Labor starved Colorado Springs employers may feel as though this year’s nearly 3,000 local laid off workers have presented them with a kid-in-a-candy-store scenario, but calculating the cost of turnover could turn things sour instead of sweet.
That’s the message Eleanor Lawrence shared with employers during a Colorado Springs Chamber of Commerce Metro Council meeting held last week at the World Arena.
“It’s natural to lose people,” said Lawrence, principal of Human Dynamics, a local human resources management company that provides leadership development and consulting services to health-care corporations. “You have reasons for that.”
Those reasons range from employee relocations to the decision to stay home to care for the family. Either way, training a replacement for an outgoing employee costs the employer about one-and-one-half the amount of the position’s annual salary. And that cost is rarely counted when the employer plans his or her annual budget.
The average turnover rate in the United States, excluding global firms, is between 20 percent and 26 percent, based on numbers collected by the Bureau of National Affairs, said Lawrence. One example given was the health-care industry where the turnover rate is 22 percent. This loss isn’t always included in a company’s financial data. Rather, they tend to look at salaries, wages and benefits, which usually sit at 40 percent to 50 percent of a company’s operating costs. But such figures do not include the total cost of turnover.
The reason, said Lawrence, is because companies don’t want to look inward. If they did, they would have to admit they failed in one area and may not want to make a short-term investment in a long-run return. CEOs are more concerned about the product and the profit, said Lawrence, not employee retention.
The No. 1 reason employees leave a company, she continued, was due to lack of respect. When an employee leaves a company, they are actually “quitting” their supervisor. Competitive wages and benefits are also important to employees. They want to know they are valued in more ways than one. A third reason employees leave their company is because of lack of advancement opportunities.
“The data says leverage is in the supervisor,” Lawrence said.
Long-term planning is essential in maintaining a full work force. Without it, Lawrence said, “We’ll continue to fill positions and we’ll never get ahead of the curve.” She added that every 10 years, career positions experience a shortage. Companies and schools need to entice people into a certain field while it is satiated. This will not only ensure job availability in that field when those people enter the work force, but will ensure that the salaries for those positions are appropriate.
Some companies have learned how to retain employees. For example, Southwest Airlines has a policy whereby spousal teams can work for the company. Other businesses may offer employees non-monetary bonuses as a way of thanking them, such as movie tickets. Others might offer stock options as a form of retention.
“Recruitment and retention go hand in hand,” said Lawrence. “A layoff and reduction in the work force … it tells about your social responsibilities and ethics to your community. You will remember how (the employer) let you go. If (he or she) did it appropriately, you will be interested in working with (him or her) again.”