The Cost and Causes of Employee Turnover (and How to Reduce It)

I quit message on adhesive note on office table

Ok, retailers, we have good news and bad news.

The bad news is many retailers seem to be having trouble retaining their staff. According to the Bureau of Labor and Statistics, retail is among the top 5 industries with the highest turnover rate (as of April 2016).

Needless to say, staff turnover is a major concern for retailers. Having a revolving door of staff not only diminishes morale, but it’s quite expensive to replace employees. A study by the Center for American Progress found that turnover expenses from cashiers can be anywhere from $2,286 to $4,313. Meanwhile, the cost to replace hourly personnel can range from $3,372 to $4,291.

To put it another way, “experts estimate it costs upwards of twice an employee’s salary to find and train a replacement.” (Source: WSJ).

These facts don’t look great, but there is some good news: employee turnover can be prevented. And the first step to doing that is recognizing the causes of poor staff retention. We’ve outlined some of these issues below and provided tips to keep your stores well-staffed.

Hiring to wrong employees from the start

For obvious reasons, hiring the wrong employees contributes to high turnover. People who aren’t a good fit for the job and your company will naturally feel disengaged and unmotivated. Too often, companies attract employees who are just looking for a job, or a means to an end. Such individuals don’t have any deeper motivations and as a result, leave the minute something better comes along.

If you’re always employing the wrong people, you should re-assess your hiring process. Think about how you find and evaluate applicants and see if you’re missing any steps or if there’s something you could be doing better.

For example, perhaps your interviews are too skill-focused and fail to evaluate cultural fit. You can fix this by getting to the bottom of why an applicant wants to work for you store or industry. Are they genuinely passionate about your field? Are they open to learning or are they just after a paycheck and nothing else?

You could also utilize behavioral or personality tests to determine whether or not they would fit well into your organization.

The bottom line is if you want new hires to stick around,  set your sights on those who have a genuine interest in your industry. Even if they don’t have all the skills that you’re looking for, they’ll likely be a better fit in the long run if they’re passionate about your field.

Employees can’t see the big picture

It’s not easy to find meaning in your work especially if you’re in retail. As Joshua Evans, Founder and Enthusiasm Expert at Enthusiastic You! said, “it’s difficult to be passionate about folding shirts that some teenager just messed up.”

That’s why managers and store owners need to show employees that that the things they’re doing — no matter how seemingly inconsequential — matters a great deal to the company.

“If you can share with them the bigger picture of helping clients, building relationships, and differentiating your retail establishment from the competition you can get their mental buy-in,” says Evans.

Matt Heller, author of The Myth of Employee Burnout, offers the following an example of what you could say to your staff:

Let’s say you have an employee, Josh, who is very good at resetting the store and displays after large crowds have come through. Recognition that ties his behaviors back to the company goals might sound like this:

“Josh, I noticed how quickly you get out on the floor to reset the displays after a big rush of guests. I really appreciate this! It helps the guests find what they need and ultimately creates a more pleasant shopping experience for everyone.”

Now Josh knows that what he does has a direct impact on the guest experience and the performance of the store, and is much more likely to be motivated to take that action again.

Workers don’t feel valued

Employees — even those who start off motivated — will lose their enthusiasm if they don’t feel valued.

That’s why if someone is doing great work, make it a point to let them know. Tell your staff how important they are to the company and set up initiatives such as an “Employee of the Month” program.

staffturnover-carmax

And if the store is doing well, share the glory with your staff. One company that does this is CarMax. According to Fortune, “When store performance is strong the entire store is recognized with a steak cookout. CEO Tom Folliard and other leaders visit the store, fire up a grill, and serve the store’s associates to thank them for their hard work and dedication in providing exceptional customer service.”

You should also encourage team members to recognize fellow employees. Praise from the higher-ups is valuable, but it’s also motivating for your staff to receive recognition from their peers. At your next staff meeting, why not ask employees if they would like to give kudos to their fellow team members? In doing so, you’re not just ensuring that workers feel valued, but you’re fostering a great work environment at the same time.

