The Cost of Employee Turnover

Making the Employment Market a Competitive Advantage for your Company

I was recently driving past an industrial park with my three young boys in tow. I casually noticed that there were several businesses with ‘Now Hiring’ signs posted outside their business doors, and made a comment stating that fact. My oldest son, Bryce, pronounced, “I wouldn’t want to work for any of those companies!” This instantly piqued my curiosity. “Why not, Bryce?” He responded without batting an eye and said, “Well, if they have to put a sign out front, they obviously must not be a very good place to work.” Wow. I had honestly never made that connection before. My 9-year-old challenged me to think that the standard practices of advertising for a position may be sending an entirely different message than what we realize.

Very shortly after my conversation with my son, I was introduced to Matt and Kim Sullivan, owners of Express Employment Professionals, a local franchise based in Green Bay, Wis. Matt and Kim are a husband-and-wife team, and as owners, they have very complementary skill-sets they bring to their clients. Matt’s sales management background is an asset, as he works with area businesses regarding employment, recruiting, and retention practices. Kim’s social work background is a strength, as she works directly with individuals searching for employment or career advancement. The two have a shared passion of “helping businesses find good people and helping people advance in their careers.” The time I spent with Matt and Kim highlighted key areas that every business needs to focus on in today’s employment market.

Before I get into what I learned from Matt and Kim, I want to ask a few questions for you to reflect on. First, why do we work? The answers to that question will be broad and deep, so take time to reflect on that.

I also want you to think about this next question. How often have you heard others, or maybe even yourself say, “He’s just in it for the money”? Typically, when we make a statement like that we’re not being complimentary, am I right?

Now my next question is, are you giving people a reason to be ‘in it’ for more than just the money? Our ideas about people and about what motivates them can create an environment in which those things become true. As your read ahead, spend time reflecting on your own attitudes, but, more than that, think about the kind of workplace culture you want to create for your current and future employees.

Recognize It’s a Candidate’s Marketplace

Have you thought about your competition? I’m not talking in the traditional sense, but understanding that your true competition is the employer down the street. As Baby Boomers continue to retire, the labor market is only going to become more competitive. The demand is already higher than the supply. As a result, employers need to think about not only what differentiates them in the marketplace, but also what makes them stand out to candidates. We talk about customer experience and employee engagement, but have you thought about what you want your candidate’s experience to be like and how you differentiate yourself from other employers? Important to note is that the factors which differentiate your employment opportunity must be relevant to the hierarchical needs of the candidates you are trying to attract.

According to Matt and Kim, the current hiring process in most companies is very impersonal. A prospective employee may go through multiple, impersonal steps just to get their resume and application submitted. Even further, the process is often inefficient and ineffective. If the process is cumbersome and difficult to even apply for positions, employers may miss qualified candidates who apply elsewhere to companies who are easier or faster to engage with or make hiring decisions. Matt and Kim have a belief that “when it comes to attracting new employees, professionalism attracts professionals.” What are you doing to stand out?

Have an Overall Employee Strategy

This was honestly not something that I had thought of before. As a co-owner in my own business, we have a strategic plan for our business, but it’s a whole different thought to create an employment strategy and, born from that, a recruiting strategy and a retention strategy. Can you describe your employment strategy? How are you candidate-centric? Here are some questions that Matt and Kim ask of the businesses they work with:

  • Is your employment strategy aligned with the owner’s mission and values?
  • What is your employer brand image?
  • Does your employment strategy address candidates’ hierarchy of needs?
  • Is your recruiting strategy proactive or reactive?
  • How have your recruiting tactics changed to reflect the market?
  • When do you implement retention tactics?

Understand Your Employees’ Hierarchy of Needs

It is critical to recognize the needs of our potential employees. What’s important in attracting a senior-level executive will be different than what is important to a candidate who is barely making a living wage. In looking at employees’ hierarchy of needs, Matt and Kim made a tough decision, yet one they felt was critical for their employees. Express Employment Professionals will not work with a business that pays their employees a below-market wage. This decision was both values- and economically-based. This was a defining decision, because they did not want to be in the business of providing ‘cheap labor’. They want to be in the business of creating efficiencies, effectiveness, and personalization for both employers and candidates. People will move for $0.25 an hour until they reach a point of financial stability. The labor pool at the lower end of the pay scale is elastic or price-sensitive. Think about the ineffectiveness of a business strategy where you compete only on price with your competition. One can argue that there is no strategy when you’re competing only on price. Why would your employment strategy be any different?

There is a significant cost to employers when they start calculating the cost of turnover. Generally, turnover costs range from 33% to 50% of compensation (including benefits) for non-exempt employees, and 100% to 200% for exempt employees. Express Employment Professionals has a new turnover calculator that allows users to enter a variety of variables, including training costs, separation costs, and replacement costs to help gauge the real impact of employee turnover for a specific position or the company overall (click here for the calculator).  Calculate what you would save in reduced turnover costs by providing an in-market wage. It is a good business decision to do so! Here are some important wage numbers to be aware of:

  • $9.64 is the one adult living wage in Brown County – anything less may be incongruent with aspired values.
  • $10.15 is the minimum wage for Federal contractors.
  • $10.33 is the value of ‘assistance’ programs in Wisconsin – the perverse incentive to not work.

The average wage when an employee feels stable is $14.00 per hour. Getting to the quality of employees that employers want would ideally bring you to $15.00 per hour. This living wage creates financial stability for employees and helps get them focused on growth and professional development – which are entirely different retention factors.

Create Your Employer Brand – Your Competitive Advantage

What kind of employer do you want to be known as? The opportunity exists for employers to achieve a competitive advantage by creating a candidate experience that is easier, faster, and more personal. Here are areas to focus on as you create an employment strategy that becomes your competitive advantage:

  • Recognize it’s a candidate’s market.
  • Recognize all employers are competing for the same talent – the employer down the street is your competition.
  • Define what sets you apart from the other employer that pays the same wage.
  • Be thorough, but also interview faster and more efficiently. In other words, improve your hiring process!
  • Develop strategic partners who provide ongoing qualified candidates.
  • Align your employment strategy to your employees’ hierarchy of needs.
  • Connect with new employees on their first day, so they feel engaged in the workplace culture.

Another resource that will challenge your thinking even further is a TED talk titled, “The way we think about work is broken,” by Barry Schwartz. This video is well worth the nine minutes of time it takes to watch it.

If you need help defining your employment, recruiting, and retention strategy, Matt and Kim Sullivan are a great resource. If you need help defining your organizational values and culture to truly create an employee experience that differentiates you in the marketplace, The Utech Group offers customized organizational development services.  We can provide targeted action steps to align and engage your organization. There is no better time to develop your employment strategy than now. Contact us to learn more.