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Articles
Elder-Care Turnover Costs
Turnover costs money. It costs to recruit. To interview. To select. To train. And don’t forget: What does it cost because a new employee isn’t working up to full speed? What kind of price tag goes with the loss of a customer? What revenue was lost because something didn’t get done in time, or done right?
When asked how much it costs to recruit and hire a new person, hiring managers often respond with figures varying from 20 percent to 150 percent of the position’s annual salary. What’s more important, however, is what it costs you and your organization. Here’s how you can do your own research.
Identify the real cost.
Think of a recent and specific situation in which you had to replace an employee. Maybe the wrong hiring decision had been made. Or, maybe an employee decided to work somewhere else. With that person’s position in mind, complete the following worksheet.
For each item, assign a dollar amount – a realistic estimate is fine, but try to get as close to the actual figure as possible. Do some digging if you need to. Don’t skip over an item just because it takes time to think about the real cost. Each item is important, and each item contributes to the cost of turnover.
You want the real cost – in other words, not only the hard costs (postings, fees, etc) but also the dollar costs for the time a person spends on each listed category. Example: if you’re paying a manager the equivalent of $30 per hour, and it takes the person 15 hours to make the decision to hire someone then the cost is $450.
Add it up. Is your total cost higher than you expected? Now multiply that figure by the average number of people you replace each year. Your costs will go even higher if the person leaving was one of your top performers, or it’s not easy to find a good replacement.
Other Costs of Turnover. There are other costs, beyond the dollars and cents spent in recruiting, selecting, and training. Here are three.
Time. Go back and add up the number of hours you spend on advertising, recruiting, interviewing, selecting, hiring, and training a single new employee. It’s probably a lot more than you thought.
Now think in terms of how much extra time you could have if you cut turnover in half. All of a sudden you would have lots of extra hours. For yourself. For your kids. For your friends. Your hobbies. The things you said you were always going to do when you had time….
Owners and managers who have reduced turnover don’t have to put in outrageous hours. Time spent recruiting and hiring and training can be spent on other areas, like community relations, attention to other aspects of the business, or just plain time off for relaxing and re-creating.
You figure it out. If you could have 5-10 more hours each week, what would you do with it?
Customers. High turnover costs you clients. In two ways. First, high turnover costs you clients because new employees seldom do the job as well as experienced employees. They make mistakes. They don’t work fast. They forget things. They can irritate customers. And if a regular client gets bad service several times in a row, because all you have are new trainees, the regular will find another place to be regular.
When you have employees who stay longer they get acquainted with the regulars. And the regulars get accustomed to the same faces. They like that. And they stay as regulars.
Marketplace Standing. If you’re constantly advertising for new help, if there’s a steady string of new faces that greet customers, and it’s not because you’re growing, pretty soon the marketplace wonders why.
The usual conclusion is that there must be something wrong within the organization. The word gets around. And the best people, the ones you want on your team, go someplace where turnover is low or non-existent. After all, if there’s little turnover, it must be a great place to work!
How much turnover is too much?
How much can you afford?
Remember that turnover doesn’t just cost dollars – it costs in total organizational effectiveness. Even your own productivity drops as you take time to introduce new people to the right procedures, or you stop to coach the newest employee, or you get tired of working overtime because there aren’t enough good people to fill the vacancies.
Fortunately there are ways to reduce turnover.
Reducing Turnover.
Here are three things you can do to reduce turnover, particularly of positions within the senior care industry that typically have high turnover.
1. Examine your pay range for the positions of highest turnover. Sometimes organizations can reduce turnover simply by increasing their hourly pay. How much? If your competition is paying $10.50 an hour, then raise your pay to $10.80 an hour or even $11. That will still be less than it costs you to replace a person. And it will help you keep the best people.
2. Remember to say “Thank You,” and “Job well done.” Many of the hourly people you hire don’t get a lot of praise – but they like it! Just like you do. When a client tells you what a good job a care provider is doing, tell the provider! Right away. Within minutes, if you can. Include within your message a gift card to Wendy’s or a local pizzeria. It doesn’t’ need to be expensive to be remembered and commended for doing a good job.
3. Make sure your managers know how to manage. Most employees leave a job because they don’t like their manager. If you’ve noticed that turnover in one manager’s unit is higher than the others, then you probably have a problem with the manager, not the employees. One way we’ve evaluated managers is to give employees a piece of paper and ask them to complete the sentence, “I wish my manager would…” in as many ways as the person wants. After the papers have been turned in anonymously you know the training needs of your managers.
But first you need to find out what turnover is costing you. Here’s the Worksheet:
Cost of Turnover Worksheet
COST CATEGORY
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ITEMIZED COSTS
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TOTAL COST |
Decision costs: Discussing the situation, figuring out how best to handle it, and finally coming up with the decision that a change needs to be made or a particular position filled. |
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Termination costs: In the case of a termination, include severance, outplacement, payment for unused vacation days, and other benefits. |
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Productivity costs: Lost productivity and/or lost business while the position is vacant, while someone temporarily fills the position, or while someone attempts to handle the duties in addition to their regular work. |
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Recruiting costs: Newspaper ads, agency fees, lunches, time spent calling other people asking about potential candidates, preparing listings, reviewing job descriptions, placing postings, attending job fairs, and so on. |
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Screening costs: Responding to phone calls, screening of resumes, providing information to potential candidates, and selecting “top candidates.” |
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Interviewing costs: Reviewing resumes, developing interview questions, contacting the finalists, scheduling, preparing for each interview, and conducting the interview (figure in the cost for each person participating in the interview and each level of interviewing – screening interview, decision-making interview, etc). |
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Selection costs: Evaluating the candidates and making the actual final selection. Be sure to include the several discussions you have with others. |
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Job offer costs: Time spent making the offer, negotiating the final agreement, getting approvals, writing up the offer, and setting the start date. If applicable, include moving expenses as well as any expenses in arranging housing visits, new office furnishings, and so on. |
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Training/Orientation costs: Introducing and orienting the new employee to the company and to the work unit, training the person for the position or on special equipment or software. |
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Learning curve costs: What are the costs because of reduced efficiency while the new employee learns the job? Include any lost business estimates because the new employee didn’t know how to handle a client, or the new person didn’t know how to get the task done most efficiently, etc. |
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Other turnover costs that you’ve identified but which haven’t been specifically mentioned above. |
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TOTAL COST of Employee Turnover: Add it up!
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Worksheet developed by Terri A Deems, PhD and Ócopyright 2011 by WorkLife Design. Include attribution when copying.
Richard S Deems, PhD, is CEO of WorkLife Design with offices in Arizona, Iowa, and Illinois. A popular keynote and seminar leader, he has been quoted in over 300 media outlets including New York Times, Wall Street Journal, International Herald-Tribune, The Ladders, Atlanta Journal Constitution, Des Moines Register, and even The Sporting News.
Terri A Deems, PhD, is Richard’s daughter and a specialist in organizational efficiency and workplace development. She has presented seminars nationally and internationally based on her research on The Vital Workplace. Terri and her father are co-authors of the 5-Star Book Leading In Tough Times, on both Eaton’s and Microsoft’s Recommended Reading lists.
2012 WorkLife Design ~ All Rights Reserved
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