And that brings us to our next point…

Negative work environments

Working at retail doesn’t have to be enjoyable all the time, but it shouldn’t be a dreadful experience either.

Strive to build a positive work environment. According to Evans, one of the things you could do is engage employees through humor and lightheartedness.

“If you can make your store the ‘fun place to work’, while retaining your effectiveness, why wouldn’t you? If you truly become the most enjoyable retail place to work, word will spread quickly! Employees will never want to give up their coveted position and you will have a catalog of high-quality retail professionals that would like to work for you,” he says.

staffturnover-nuggetmarket

Consider Nugget Markets. The California-based grocer is thriving and has never made a single layoff in its 90-year history, partly because of the exceptional treatment that it gives employees.

Aside from offering industry-leading wages, Nugget Markets has a fun-loving culture. They hold annual parties at their stores. They celebrate jobs well done on a daily basis. They also treat employees to fun activities such as snowmobiling and whitewater rafting.

With initiatives like that, it’s wonder Nugget Markets sits at #13 on Fortune’s list of 100 Best Companies to Work For.

Poor compensation and benefits

Do your best to offer competitive wages to your staff. For obvious reasons, low pay and lack of benefits can drive people away.

Understandably, your compensation and benefits packages will depend on the economy and your financial situation, so you’ll need to review your books when deciding on compensation and benefits.

But with that in mind, it may be helpful to view staff wages as a sales driver, rather than a cost driver. It’s tempting to cut labor costs when you’re trying to increase profits or reduce expenses, but being too stingy with your staff can cause your operations to suffer.

Remember that properly stocking shelves and serving customers requires significant effort and judgment. Not paying your employees well could discourage them from exerting themselves fully.

As MIT researcher Zeynep Ton put it:

It’s the low-paid employee, not the inventory-management software, who notices that a shelf looks messy or that some of the products are in the wrong place. It’s the low-paid employee who notices that some of the lettuce has gone bad or that there are still signs up for last week’s promotion. It’s the low-paid cashier who can tell the difference between serrano peppers and jalapeno peppers during checkout. It’s the low-paid employee who notices that there are too many customers waiting in the checkout and offers to open an additional cash register. When retailers don’t invest in human capital, operational execution suffers and the company pays with lower sales and lower profits than it could have had.

Lack of advancement opportunities

You’ll lose your best employees if they feel like they’re working a dead-end job. Lack of growth and advancement can demotivate your staff and prod them to look for opportunities outside your company.

To prevent employees from jumping ship, talk to each of them about their career aspirations. Ask about what jobs they’d like to take on, then equip them with the knowledge and skills that would enable them to succeed.

Depending on their needs, you could provide additional training or send them to events that would enrich their career.

Also, remember that advancement isn’t just about promoting someone to the next logical position (e.g. from assistant manager to store manager). As Cara Silletto employee retention expert and founder at Crescendo Strategies puts it, “If we only consider the traditional career ladder approach, employees have nowhere to go if the person ahead won’t get out of the way.”

So be creative with the opportunities you offer your staff. Silletto recommends giving cross-training, special projects, or mentorships. “Today’s workforce likes to learn new things, so if you build in ways to grow their careers inside the organization, workers will be less likely to leave,” she adds.

Next steps

Take an honest look at your workforce and ask yourself if you’re giving them reasons to leave. If the answer is yes, figure out how you can retain them. Or better yet, ask them. Do they need more training? Do they feel valued? How do they feel about their compensation? Employee retention isn’t a project you can take on alone. It requires close collaboration between employers and their staff. So talk to your team and figure out a solution with them.

If you need additional insights on reducing employee turnover, check out our Guide on Training and Motivating Retail Employees here.

What are you doing to keep your employees happy and motivated? Share your tips in the comments.

About Francesca Nicasio

Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.

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