of the industries with the worst turnover rates:
· Retail. The turnover rate for entry level retail employees is a whopping 81% annually. Meaning that less than 2 of every 10 retail employees you have will still be with the company a year later. There is a constant cycle of hiring and training new employees as well as a very low rate of employee satisfaction.
· Hospitality. Coming in only slightly behind retail is hospitality with a turnover rate of 70%. Hospitality, like retail, offers many entry level positions but the cost of replacing entry level employees with such high turnover can easily eat away at the profits of hospitality focused organizations.
Aside from industries containing high levels of entry level employees, some of the highest turnover rates also occur in:
· Technology. Specifically, software engineering. Technology turnover rates are one of the highest with rates of 23% annually. This is a highly skilled profession with a much higher annual salary than those positions we previously discussed, meaning the cost to replace an employee could be up to 5 figures. Not a fun budget to create for nearly a quarter of your engineering team.
· Professional Services. Professional services include industries such as legal, financial, and consulting. They clock in with a turnover rate of about 12%. Like technology, these skilled professions cost an organization much more to replace as you burn through resources such as time spent finding a replacement and money spent paying others to do the extra work.
Whether you are in an industry abundant with entry level jobs or highly skilled jobs, the problem remains the same - employees are not leaving their jobs with your company to pursue a different career, they are just changing to a different company.
So how do you reduce your turnover rate when the statistics are against you? Let’s start by finding out why employees are leaving in the first place.
Why Employees Leave Jobs
Is your industry doomed to always deal with high turnover? Are you going to forever be in the process of filling an understaffed team? Maybe. But you do not have to be.
Employees leave jobs for a number of reasons, but some of the top reasons include:
· Lack of appreciation
· Lack of respect
· Lack of trust
· Lack of support
· Lack of communication
· Lack of work-life balance
· Lack of advancement opportunity
· Lack of connection with company values
· Lack of connection with personal goals
· Feeling underutilized
· Feeling stressed and overworked
· Unhealthy work environment
· Watching coworkers leave
Hopefully you have noticed a trend here. The message to take away from this list is that employees feel their jobs are lacking something. But digging even deeper, what do so many of these reasons have in common?
Nearly every item on this list is impacted by management.
That’s probably not what you wanted to hear. You want the turnover rate of your industry to be someone else’s problem, someone else’s fault. Unfortunately, it is not.
If you are noticing that your turnover rates are at industry standard you may just shrug your shoulders and be happy with average. We say, why be happy with average when you could be extraordinary? Let’s take a look at a few companies who haven’t settled for average and what they do to become extraordinary.
Pal’s Sudden Service. Pal’s Sudden Service is a fast-food chain with 26 locations in Tennessee and Virginia. They have over 1,000 employees, most of them part-time and fitting the typical demographic for fast food with nearly half of their employees between 16-18 years old. Being part of the hospitality industry and having such a young demographic of employees, you would expect that Pal’s turnover rate would fit the industry standard of 70% turnover. But they do not. Actually, Pal’s turnover rate is nearly ⅓ that number and the main reason for turnover is their employees moving away for college. Additionally, in their 33 years of operation, only 7 managers have left the company. How do they do it?
They take time to find the right employees instead of just who is available to fill an empty role with a 60-point psychometric survey. They average 120 hours of training new employees so the employee can feel as if they will succeed and be a worthwhile member of the team. They have software that randomly selects employees during their shifts to complete new training to create advancement opportunities. They have their management spend 10% of their time on teaching employees new skills. Based on our list of reasons why employees leave jobs, Pal’s is addressing nearly every item. They’re promoting company values, offering room for growth, showing appreciation, and in doing so, employees aren’t having to watch their coworkers leave.
Costco. As an industry leader in retail, Costco would have an expected turnover rate of 80% for its entry level employees. Costco’s turnover rate is only 17% for employees who have been at the company for less than 1 year. While their closest competitor, Wal-Mart, has a turnover rate of nearly half that of industry standard, they are still twice as high as Costco. Why? They pay high wages for entry level work. The average pay for a Costco employee is $20 whereas Wal-Mart employees average $11. They provide benefits to over 80% of their employees. They hire internally.
Costco takes an “employee first” mentality. They provide higher than average wages, offer room for advancement, and have basically set themselves apart from other retailers. In doing so they have created a culture of loyal employees who value the benefits offered by the company. You may be wondering how they are able to spend so much on each employee. To start, they do not have a PR or marketing budget. With an already popular brand and loyal customer base, Costco is able to forgo marketing and instead return that budget to its employees. The CEO also takes a modest salary in comparison to other CEOs at this business level, which also provides more resources to be available to employees.
