Turnover -- Is it the Nature of the Beast.
By Dr. Rick Johnson
Monday, 16th July 2012
I have worked with numerous companies that have or had employee retention issues without any real understanding as to why they can't seem to keep good employees.

Oh, most of them track turn over. Some even measure it accurately. Some even do exit interviews but very few have a clear understanding as to the cause of high turnover rates. Added to that fact, a common attitude seems to exist that turn over in operations and logistics may just be the "nature of the beast."

This attitude often becomes apparent when I am discussing turn over with business owners that seem to have a track record of high turnover rates in the warehouse or in their trucking. Ironically, most companies that have a high turnover rate in operations may find that they have a higher than desirable turn over in their sales and administrative force as well.

My suggestion to you, if this is beginning to sound familiar, is that there is no such thing as the "nature of the beast". It's time for you to take a long hard look at the culture of your company. The value you place on your employees; your competitiveness in the market place. I am not talking about lip service. It is easy to say; "Our employees are our most important asset. We strive to become the Employer of Choice."

The Acid Test

Ask your employees if they think they are the company's most important asset. Ask your employees if they think you are the Employer of Choice. Do it anonymously. You might just be surprised at what they reveal. Regardless of what you might believe about warehouse personnel or even truck drivers, I am here to tell you that having a high turnover rate and being an Employer of Choice is an Oxymoron.

A Strong Word of Caution

Once you elect to solicit input from your employees you not only have to listen to them, you must act on the results. That doesn't mean you have to acquiesce to every wish but you must acknowledge the input and create a plan to address the legitimate issues of concern. Failure to do this will not only cost you credibility and integrity but it will compound your turn over problems.

Look Into the Mirror

I know that it isn't easy to take the blame for high turnover. I know that the majority of CEO's, Presidents and owners do value their employees. This is true even in many of those companies that have high turnover. However, remember the old cliché; "The buck stops here."  If you aren't responsible, who is? Trust me; it isn't your Human Resource Manager, (If you have one).

It's your responsibility to insure that the culture and the environment that your company is built on releases the power of profit that is stored in every employee that works for you. The maximum force of that power of profit cannot be released unless you actually believe that your employees are your most important asset and you demonstrate that belief in everything you do.

I once had an owner argue with me that he treated his employees like family. Yet his sales force came and went like a revolving door existed. His key management team had only one person with more than ten years of tenure and his overall (unplanned) turnover exceeded thirty five percent.

I told him that if he treated his employees like family then he could probably be arrested for being an abusive Father.  I understand that everything you do as a company centers around the profitability of the company. However, if you are struggling with a high turnover rate, you must come to the understanding that your employees may not be profit but without your employees there can be no profits.

Rest assured that I understand that you can't baby sit everybody. You can't give every employee everything they want. Well, here's some exciting news. You don't have to. Start by building a culture and environment that is based on the following principles:

  • Trust your employees --- demonstrate that trust with empowerment and delegation. Do not micro manage.
  • Respect your employees --- demonstrate that respect by valuing their opinions, their ideas. Learn to really listen to them.
  • Give credit where credit is due --- demonstrate that by recognizing not just extraordinary effort or the occasional home run but recognize individual efforts in a sincere fashion and do it publicly.
  • Create opportunities to learn --- demonstrate your willingness by taking a risk, assign employees tasks that may stretch their talent and then coach them (not manage) through the process.
  • Recognize that you don't have to have all the answers – demonstrate that recognition by asking for help, advice and input from your employees.
  • Learn to say please, thank you, can you help, what do you think, what would you do --- demonstrate this with humility, compassion and sincerity.
Yes, dealing with humans means that sometimes they do stupid human things. But, even though you may be the CEO you can do some stupid things sometimes as well. After all, you are human too; aren't you? You never get too old to do something stupid.  Your responsibility is to have a personal and corporate commitment to recruiting, training, motivating and retaining the best employees you can possibly get.

