I was recently doing a seminar for small business owners and one of the questions I asked the group: “Do you know your turnover cost?” And everybody looked at me like, “What?” And nobody knew what their turnover cost was. Turnover cost is what it costs you, the business owner, when you lose somebody you didn’t want to lose, and the rule of thumb is one and a half times the person’s salary. At the break, I had a young lady who owned a hair salon come up to me and say, “Jan, help me out with my turnover cost.” She had lost a stylist that she didn’t want to lose, and I asked her how long it was going to take to replace this person, and she said, “30 to 45 days,” and I said, “Well, that’s simple enough. We can calculate the time it takes you to place the ad, interview the people, and get the individual onboarded.”
She says, “Well, that’s not my problem,” and I
said, “What’s your problem?” And she says, “The vast majority of
women who had that lady as a stylist followed her to wherever she went to next.” Apparently, guys, women tend to follow their
stylist wherever she goes. So now I have a different question I have to ask,
and that question is, “How long is it going to take this new person coming
in the door to get to a break-even of the person who left?” And the
answer: two years.
This is what happens in your world all the time. Do you know how long it’s going to take somebody who is replacing the person who that you didn’t want to lose, to get back to the point of break even? And it is a longer time than you think, and you are bleeding money because you have less productivity during this time frame.
And so one of the things that I preach is for you to understand is it’s better for you to keep good employees than to find a new employee, and so developing a culture and a leadership style that helps people want to come to work for you, do quality work, and not leave, is paramount in today’s world.
Having engaged employees who want to come to work and do quality work is paramount to your viability as a business owner or manager. Less than 50% of all new business will be around in 5 years and one of the main reasons is the workforce management practices that are out of touch in today’s workplace. Many businesses today manage people the same way as they did post 2nd World War. Command and Control. That style didn’t work well for the past 70 years and it certainly doesn’t work today. Millennials won’t stay with your business and one of the 7 main reasons they leave is they want a coach and not a boss. You say I can’t keep younger workers I say well whose problem is that. They can leave you and go down the street because their earning expectations are inline with the market.