These are just a couple of examples of organizations who weren’t willing to settle for average and instead aimed for extraordinary. While you do not have to do exactly what they did, hopefully hearing their stories has given you some ideas about ways in which you can also become extraordinary. So, take a long hard look at the list of reasons why employees leave companies and be brutally honest with yourself about where you could improve your management practices to better align with your company values.
Reducing Turnover
There’s no quick fix for reducing employee turnover. If there was, everyone would do it. But that doesn’t mean that you cannot take steps in the right direction. First and foremost, reducing turnover starts at the top. If you want to enhance employee retention you have to first ask yourself these questions:
1. What do I offer to employees that my competitors do not?
2. Are my employees happy to come to work? Why?
3. Do I promote career advancement?
4. What is it my employees are looking to get out of this job? How can I embrace that?
5. Am I showing my employees just how valuable they are to the company?
Let’s take each of these one at a time.
What you offer that your competitors do not. Are you providing your employees with something that they could not get somewhere else if they were to leave your company? Remember how we said that employees aren’t usually leaving for a new industry, they are just going to work for your competitor? If that competitor is offering higher pay, more benefits, remote work options, or something else your employee wants, making the change is an easy decision. By providing employees with the bare minimum you can get away with, you are not creating a culture of retention. But also, be wary about providing perks that are not aligned with employee desires.
Happy employees. Are your employees excited to come to work or do they dread when the alarm clock goes off every morning? You may want to believe your employees are happy but if your turnover rates are at or higher than industry average, your employees aren’t happy. Unhappy employees tell other employees that they are unhappy which causes a chain reaction in job satisfaction. Instead of brushing this aside, really try to find out what makes them unhappy. Is it their long commute (something you cannot control) or is it being micro-managed and scrutinized while at work (something you absolutely have to control)? My guess is the latter. Even a long commute is worth making if you enjoy your job. Analyze what it is that is driving employee unhappiness and address that problem head on. My guess is that management has something to do with it.
Career advancement. Are you offering your employees the chance to advance their careers in your company? If you are not, you should be. It is incredibly rare for someone to find a job that they plan to stay in for the rest of their lives. The goal of any job should be to learn enough, prove your worth, and make a difference at a company so that they provide opportunity for promotion. Having career advancement tracks and professional development are absolutely essential to creating a culture of employee retention (and job satisfaction). If there is no opportunity to advance, receive a raise, or take on more responsibility, then where is the incentive to become a better employee or stick around once you have mastered the position?
Employee goals. This one goes hand in hand with career advancement but deserves to be its own category. Your employees are people just like yourself. They have dreams, ambitions, and a desire to improve their own lives. The job they take with you is a stepping stone in their lives toward making those dreams their reality. Embrace that. Levi Lusko said it best, “Don’t ask, what if we train them and they leave? Ask, what if we do not train them and they stay?” If working for you is part of a 2-year plan for your employees to move to a new industry, position, or company, then make that the best 2 years of their career. If you show your value as a company and invest in your employee’s goal (whether they include you long term or not) you may just change the way the future plays out. Don’t create a culture of high employee turnover by falling for “… what if we train them and they leave?”
Employee value. You likely hire employees because you cannot do all the work yourself, not because you just really wanted to manage a team of people. This means that each employee is critical to business success. Failing to show each employee how much of a difference they make for the company and why they are so valued leaves them believing that the company doesn’t care about them. There’s no right way to show value, just like there is no right way to make employees happy, but adopting a culture focused on employee value and implementing it from the top will get you on the right path.
Everything that we have discussed starts with management. You absolutely have to start at the top before you see a difference. A manager that doesn’t share your business values or lacks the ability to promote a culture of employee retention can quickly derail business success. Just as you should invest in employees, invest in management as well.
If you are a business owner realizing that your managers are derailing your business and do not know how to fix this, we can help. If you are new to management and want to make sure you promote a culture of employee retention, we can help. If you are a solo business owner and do not want to make these mistakes when you are ready to hire, we can help.
If you are already in the high turnover cycle and you can see your employees about to walk out the door, it is time to make some serious changes. Getting out of this cycle is incredibly difficult if you are unprepared. Remember, coaches and consultants handle both change management and team building. We can come in and overhaul your human resources to create more engaged employees and implement the changes needed to finally break that cycle. Investing will save money by building bosses that do not make employees quit.
