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Employee Retention: Creative methods – financial and otherwise – to keep the best!

 

On the surface, hiring and keeping good employees in today’s competitive hiring market seems simple . . . 

If you just pay more than everyone else, you will recruit and keep the best employees.

Of course, it is not that easy, because if you believe and apply that principle, another business can just outbid you. Believe it or not, money is only one driver of employee employment decisions. 

 

Retention Builds Profits 

Let’s give this conversation some context. Losing a well-trained, successful employee is very expensive. Some considerations:

  • Hiring is costly. For me, I have found that I normally need to make two or three hires to find one really good employee. The cost to market for attracting applicants, interview and vet them, is very expensive. 
  • The cost of bringing on new staff is costly too. The time invested in training new hires costs money. Plus you lose income when they provide poor service while they are learning. It adds up. It is better to pay more and keep your best people. To be clear, paying more to keep a weak employee is not a recipe for success. It can sometimes be necessary to do that if you are short-staffed, but you should avoid it long-term. 
  • There is no guarantee of payback. Paying employees more doesn’t mean you’re necessarily going to get a better employee or improved retention.  
  • Great employees are more productive. They make fewer costly mistakes and the high quality service they provide brings in more customers. Having a team of A Players will have a very positive economic benefit to the company. It is worth creating a culture that will retain them and keep them satisfied. 
  • The payback can be greater than just the dollars you spend. If your cost of payroll Is typically 25% for example and you need to increase wages by 20% to be competitive, you could be moving your cost of payroll to 30%. I use the term maybe because with the 20% increase in wages, if you can hire better quality people and retain them, you will achieve increased sales, plus a lower cost associated with high turnover and a reduction in mistakes. It’s quite possible that you can increase wages and have a net effect of lowering your percentage of wages.

So we see that simply raising wages isn’t the answer. The key to business success is the ability to recruit high quality employees and retain them.

Here are the keys to being an attractive company to work for:  

  • Provide good health insurance. People need it and will leave if you don’t provide it.   Additionally it will allow you to attract high quality talent.
  • Train, Train! Younger generations desire to work at companies where they can grow.  Providing training, which allows your employees to grow, will be a game- changer. Also, today most learning management systems (LMS’s) offer personal development training; some offer personal development courses that you can add on. Having a culture of training will make a big difference and will cost less than losing employees.
  • Offer retaining pay/bonuses. For instance, if you offer a $2.00/hour increase in compensation (retaining pay) on an employee’s work anniversary, the result can be a $4,000.00 increase in pay, which is something employees will find worth staying for. This will cause your employee not to want to leave before a year has passed, which will result in the loss of the retaining bonus. Is it better give someone a pay increase of $2.00 that is not tied to staying, or a $2.00/hour retaining bonus? The retention bonus will cost the same, but improve retention. Also, if the employee leaves early, you will never have to pay the retention bonus.
  • Also offer productivity bonuses. Clearly define key KPI’s (Key Performance Indicators) that your employees should aim for. Those incentive bonuses will enable your employees to earn more while you earn more at the same time.
  • Provide feedback. Employees like to know how they are doing. They want coaching too. Remember, many employees leave because they don’t feel appreciated.
  • Use the 5/1 rule. This means making sure that you provide five pieces of positive feedback for every piece of feedback you give that employees could potentially perceive as negative. This is a simple principle which, in my experience, has provided exceptional improvements in employee satisfaction and retention. 
  • Replace traditional yearly (or twice-yearly) job reviews with frequent touch base meetings. Traditional reviews usually are built around the question, “Tell me what you didn’t do well in the last year.” In contrast, touch base meetings can start with the positive question, “Tell me something you have done since our last touch base that you feel especially good about.” When you shift the paradigm from negative to positive, your employees will feel good about their work, enjoy working for you, and stay with you for the long run. 

In Summary . . .   

There is more to retention than just paying more. With dedication and imagination, you can find many creative ways to get more value from every employee you hire and train and motivate with opportunities to grow. Furthermore, additional compensation doesn’t necessarily mean your business will be less profitable, it allows you to keep the top performers and reduce turnover. 

This is a two-pronged approach, made up of a combination of competitive compensation and a compensation package that offers retention bonuses and productivity bonuses. When you combine that two-pronged strategy with a culture that makes people want to stay, you will create an agile, world-class workforce.

If you are determined to win, I encourage you to apply all the strategies I describe above. 

About Evan Hackel

Evan Hackel, a 35-year franchising veteran is a nationally recognized expert and speaker on franchising. Evan is founder and CEO of Ingage Consulting, and CEO of Tortal Training, a leading training development company. Evan is an active advisor in the C-Suite Network. He is also author of Ingaging Leadership, and host of “Training Unleashed,” a podcast covering training for business. Contact him here, follow him at @ehackel, or call 781-820-7609.