by Bob Miodonski
Of Contractor's Staff
ST. LOUIS — Contractors should care about employee turnover for two basic reasons: It's expensive and it involves their greatest competitive asset.
"Your competitors can copy everything, including the equipment you sell," said contractor-Bill Raymond who led a workshop on reducing employee turnover at Penton Media's Comfortech Sept. 17 here. "But the one thing you have that they don't have is your people. Your people are the difference."
Raymond, who is co-owner of Frank & Lindy Plumbing & Heating Service in Peekskill, N.Y., told contractors at his workshop that the formula for calculating the cost of losing an employee works out to be 25% of the worker's annual salary plus benefits and taxes. So, an employee who makes $50,000 a year and costs the contractor another $15,000 in benefits and taxes will cost the company $ 16,250 more when he leaves.
"Who pays for this? If it's not budgeted, you pay for it," Raymond said. "Ideally, you want your customer to pay for it."
Contractors can accomplish that by figuring out their company's turnover rate and then charge prices that cover the cost of employees leaving. Contractors can calculate their turnover rate by dividing the total number of employees who left in the previous year divided by the average number of employees in the company for that year.
"I shoot for 20% or less of turnover," Raymond said.
As an owner of his company, Raymond believes that he has control over the factors that make employees want to stay, or leave. A senior trainer with the Nexstar best-practices group, he shared the results of Nexstar's 2003 Employee Satisfaction Survey. Employees rank compensation, benefits, job security, company ethics and communication near the top of the list of why they stay with a contracting firm.
"Who has control of all this stuff?" he asked contractors. "You do. So, why don't we do these things? Either we don't know how or we don't want to."
Since compensation and benefits are so important, contractors should find out what to offer employees by asking them. What workers want may not be more money, Raymond said, but time off or flex time.
"Make it the best in your marketplace, whatever the best is," he added.
Creating a work environment where employees wish to remain requires contractors to have leadership and management skills. The characteristics of a great leader are a commitment to nurturing and developing people, follow-through on promises, and, perhaps most importantly, vision and communication.
"Your job as a leader is to be the ambassador from the future," Raymond said.
The most important tasks of management are:
- Determining the responsibilities and standards of performance for all employees;
- Training and coaching behaviors;
- Holding people accountable for their actions; and
- Weeding the garden.
"Sometimes firing someone is the best thing you can do," Raymond said. "The reaction from other employees may be, 'What took you so long?'"
Another key component in reducing employee turnover is to have fun at work. Raymond invited contractors at the workshop to provide examples of their own fun events. These include: an annual fishing day, a tech appreciation day and bi-weekly breakfasts for all employees.
"The corporate culture is the result of what the leadership and management team does or doesn't do," Raymond said. "When magazines like Contracting Business and CONTRACTOR name their Contractor of the Year, employees always say that they feel a part of the team or a part of the family. It's all about the soft stuff."