Is employee turnover just the nature of the beast?

I have worked with numerous companies that have or had employee retention issues without any real understanding as to why they can’t seem to keep good people around.

Most track turnover, some measure it accurately and some even do exit interviews. But very few have a clear understanding of the causes of high turnover rates. Added to that fact, a common attitude seems to exist that turnover in operations and logistics may just be the “nature of the beast.”

This attitude often becomes apparent when I am discussing this topic with business owners that seem to have a track record of high turnover rates in the warehouse or in trucking. Ironically, most companies with a high turnover rate in operations may find they have higher than desirable turnover in their sales and administrative forces as well.

If this is beginning to sound familiar, here’s some advice. There is no such thing as the nature of the beast. It’s time to take a long and hard look at the value you place on your employees and your market competiveness.

The acid test

Ask your employees if they think they are the company’s most important asset and if they think you are the employer of choice. Do it anonymously. You might be surprised what is revealed. Regardless of what you might believe about warehouse personnel or even truck drivers, I am here to tell you having a high turnover rate and being an employer of choice is an oxymoron.

Once you elect to solicit input from your employees you not only have to listen to them, but you must act on the results. That doesn’t mean you have to acquiesce to every wish, but you must acknowledge the input and create a plan to address legitimate issues of concern. Failure to do this will not only cost you credibility and integrity, but it will compound your turnover problems.

It isn’t easy to take the blame for high turnover. I know the majority of CEOs, presidents and owners value their employees. This is true even in many of those high turnover companies. Remember the old cliché “The buck stops here?” If you aren’t responsible, who is? It isn’t your human resource manager (if you have one). It’s your responsibility to ensure the culture and environment your company is built on releases the power of profit stored in every employee that works for you.

The maximum force of that power of profit cannot be released unless you actually believe your employees are your most important asset and you demonstrate that belief in everything you do.

I once had an owner argue with me that he treated his employees like family, yet his sales force was a revolving door. His key management team had only one person with more than 10 years of tenure and his overall (unplanned) turnover exceeded 35%.

I understand everything you do as a company centers around profitability. However, if you are struggling with a high turnover rate, you must come to the understanding that your employees may not profit, but without your employees there can be no profits. Start by building a culture and environment based on the following principles:
  • Trust your employees. Demonstrate that trust with empowerment and delegation. Do not micromanage.

  • Respect your employees. Demonstrate by valuing their opinions and ideas. Learn to really listen to them.

  • Give credit where credit is due. Recognize not just extraordinary effort or the occasional home run. Recognize individual efforts in a sincere and public fashion.

  • Create learning opportunities. Take a risk. Assign employees tasks that may stretch their talent and then coach them (not manage) through the process.

  • You don’t have all the answers. Ask for help, advice and input from your employees.

  • Say “Please,” “Thank-you,” “Can you help?” “What do you think?” “What would you do?” Demonstrate this with humility, compassion and sincerity.

Acceptable turnover rate

The answer to that question depends on many factors including the unemployment rate, your individual market, the type of business you are in, the external environment, individual job function and even something as simple as the neighborhood your plant is in. Here is my general opinion as to what your unplanned (employees leaving by their own decision) turnover rate should not exceed.
    Outside sales…20%

    Inside sales…15%

    General administration…20%


    Truck drivers…25%

    Middle management…20%

    Executive management…15%

I once had a candid discussion with the CEO of a smaller company ($25 million in sales) and he proceeded to give his opinion as to the competency of his entire management staff, which consisted of 11 employees. He made exceptionally negative comments about nine and said the other two were average at best. I told him the solution to the problem was simple. “We need to replace the CEO.” He decided not to hire me.  

What's the answer?<

So how do you consistently attract, recruit and retain good people? It isn’t easy, but it’s not impossible. These guidelines will help achieve recruiting success and improve retention rates. Being an employer of choice is earned and it’s not cheap. Invest in your employees. When you feel that nagging tinge of reluctance at budget time, remember the following formula for high turnover replacement costs.

  • Replacement cost = 1.5 times annual salary.

  • Example: $50,000 (annual salary) X 1.5=$75,000 X 100 employees=$7.5 million.

    Be on the lookout for that next employee. He or she may be working at the local convenience store, at the local restaurant as a waitress or waiter or it might be that individual you met at the recent trade show. The best employees generally already have jobs unless they are in transition. I know a CEO that carries two sets of business cards. On the back of one is the following statement:
      “You act like the type of person that would fit in at our company. The type of person we are always looking for. If you would be interested in pursuing an opportunity at our company; call 111/111-1111 and ask for Joe Job in human resources. Tell him you have my card and he will schedule you for an interview.”

  • Recruitment, retention and pay

    Recruitment and retention is the responsibility of every manager at your company. Make sure all your managers are aware of that responsibility and hold them accountable. Create some form of recruitment incentive for all employees. Pay them half when their recommended candidate is hired and half after six months.

    Establish a buddy system for new employees. Once the employee has been on the job two weeks have them select a buddy mentor to teach them the ropes. This isn’t skills training, it’s culture training. Reward the buddy with a monthly bonus for the next two months. The most critical timeframe for new employees that are making a decision whether to stay at your company or begin looking again is the first 60 days. Can you imagine how they will be welcomed by other employees when there is an opportunity to get a two-month bonus for coaching the new hire?

    In terms of money, saying you can’t afford to pay at or above midmarket wages is an overused excuse. It isn’t always about money. Employees want to be paid well, who doesn’t? However, many surveys rank pay as the third, fourth or fifth most important reason to work for a company. Recognition, praise for work well done and a sense of belonging are all more important factors to most people.

    That doesn’t mean you can be the cheapest in the market, but it may mean you don’t have to be the highest either. Drink your own Kool-Aid when it comes to selling your value propositions. Isn’t that what you tell your salespeople when they face price objections?

    Your company has value propositions too. Figure out what the value propositions are for working at your company. If you can’t figure them out, then you have a problem. The goal is to create the kind of culture and environment that will support becoming an employer of choice.