Why Keeping Employees Matters
Even when unemployment is high, it pays to hold on to your employees. Some business people think of employees, especially those at the lower rungs of the ladder, as just so many replaceable bodies. Consequently, they do not pay much attention to keeping employees on the job. Their attitude is that it is easy to replace people who leave, so it isn’t worth the effort to keep them. Just the opposite is true.
In fact, in a recent survey by George S. May International, small business owners said that the biggest challenge they face today is finding and training new employees. They ranked it above “increasing competition,” “finding new customers” and “financing growth.”
The cost of hiring even a minimum wage employee and bringing him or her on board and up to speed is much higher than you would probably think. Studies have shown that replacing an employee costs at a minimum 30% more than retaining one. In fact, it is usually the most underestimated cost that companies face. Add up the costs of advertising, interview time, processing the new employee onto the payroll, orientation and training. These costs can quickly reach roughly 30% of the total salary for the new employee. And if the new hire doesn’t work out, you have to start all over again. As you move into the supervisory and management levels, the costs go up dramatically.
Hidden costs of hiring
Having to hire new employees includes some hidden costs:
- Employees who know the job and the company are far more efficient. They make fewer mistakes, require less supervision and generally get the job done better. A new hire can take months to get up to full speed.
- Long-term employees often are the best source of job applicants. They can steer highly qualified people to you, cutting your hiring costs when you do need to replace someone or expand your business.
- Long-term employees develop good relationships with your customers. This creates customer loyalty. Employees get to know the customers and their preferences, and therefore provide the best service. Furthermore, through these relationships, employees will get feedback about your products and possibly valuable information about what your competitors are doing.
- Experienced employees can steer business your way by telling friends and relatives about your company. They know the firm well and can be your best source of word-of-mouth advertising—the cheapest and most effective way to increase sales.
Consider employees an asset
What this means is that you should consider your employees an asset, just as you do your equipment and machinery.
Indeed, to carry the analogy further, how valuable would your equipment be if you never bothered to perform maintenance? The same is true of your employees. If you don’t address employee retention issues, productivity will drop and your employees will defect for greener pastures.
In a recent survey by George S. May International, small business owners said that the biggest challenge they face today is finding and training new employees.
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