What’s the cost of hiring a new employee? $1,000? $2,000?
Recent studies show that even a $8 per hour employee could cost your company over $3,500 in turnover costs–both directly and indirectly. But where does all that cost come from? Well, let’s start with recruiting. The cost of simply finding the right person to hire can be hefty within itself; you have to pay for advertising, recruiting, and the cost of the recruiter’s time as they review applicants and resumes. From there you’ll have to pay the interviewer (keeping in mind that interviewing takes time as well); you’ll have to cover the cost of drug tests and background checks, and, if you choose to make your new employees take a personality test, you’ll have to pay for that too.
As if that process wasn’t costly enough, once your new hire has officially started, you’ll be expected to provide them with adequate training–one of the costliest investments you can make. Does your new employee now need a desk, chair, or computer? Add those costs to your already staggering bill. But it doesn’t stop there, a recent study by Harvard Business School estimated that typical mid-level managers require 6.2 months to reach their break-even point (ie; the point at which their gains are equal to your losses). That means you can expect at least six months to pass before that new-hire starts to make you any money.
Wow. With those numbers in mind, isn’t it worth your while to improve your employee retention rate? Think about it, employees who stick around for the long haul are not only loyal to you and your business, but they’re saving you the hassle (and cost!) of hiring their replacements. Of course, a 100% retention rate is an unrealistic goal to shoot for (part of being a smart business owner is knowing when to gracefully part ways with those employees who don’t fit your company), but 80 to 90% is a good starting point. Here’s how:
1. Attract the right candidates from the start.
If you’re hiring new employees and parting ways with them several months later, you’re hiring processes could probably use some work. Consider implementing a personality test that clearly defines their strengths and weaknesses. For example; at The Newsletter Pro, Project Managers require a different personality type than Graphic Designers. The same can likely be said for your company. Define what type of person you need for each role and hire based on that information.
2. Motivation is not enough.
Bonuses, office-paid parties, and vacation days are good reward for a job well done (and they’re likely to motivate the employees to produce similar results in the future), but focusing on motivation is not enough. When it comes to your employee retention, you need to take into consideration what could be rubbing your employees the wrong way. Or, in other words, unmotivating them. But here’s the tricky part, not all of your employees are going to be motivated or unmotivated by the same things, and while it’s almost impossible to please everyone (scratch that, it IS impossible) holding monthly meetings to touch base with your employees is a great way to make them feel heard. We recommend holding a clarity day.
3. Don’t burn bridges.
There’s an old saying, “people don’t leave companies, they leave leaders.” And that’s especially true for a small company or practice like yours. Smaller companies tend to feel a greater impact when an employee quits, and because of that, it can be hard not to take their desertion personally. However, it’s important to remain professional in these situations. If they were a valued employee, you never know when they might want to come back…or who they might recommend in the future. Worse comes to worse, you now have a friend in the industry. On that note, always perform an exit interview. You might discover that while they love the company, they don’t love their job, and a simple exchange of titles could prevent them from walking away.
When it comes right down to it, your employees are the heart and backbone of your company. There are a million ways to improve your employee retention rates, but it all boils down to hiring the right people and treating them the right way (the golden rule is applicable here). If you provide them with a healthy atmosphere, a challenging role, and a fun (yet professional) environment, they’ll provide you with all the productivity and loyalty (not to mention longevity) you could ask for.
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