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Staff don’t always leave for more money
Staff don’t always leave for more money

The real cost of changing staff

What is the cost of replacing an employee? Surprisingly, it can add up to a lot more than just the loss of some sales and a few hours of time, David Brown says.

In a typical retail jewellery store, payroll will be in the area of 15-17 per cent of total sales achieved. If this is not the case, managers might need to seek professional advice on getting the staffing mix right to keep this cost under control. But the true cost of staffing, and in particular of staff turnover, can be considerably higher and is difficult to pinpoint.

When any staff member decides to leave, businesses are faced with many costs. Firstly, there is the cost of recruiting a replacement. Depending on how this is handled, recruitment costs may run into the hundreds, if not thousands, of dollars.

There is then the cost of time spent preparing advertisements, reading CVs, following up on references and interviewing candidates. These are non-direct costs, but can again amount to thousands of dollars in lost productivity alone.

Once a suitable replacement is found, businesses then face the cost of training that person, either externally or in-store, then riding out a period of lower sales while the new staff member comes “up to speed”.

On top of this, there are exit costs, holiday pay and benefits for the former employee who left, and possibly even a permanent loss of sales if the new salesperson is unable to achieve the results set by the previous employee.

Then there’s the possibility that the new staff member may not be as good as their resume suggests or they just don’t match the business’ culture and before long employers are hunting for a new staff member all over again.

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. With this in mind, it’s best to try to keep employees happy.

So why do they leave? It’s not always for the reasons one may think. Although money is often cited as a reason in water-cooler grumbles to work colleagues, research has shown that it’s often other factors that have a greater influence.

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

•    a lack of career-advancement opportunities;
•    a feeling that their opinions aren’t valued or that they aren’t heard;
•    they feel poorly trained;
•    they feel overworked;
•    the resources and equipment on-site are inadequate;
•    there is a lack teamwork;
•    there is a lack of communication;
•    they are poorly paid.

Interestingly, when employees are well paid but face some of these other major issues, they are just as frustrated and likely to leave as employees facing the same issues who are poorly paid. On the flipside, employees who are poorly paid but feel satisfied in other ways are only slightly more likely to leave than employees who are well paid in the same environment.

This illustrates that throwing more money at people in unhappy environments doesn’t make issues go away.

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

The bottom line is that managers who want to retain staff should start by addressing the following key issues:
Listen to staff: we all want to be heard and have our opinions valued. Listening to staff issues and concerns can be the single biggest factor in them deciding to stay or leave.
Involve staff: secret societies don’t work. Businesses that don’t share information are akin 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 staff some idea of how things are going and what the business wants to achieve will help improve results.
Create a team environment: if the environment isn’t right, it’s seldom the trouble-maker who leaves. More often than not, it’s the other staff who abandon ship.

Showing leadership means creating the right environment, making sure everyone is treated fairly and is pulling their weight, and dealing with staff members who don’t want to be team players.

Staff will respect managers who do so.

David Brown

Contributor • Retail Edge Consultants

David Brown is co-founder and business mentor with Retail Edge Consultants. Learn more:

Peter W Beck

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