Employee turnover vs. retention — Which one costs you more?
Friday, January 24, 2014
Almost every retail business owner knows employee turnover is a fact of life, as it is in most any kind of business. It's just multiplied by about 10 zillion in retail. The number of employees leaving their jobs may have dropped during the recent recession, but turnover is already starting to increase again as the economy heals.
The typical view on employee turnover is that it's costly in terms of the time and money to find and train someone new. Another important consideration that's often overlooked is the cost in terms of customer loyalty.
Sometimes customers want to see a familiar face
Customers can usually find your merchandise elsewhere. They can buy it for the same price or a better price from someone else or on the Internet. The one unique thing you can "stock" that customers may return to your store or business for is a superior salesperson that they like and trust. So, staff turnover is costly not only in terms of the money you invest in new employees, but in the potential loss of repeat business.
On average, it takes employees a year to get to the point where they can not only do their job well, but also make substantial additional contributions to the company. When salespeople are no longer developing basic skills, learning operational tasks and procedures, etc., their time and energy are freed up to help build personal trade and take your sales up a few notches.
Creating an environment that fosters success and rewards employees for their contributions has always been the right thing to do. But now the playing field is expanding by leaps and bounds, so being a competitive employer — not just a competitive retailer — is more important than ever.
Retention cost vs. turnover cost
How much are you investing in employee retention? To assess the viability of investing in retention, estimate the cost of employee turnover in your store.
Let's look at an average employee in an average retail store to get a general idea of the cost of employee turnover. Your figures may be significantly different, but you can apply the same basic formula.
Meet Johnny. He's on his way out. Johnny makes $8 per hour. He costs you at least an additional 20 percent in government taxes and the benefits you give him out of the goodness of your heart. Now we're at $9.60 per hour.
Lets make a modest estimate and say it takes an employee 60 days to start contributing rather than costing you money. During those 60 days, Johnny worked 325 hours. 325 x $9.60 = $3,120.
After you've invested approximately $3,120 in Johnny, he informs you that he's accepted a job at Veggie Burger Boy, the fast food chain that's sweeping the nation with a hip new approach to fast, fat-free food. Veggie Burger Boy pays $8.10 per hour and has a 401k plan. Johnny has heard he should have already started saving for his retirement. Bye-bye, Johnny.
How many "Johnnys" will you have in an average year? Two? 10? Let's say it's just three. That would bring the total to nearly $10,000. Ouch! So, how much do the employees who hang around have to sell to replace that $10,000?
Maybe investing in ways to make your current staff more successful and a few perks to keep them fully engaged and happy, isn't such a bad idea after all.
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