“What if we invest in training and the employee leaves?”
“Well, what if we don’t train them and they stay?”
This familiar platitude, while powerful in a water cooler conversation with co-workers, will unfortunately not inspire management to invest in a much needed employee training program. We can all agree that training is valuable in theory, but management needs to know that it’s valuable in reality with a clear ROI, which is not always easy to prove. This leads to, as Harvard Business Review calls it, “a vicious circle: Companies won’t train workers because they might leave, and workers leave because they don’t get training.”
So instead of trying to prove the value of training programs, let’s look at it from another angle. What is the cost of not training employees, which in turn leads to higher turnover rates?
The cost of turnover
Results vary on exactly how much one employee leaving a company costs. In 2012, an Allied Workforce Mobility study found that the average cost to fill one vacancy was around $11,000. Further studies estimate it costs between 6-9 months’ salary, and others expand that figure to as much as two times the employee’s annual salary.
The bottom line is that it costs money – a lot of money – to fill each vacancy. Josh Bersin, Principal and Founder of Bersin by Deloitte broke down the “total cost” of replacing an employee in a 2013 article and included factors such as:
- Hiring costs: Placing ads, interviewing, and hiring
- Onboarding: Training
- Productivity: “A new person may take 1-2 years to reach the productivity of an existing person”
- Engagement: When employees stay through a period of high turnover, they start to become less productive and engaged
- Errors: Because new employees take 1-2 years to become as productive as an existing employee, they’re more prone to making errors and less equipped to solve problems
- Training: Bersin advises a company should invest at least 10-20% of an employee’s salary in training over 2-3 years
- Culture: With any turnover, employees question why and whether they should also look for a new job
Ask your coworkers what turnover means to them. It likely translates to covering extra work until someone is hired and the new employee is properly onboarded. It means customer service is affected as resources stretch to fill the talent gap. It means sifting through a lot of unqualified resumes and sitting in interviews that may or may not work out. It means, time, emotion and money — all things that impact your company’s bottom line.
How training can reduce turnover
While training isn’t a silver bullet to eliminate turnover, there is proof that it helps significantly reduce it. Harvard Business Review recently detailed an interesting case study showing how the Pals’ Sudden Service fast food chain used a robust and integrated training program to keep turnover rates well below industry averages.
Once Pal’s selects its candidates, it immerses them in massive amounts of training and retraining, certification and recertification. New employees get 120 hours of training before they are allowed to work on their own, and must be certified in each of the specific jobs they do. Then, every day on every shift in every restaurant, a computer randomly generates the names of two to four employees to be recertified in one of their jobs—pop quizzes, if you will. They take a quick test, see whether they pass, and if they fail, get retrained for that job before they can do it again.
The results of this training program are astounding: Pal's churns out customers twice as fast as the nearest competitor and is ten times more accurate than average fast-food restaurant with their orders. Employee retention is even more impressive: “In 33 years, only seven general managers…have left the company voluntarily…Annual turnover among assistant managers is 1.4 percent, vanishingly low for a field where people jump from company to company and often exit the industry altogether. Even among front-line employees, turnover is just one-third the industry average.”
Employee training programs show people the company is invested in their future and builds loyalty which in turn increases productivity. These are valuable gains, but that doesn’t mean they have to be costly. As Victor Lipman pointed out in a post on Forbes: “At its core it’s mostly a matter of good managers taking the person-to-person time to understand their employees … recognizing their skills and needs … and guiding them to fill in the gaps. If it’s done well, the payoff can be substantial in terms of long-term loyalty. If it’s not, the costs can be substantial in terms of long-term talent.”
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