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What does a change in staff really cost you?

If you’re like the typical store, payroll to run your business will be in the area of 15-17% of your total sales achieved. (If it’s not then contact us as we can advise you on how to get the staffing mix right to keep this cost under control).

Unfortunately that’s not where it ends. The true cost of staffing, and in particular of staff turnover, can be considerably higher and is difficult to put an exact amount on.

Let’s say the worst happens and one of your best sales staff decides to leave. You now have the cost of recruiting the replacement. Depending on how you handle this, the cost may run into the hundreds if not thousands of dollars as you place advertisements or use a recruitment service.

You then have the cost of your time in preparing advertisements, reading resumés, following up on references and interviewing candidates – again this hidden cost will most likely number in the thousands when you consider the lost productivity

You will then face the cost of training the new person, be it external or internal costs, such as yourself or an experienced sales person spending time alongside them, exit costs, holiday pay and benefits for the former employee who leaves, a period of lost sales while the new person comes up to speed and, possibly, a permanent loss of sales if they are unable to achieve the results that the former employee achieved.

Would you like to hazard a guess as to what all this may cost? I’m not sure I’d like to.

The upshot is that keeping staff members, even those who aren’t star performers, can be considerably cheaper than going through the expense of replacing them. It’s best, where possible, to keep them happy in the first place.

So why do they leave?

It’s not always for the reasons you may think. Research has proven that although money is often cited as a reason in water cooler grumbles to work colleagues, it’s often other factors that have a greater influence.

The following are cited as some of the biggest reasons why staff leave a business:

  • Lack of career advancement opportunities
  • Don’t feel their opinion is valued or they are listened to
  • Poor training
  • Overworked
  • Poor resources and equipment
  • Lack of teamwork
  • Poorly paid
  • Poor communication

The interesting thing is that when employees are well paid but face some of these other major issues they are as equally frustrated and likely to leave as employees facing the same issues but poorly paid. Employees who are poorly paid but feel satisfied in terms of the other areas are only slightly more likely to leave than employees who are well paid in the same environment.

This illustrates that although pay rates may be a factor it’s not a major influence; throwing more money at people in an unhappy environment doesn’t make the issues go away.

I know one store owner who hired 3 staff over a period of time from another local retailer in an unrelated industry. In each case the staff member took a pay cut of $3 or more per hour, from above average paying jobs, because the environment they were in was not satisfying their needs.

On the one hand, that provides hope for those who are concerned they can’t match the payrolls that others are offering. If you want your staff to stay you need to address a few key issues:

Listen to them – It’s one of the basic needs of human nature that we all want to be heard and have our opinions valued. How else do you explain the meteoric rise of social media? Listening to your staff’s issues and concerns can be the single biggest factor in them deciding to stay or leave.

Get them involved – Secret societies don’t work. I often compare businesses that don’t share information with staff to coaches who expect a team to play a game without knowing what the scoreboard says. You don’t have to open up the financials, but giving them some key yardsticks of how things are going and what you want to achieve will go a long way to achieving better results in your business. You’ll be surprised how they blossom.

Create a team environment – If the environment isn’t right, it’s seldom the trouble maker who leaves; it’s normally the ones you don’t want to go. Showing leadership means creating the right environment, making sure everyone is treated fairly and are pulling their weight, and dealing with those who don’t commit. You’ll gain the respect and commitment of your best staff by doing so.


David Brown is President of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it or call 877-569-8657.

 
 

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