How much fun is it when several employees elect to leave within months of one another? The answer: Not much.
And with unemployment below 5 percent for the first time since before the recession, it’s especially difficult now to replace those leaving for greener pastures. There are simply fewer people looking for jobs. Those with skills and a work history have their pick in most parts of the country.
It can be disruptive when one employee leaves, but that effect is magnified exponentially when several leave at around the same time. “Frequent voluntary turnover has a negative impact on employee morale, productivity, and company revenue,” notes the Zane Benefits website. The reason is simple: “Recruiting and training a new employee requires staff time and money,” the site notes. And among industries of all kinds, construction is one of the handful where turnover is highest, Zane says, calling attention to information from the Bureau of Labor Statistics, which points out that “turnover is highest in industries such as trade and utilities, construction, retail, customer service, hospitality, and service.”
Not Just a Nice-to-Have
So if you, as a home improvement or remodeling company owner, are reluctant to commit funds to training workers, think of it this way: Would you rather have to spend that money to replace people? Not to mention the stress involved in losing valuable employees, then recruiting their replacements, and then … training the replacements. Wilhelm Schnotz at the Houston Chronicle puts it this way: “Hiring and training a new employee can be very expensive, undermining profitability, so it’s important to consider employee retention efforts to help curtail unseen costs that come with new employees.”
Do employees really leave because there is no professional development where they work? Yes. In fact, it’s one of the biggest reasons why the best leave. A story by Laura Troyani in Forbes last September lists five reasons employees leave. Reason No. 5: Lack of professional development opportunities. “Professional growth opportunities aren’t just a nice-to-have,” she writes. “They are a need-to-have. Employees that reported having access to either internal or external professional development were more than 10% more likely to stay with their current employer. And lacking cross-training results in employees being 10% less likely to stay.”
Cost of Losing Employees
Turnover costs essentially result from lost productivity. When an employee informs you he or she is leaving, you may view it as a matter of inconvenience rather than as an expense item. But it is an expense item. Let’s put a number to it. “For all jobs earning less than $50,000 per year, or more than 40 percent of U.S. jobs,” notes Suzanne Lucas of CBS News, “the average cost of replacing an employee amounts to fully 20 percent of the person's annual salary.” She cites a think-tank report that looks at 31 corporate case studies. But the 20 percent figure is pretty much a consensus among those who track these statistics. A study by the Center for American Progress found that the average cost to replace an employee, regardless of salary or position, is 21.4 percent of the employee’s salary, as measured in studies from 1992 to 2007. And it also found that there’s not much difference, percentage-wise, between the cost of replacing a top manager versus replacing an entry-level worker—one or two points at most. “The cost of employee turnover for businesses is high, regardless of the level of wages being paid to the departing or incoming employees,” note authors Heather Boushey and Sarah Jane Glynn. “Workplace policies that improve employee retention can help companies reduce their turnover costs.”
Cost and ROI of Training
Among those policies are opportunities for professional development—that is, training—which equates, in the eyes of employees, to increased skill levels, competency, and advancement. Providing employees with a means to acquire new knowledge and skills does a few things for you and for them. It makes them more productive, hence valuable to your organization. Say, for instance, you pay for your marketing person to attend a one-day seminar on online leads. The result? More and better online leads. Or you send a new salesperson to a sales training bootcamp, such as the one-week training offered to members of Certified Contractors Network. Training, for home improvement companies, can mean a lot of things, from classroom instruction, tuition reimbursement, webinar attendance, field training in best installation practices, or simply bringing a sales trainer in to work with your sales team for a day, or taking that team to the factory where the product(s) they sell are made.
What experts call “Learning and Development” leads to “higher customer satisfaction, more innovation, lower costs and faster growth,” notes Danielle Bullen in “How Top Companies Make the ROI Case for Employee Training” published at the website of corporate trainer Skilledup.com. “Training,” Bullen notes, “needs to be a strategic priority for it to be effective.” That is, it needs to be aligned with the strategic goals of your organization, whatever they may be, to yield the kind of ROI that makes training more than worth your while.
How much do companies spend? The 125 companies ranked at the top by Training magazine for employee development had a mean training budget of 6 percent of payroll. And these are the big spenders. In its 2014 Industry Report on training, by company size and industrial classification, the magazine reports that all companies spent an average of $976 per learner in 2014, with smaller companies spending more on training than midsize and large companies. That figure is in the same ballpark as the $1,208 per employee cited by Simon Casuto of eLearning Mind, an e-learning program developer. But, Casuto notes, “the truth is that the costs to truly train an employee vary widely—and in some cases may be much more than necessary. Since training is only as effective as its content and delivery method, the true cost of ineffective training might be much, much more.” In other words, you could spend money on training and realize few if any results. Casuto advises that “relevancy, speed, and efficiency can stretch training dollars to ensure that companies don’t spend more than they need to. Perhaps it’s not a matter of spending more on training, but making sure that every dollar counts toward creating talented, skilled employees who can act—starting now.”