In many businesses, employees are perceived as a required evil – payroll is a liability that is necessary to be in business. Unfortunately, in many service oriented industries (such as retail, food-service, and hospitality industries), this attitude harms the business by increasing turnover, deflating morale, complicating legitimate hiring practices, and increasing employee training costs.  These problems are systemic in many organizations, creating dissension between salaried managers and non-salaried employees and increasing turnover. Another, better, way to view employees is as assets to the business.

Training Costs Money Too

All new employees, even experienced hires, must be trained appropriately. Employees should be trained in the corporate vision, customer service, and the details of their specific job.  Duties that each employee is responsible for performing will need to be demonstrated by a competent manager or trainer, and then must be repeated by the newly hired staff member. Training entry-level workers can often take more than a week of management time, and properly training salaried managers may occupy several months.  In addition to the management time utilized training employees, new hires must be paid during their training.  Make sure that training is streamlined and hiring practices are refined to reduce the cost associated with hiring.  Consider Internet based tools to assist staff training, where appropriate.

Example: Assume that a new bank teller is hired on the first of the month, at an hourly rate of $10 per hour. A senior bank teller, earning $12 per hour, trains the new hire for two weeks before the teller is allowed to work with customers independently.  The bank manager, a salaried manager earning $50,000 per year, interviewed twenty job applicants before hiring the new teller. At the beginning of the third week, more than $2,240 as been invested in the newly hired teller!

Employees Become Lucrative Assets Over Time

Employees are expected to learn new skills while working, often referred to as “on the job training”.  Most work-related skills can be learned on-the-job, including new equipment skills, customer service skills, and business skills.  These new skills are passed to employees through interaction with managers and other employees at the business, and is the foundation of many promotions. Hourly wage workers can grow into Assistant Managers.  Assistant Managers can climb the ladder to become General Managers.  General Managers become District Managers, or Vice Presidents. Each employee becomes a trusted asset, and finding a replacement for an employee that leaves the business will always cost more than the direct salary of that employee.  In addition to training costs, there is an obvious and direct cost when employees are absent and customers are not adequately served.

Example: An assistant manager at a 5-unit hotel chain submits her two-week notice – her resignation.  She has been with the company for over 3 years, and started as a front desk associate. Her initial training occupied more than 60 hours of manager time, and every year the business has wisely reinvested in food-safety training, vendor management training, customer service training and labor management training. An additional 40 hours each year has been devoted to training this assistant manager. Assuming that she makes $40,000 per year, more than $2,500 has been invested in direct training costs. Additional costs will be incurred after she leaves, another manager will need to cover her shifts until a replacement manager is located and trained as her replacement.

Keep Assets (Employees) in Mind While Scheduling Work

When scheduling employees, managers should remember that employees are assets necessary to help the business grow and profit. Employees that excel at certain job duties should be scheduled where their talents can improve business profitability. Employee requests for time off, changes to the work schedule, and holidays should be honored where possible – and the business should establish rules and regulations to facilitate constant communication between employees and managers.

Example: Two managers are directly responsible for the schedule at a nightclub, a bar manager (assistant manager) and a general manager. Employees are easily confused regarding which manager needs to approve time off. Joe, a bartender, is given time off for July 4th to attend an expensive concert with his girlfriend. However, the general manager also approved time off for another bartender, leaving the bar short staffed for the July 4th shift. Joe’s dedication to the business and frustration level over this management snafu will determine whether or not Joe shows up for work on July 4th. This situation was entirely preventable with better communication among staff members and management.

Turnover Is Expensive — Really, Really Expensive

Turnover is not cheap. Indeed, most managers under-estimate its cost and the learning curve of working in a new restaurant. Approximately 70% of the cost of turnover is the loss of productivity before an employee leaves, as the employee’s attitude toward the business becomes detached and fewer customers are served.  Turnover in most hospitality-related industries (restaurants, bars, clubs, hotels) averages around 100% annually – meaning that a store with 30 employees has hired 30 employees in the last twelve months! Using a cost of $2,000 per staff member, that is an annual turnover expense of more than $60,000! Reducing turnover should b e a primary concern for any business.

Example: To recoup the loss of one crew member, a quick service restaurant (fast food) must sell 7,613 childrens combo meals at $2.50 each. A clothing store must sell 3,000 pairs of khakis at $35 to recoup the loss of a single sales clerk. The loss of a more skilled employee can cost much more. If the business employees 30 employees, and maintains an annual turnover of 100%, the business would need to sell more than 228,000 childrens combo meals, or 90,000 khakis to pay for the turnover costs. Some more information about turnover can be found here.

Internet-based scheduling tools, such as TimeForge, can assist managers when building and maintaining labor schedules. These tools can allocate labor appropriately for your business, track employee availability and time off, meal and break periods, and alert employees when their scheduling needs are, or are not, met. Your business will not always be able to cater to your employee’s needs, but constant communication between salaried managers and hourly-wage employees will reduce turnover at your business and preserve the value of your employee assets.  Payroll may be a liability, but employees are business assets.