Placing a Dollar Value on Turnover

Getting to Turnover's All-In Cost

By Sherri Merbach Managing Director, C-Suite Analytics | March 13, 2016

The single greatest step to improve employee retention is to ask first-line managers to achieve a retention goal and then hold them accountable for doing so. This sounds like a foreign language to CEOs and HR executives who continue to ask what more they can give employees such as more money, better healthcare, improved newsletters, or a new career development program. But our research along with the research of other companies proves this is true. Our path is to first place a dollar value on turnover in order to grab their attention to take action.

The truth is, turnover percentages have little impact on hotel executives compared to dollars. Most CEOs look askance at percentages and ask for benchmarks seeking an anchor, some way to make sense of the percentage in front of them. They then learn how their company’s turnover compares to the average turnover for others, and if that comparison is OK they feel OK. Average, though, means mediocre so we have conditioned ourselves that having mediocre turnover is also OK. Which raises this question: Would you feel good if your sales and service were mediocre, too? I suspect not.

Leaving employees create costs regardless of their performances because replacements must be recruited, hired, and trained, and the empty chair during hiring and ramp-up represents no productivity versus at least some while the position was filled. Open positions also cause others to diffuse their attention from their primary jobs by filling in for others.

CEOs should be alarmed with the legitimately high cost of losing talent…and CFOs, too. Let’s connect the dots between high turnover cost and the power of first-line supervisors and make the right choice, that first-line supervisors must be accountable for retention goals.

In various studies the highest percent of managers who are held accountable for turnover in meaningful ways is just 14%. Instead executives take one of two paths: they either place Human Resources in charge of retention or no one. HR’s typical response is unleashing employee programs including exit surveys, benefit reviews, brown-bag lunches, improved company communication, and employee appreciation week. These efforts while well intended do not significantly and sustainable improve retention.

Several studies are available in the macro, from 30,000 feet, about the cost of turnover.
These include:

Hotel Newswire Headlines Feed  

Lisa Cain
Johan Terve
Sheetal Singh
Jason Brown
Randa Tukan
Anne Sandoval
Bernadette Scott
Robert M. O'Halloran
Emily Venugopal
Coming up in April 2018...

Guest Service: Empowering People

Excellent customer service is vitally important in all businesses but it is especially important for hotels where customer service is the lifeblood of the business. Outstanding customer service is essential in creating new customers, retaining existing customers, and cultivating referrals for future customers. Employees who meet and exceed guest expectations are critical to a hotel's success, and it begins with the hiring process. It is imperative for HR personnel to screen for and hire people who inherently possess customer-friendly traits - empathy, warmth and conscientiousness - which allow them to serve guests naturally and authentically. Trait-based hiring means considering more than just a candidate's technical skills and background; it means looking for and selecting employees who naturally desire to take care of people, who derive satisfaction and pleasure from fulfilling guests' needs, and who don't consider customer service to be a chore. Without the presence of these specific traits and attributes, it is difficult for an employee to provide genuine hospitality. Once that kind of employee has been hired, it is necessary to empower them. Some forward-thinking hotels empower their employees to proactively fix customer problems without having to wait for management approval. This employee empowerment—the permission to be creative, and even having the authority to spend money on a customer's behalf - is a resourceful way to resolve guest problems quickly and efficiently. When management places their faith in an employee's good judgment, it inspires a sense of trust and provides a sense of higher purpose beyond a simple paycheck. The April issue of the Hotel Business Review will document what some leading hotels are doing to cultivate and manage guest satisfaction in their operations.