Ask SCORE: What's to be expected, what's excessive employee turnover?

COURTESY TO THE BELLINGHAM HERALDJuly 1, 2012 

Question: My track record at keeping employees is not too good. I realize that people come and go. But what is normal, and what is excessive turnover? Can I put a stop to this?

Answer: To address your second question, well, no you can't stop it. You certainly can, and should, create working conditions where more people will want to stay with you longer. But "stopping" people from leaving you is not in the cards, at least not since the Emancipation Proclamation. Let's talk about this.

First off, your management style sounds pretty harsh. If employee turnover is a real problem for you, look in the mirror. And why don't you just ask them why they're leaving? We'll talk more about a technique for that shortly.

Second, realize that high employee turnover is very expensive. You have the costs of recruiting, then bringing in and training the new employee. Plus, there's disruption to your other employees; the diversion of your management time; and, of course, confusion for your customers or clients, who like seeing familiar faces.

To get a rough measure of your turnover, count up how many employees you have, on average, at a given time. Then, check your payroll records for last year and count how many W-2 forms you issued. Compare the two numbers. If the W-2 number is a little above the headcount, your turnover is low. An example would be a local architectural firm with 10 people normally on staff, and it issued 12 W-2s. A high-turnover example would be a small fast-food outlet with 30 people on a typical weekly schedule. But they issued 80 W-2s last year.

The meaning of "normal" employee turnover depends on several factors. Here are five:

• The nature of the business. For example, restaurants, hospitality businesses and many retail operations tend to have fairly high turnover.

• Highly seasonal businesses like agriculture and tourism often expect to rehire nearly all their staff anew each year.

• Rapid-growth businesses with many "quick hires" realize that their loss rate will be substantial.

• Many college-town businesses, such as those here in Whatcom County, depend on a reliable stream of new workers.

• Entry-level jobs, by definition, turn over quickly.

Continuing high turnover suggests there may be problems with your recruiting and hiring process. And maybe you need to offer more training, or make sure that you're not over-promising how people will progress, and thus creating your own revolving door.

Now here's the other side: having too-low turnover is also not good, because it invites stagnation. Some manageable level of turnover is healthy. This makes sense, because in a changing business environment you need fresh ideas to remain competitive.

There are several ways to deal with turnover. One of the best approaches is to become skilled at doing an "exit interview." Most all large companies and governmental agencies do this routinely. Here's the scoop. You sit down with the departing employee and discuss their experience with your business, and their reasons for leaving. The employee has some valuable information you need, but it may take some talent and tact for you to bring it out.

Here are some typical exit interview questions.

• What is your primary reason for leaving?

• Is your job description accurate? How could it be improved?

• What training that you received was most and least helpful?

• Which aspects of your job were most and least enjoyable?

• What one thing about your job would you change?

Of course, a person whom you fire, and a person who quits, have very different stakes in leaving your business. So it's important to have different interviewing techniques for those two situations.

A person you're letting go has no real motivation to participate in an exit interview.

Human resource professionals who studied this found that terminated employees often agree to the interview only to avoid being labeled as uncooperative. But they aren't very honest about their feelings.

In HR-speak, an employee leaving to move on to another job typically has a combination of "push factors" and "pull factors." The push factors are the aspects of their job with you that they dislike. The pull factors are the perceived advantages of the new job, like better pay or benefits; a shorter commute; or more opportunity. One purpose of your exit interview is to find these out, and see what changes you could make in your business. You're looking for actionable information.

Two good websites for more discussion are entrepreneur.com and businessballs.com. Enter "exit interview" in their search boxes and see what suits your needs.


ABOUT SCORE

To learn more about managing cash flow, and other small business matters, contact SCORE, "Counselors to America's Small Business." SCORE is a nonprofit nationwide organization with more than 13,000 volunteer business counselors who provide free, confidential business counseling and low-cost training workshops to small business owners. Call the local SCORE chapter at 360-685-4259 to schedule an appointment. For details about the organization,visit SCORE.org.

Ask SCORE is prepared for The Bellingham Herald by Bob Dahms, a business counselor with the Bellingham chapter of SCORE. Submit questions for this column to newsroom@bellinghamherald.com.

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