So What is an Acceptable Turn Over Rate?

The answer to that question is that it depends. It depends on many factors including the unemployment rate, your individual market, and the type of business you are in, the external environment, individual job function and even something as simple as the neighborhood your plant is in.

However, I will give you my personal general opinion as to what your unplanned (employees that leave by their own decision) turnover rate should not exceed. (Remember – this is unplanned turn over)

Outside Sales ------------------------------- 20%
Inside Sales --------------------------------- 15%
General Administration -------------------- 20%
Operations ---------------------------------- 30%
Truck Drivers ------------------------------- 25%
Middle Management ----------------------- 20%
Executive Management ------------------- 15%

I once had a candid discussion with the CEO of a smaller company ($25 million in sales) and he proceeded to give his opinion as to the competency of his entire management staff. It consisted of eleven employees. He made exceptionally negative comments about nine of those managers and the other two managers on his staff, according to him, were average at best.

I told him the solution to the problem was simple ------ " We need to replace the CEO." 

He decided not to hire me!

What's the Answer?

So how do you consistently attract, recruit and retain good people?  It isn't easy but it's not impossible. Follow these guide lines and you will have success at recruiting and your retention rates will improve. Being an employer of choice is earned and it isn't cheap. You have to invest in your employees. So, when you feel that nagging twinge of reluctance at budget time; when you are looking at employee training, education and development, remember the following formula for high turnover replacement costs.

Replacement cost = 1.5 times annual salary

$50,000 x 1.5 = $75,000 x 100 employees = $7.5 million

Be on the Lookout

You must always be on the lookout for good personnel. You never know where you may find your next employee. It could be at the local convenience store, a waitress or waiter or even that individual you met at the trade show. Remember, the best employees generally already have a job unless they are in transition. I know of a CEO that carries two sets of business cards. On the back of one the following statement is printed.

"You act like the type of person that would fit in at our company. The type of person we are always looking for. If you would be interested in pursuing an opportunity at our company; call 111 111 1111 and ask for Joe Job in Human Resources. Tell him you have my card and he will schedule you for an interview."

It's not Just an HR Thing

Recruitment and retention is not just a Human Resource responsibility. It is the responsibility of every manager that works at your company. Make sure all your managers are aware of that responsibility and hold them accountable for it. Create some form of recruitment incentive for all employees. Pay them half when their recommended candidate is hired and half after six months.

Establish a buddy system for new employees. Once the employee has been on the job two weeks have them select a buddy mentor to teach them the ropes. This isn't skills training, it's culture training. Reward the buddy with a monthly bonus for the next two months. The most critical time frame for new employees that are making a decision whether to stay at your company or begin looking again is the first sixty days. Can you imagine how they will be welcomed by other employees when there is an opportunity to get a two month bonus for coaching the new employee?

We Can't Afford to Pay at or Above Mid-Market Wages

This is an overused excuse. It isn't always about the money. Of course employees want to be paid well, who doesn't? That is natural and normal.

However, many many surveys have been conducted that rank pay 3rd, 4th or 5th as the most important reasons to work for a company. Recognition, praise for work well done, a sense of belonging is all more important to most people. That doesn't mean you can be the cheapest in the market but it may mean you don't have to be the highest either. Drink your own Kool Aid when it comes to selling your value propositions. Isn't that what you tell your sales people when they face price objections. Well, your company has value propositions too.

Figure out what the value propositions are for working at your company. If you can't figure them out then you have a problem. Seek outside help to create the kind of culture and environment that will support becoming an employer of choice.

Rick Johnson, expert speaker, wholesale distribution's "Leadership Strategist", founder of CEO Strategist, LLC a firm that has helped hundreds of clients create and maintain competitive advantage. Need a speaker for your next event, E-mail rick@ceostrategist.com.  Don't forget to check out the Lead Wolf Series that can help you put more profit into your business.

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