The Cost Of Turnover Is Higher Than You Think
With the labor market tightening, building service contractors and in-house facility cleaning managers are facing a major problem of finding quality help. Bids need to be competitive and budgets only allow for certain rates of pay.
Yet, if you hire the wrong person, it could have huge ripple effects throughout your organization. Besides the hard costs of turnover, the soft costs can be even more devastating. Everything from erroneous lawsuits, inflated workers comp experience mods, theft, wasted resources, auto accidents, and toxic morale can result from one bad hire.
Unfortunately, it’s easy for employers to be oblivious to the hard dollar costs associated with turnover. One person leaves, you figure out a way to temporarily cover the work, hire someone new, train them and the beat goes on. Right? Wrong.
Not only is this a dangerous mindset, but it allows for high turnover to be acceptable within the organization. However, it doesn’t take long to realize that there is significant work involved in replacing an employee and it absolutely has a direct impact on the bottom line.
Let’s assume that an employee was kind enough to give you two weeks’ notice that they were leaving the company. Let’s examine some of the work involved with replacing that employee:
- Paperwork associated with that employee’s pending exit. Perhaps closing out security credentials, informing clients/vendors, collection of company property (cell phones, vehicles, uniforms, etc), final payroll and accounting tasks linked with the departure. This would also be the time where an exit interview could be conducted.
- Then, that individuals’ duties would need to be temporarily covered once the person left. That could come in the form of hiring temporary labor, paying another employee overtime or A/B time to cover the shift or another method. If you choose not to cover the work, that could result in quality issues.
- A job description would need to be produced or reviewed and updated, it would be posted to various sites (some job search boards with fees), perhaps there would be outreach to recruiters and interaction with job agencies.
- Once the calls or emails started coming in, there would be applications filled out, screening, interviews (maybe several rounds of interviews with various staff members) and then candidate assessment – background tests, drug tests, review of motor vehicle records, contacting previous employers, etc.
- After all that, you think you’ve found your next hire. Great. Hiring and on-boarding begins – more paperwork, personnel introduction, uniforms, workplace orientation, safety training, on-the-job training (systems/processes). During this time, it’s important to note that until the new employee gets fully up to speed, there’s bound to be productivity losses. You may have to cover that work with more overtime. There will also be some work involved with extra supervision and inspection so that early mistakes can be quickly detected and rectified.
That’s a lot of work to fill one spot. Each BSC or in-house facility manager should be able to look at the list above or examine their own internal practices and attach a dollar amount to it. Depending upon your turnover rate and company/department size, you might be shocked to learn that you could have administrative people on your payroll that are spending all of their time and energy simply replacing employees.
Greg Montesano is owner of The Prevailing Group in Stamford, Connecticut. The advisory firm works exclusively with service providers and contractors to uncover strategies that will save money and time, as well as boost the bottom line. He can be reached at firstname.lastname@example.org. Learn more at www.prevailinggroup.com.