The good news is that the economy continues to improve. For labor-intense industries, however, such as health care, hospitality, and retail, this rose is not without its thorns in terms of substantially increased difficulty recruiting enough qualified workers to meet staffing needs. While the numbers may be boring, they make the point that leaders in service industries need to rethink how they think about labor:
July 2018’s red flags by the numbers include:
- Unemployment rate of 3.9%
- Youth (16-19 years) unemployment at a 52 year low
- 2 out of 3 teens (16-19 years) are not in the labor force – a twenty year low
- 670,000 fewer less part time workers than in July 2017
- Growing demand for service workers compared to July 2017:
- Foodservice: ↑ 230,000
- Health care: ↑ 286,000
- Retail: ↑ marginally
What Do the Numbers Tell Us?
In a few words, the answer is that if a person wants a job in health care, hospitality, or retail, s/he can get one; making the effective unemployment rate in these industries zero. It’s time to panic or, better, it’s time to rethink our approach to staffing. The ways of thinking can be pictured as a bucket, and looks something like this:
The Employee Bucket has Holes in it!
Your employees are in the bucket. The flowing faucet represents additions to your staff, while the holes in the bucket represent losses or turnover. To the extent that your employee losses exceed your additions, you are in a world of hurt; i.e., short-staffed and unable to meet customer expectations. For a service company, this situation is deadly as customers and frustrated employees abandon your company for greener pastures. In the old way of thinking, you would try to open the faucet a bit more and, perhaps, buy customer loyalty through discounting.
What is Going On?
I have been wondering for many years why it is that the leaders of service companies tolerate high employee turnover. It has never made sense to me; especially, if you recognize that employees are the faces, hearts, and hands of your consumer brand. My conclusion is as simple as that picture of a bucket: Many leaders are looking at the wrong end. Instead of keeping the bucket full by consciously building employee retention, they focus on filling it through recruitment. Wrong thinking – and deadly during a period of full employment – and short-sighted in all economic situations.
Up until the recent economic recovery, the staffing efforts of many companies could be summarized as “fill the bucket.” That is, recruit faster than employees leave. This is the replacement model of staffing, and one that no longer works, if it ever did. Recruiting is expensive because new employees are expensive – you have to find, train, and grow them into their jobs. In addition, common sense and experience tell us that it’s often the best employees who leave as they can easily find another job. Further, if there are no stable employees – those who stay and know your customers and business – there can be no regular customers. The replacement model of staffing is about quantity and based on the twin assumptions that there is an endless supply of labor and that one employee is pretty much like another employee.
There is another way to approach the problem that starts with recognizing the fact that the only way to earn the loyalty of your customer is to be fully staffed with fully trained employees. This is the retention model of staffing and one that has always worked. It can be summarized as “plug the holes.” This quality approach to staffing that assumes that good employees are worth the effort to retain them.
Hiring to Stay
The first step toward leveling the playing field with respect to your company’s ability to attract, hire, and retain quality employees is the hardest step of all: commit to being the best place to work in town! That’s a serious commitment that involves thinking of your employees as volunteers in your company’s success. What they volunteer is their enthusiasm, hard work, and commitment to your company’s success. These qualities cannot be bought, but you can begin the journey by articulating your intended employee experience. Companies do it all the time with their customers, why not do it for the employees who take care of your customers?
Next comes the work of discovery. This is where you get your arms around the scope, causes, and consequences of your turnover by the job. This is the detective work required to identify good answers to the following questions:
- Why are our employees leaving?
- Who is leaving?
- What are the best practices in our industry for retaining employees?
- What’s the potential return on investing in employee retention?
Once you have a handle on questions such as these, it’s time to create your solutions and organize them in terms of time and resources required. Often, there is low hanging fruit that you can harvest.
For example, one of our customers discovered that their employee onboarding and orientation processes were contributing to a first month turnover, or churn, rate of over 300%. After looking at the reasons for this staggering statistic they improved the hiring process to better educate candidates about job demands and moved to group-focused training in order to more quickly create a sense of belonging among new hires, while more efficiently getting new hires up to speed. After a few months, 30-day churn dropped by more than half – with turnover continuing to decline as the onboarding and training process improves.
Being fully staffed and fully trained (FSFT) elevates employee retention to the status of being a business imperative; that is, something that’s vital to your company’s survival. Unfortunately, many leaders jump to tactical solutions when faced with challenges to a business imperative such as FSFT, looking for a quick fix – sometimes to good effect, but often not. We recommend walking before you run by identifying and focusing on your enterprise purpose such as being “the best employer in town.” When you address questions such as what you want your employees to think, say, feel, and do while working for your company, you have taken a significant step toward building employee retention through the simple expedient of creating a target. We want to help you answer questions such as these on the way to being the best place to work and a memorable brand. We can start by critically looking at what your employees experience in their first 30 days and taking quick action to build an experience they want to continue to be a part of.