Employee turnover rates will be slightly higher this year compared to a year ago according to the just released Convenience Store News 2011 HR & Labor Study.
Turnover is nothing new to convenience store retailers. Historically high employee turnover was treated as a fact of life and absorbed almost as a fixed expense. But this year stiffer competition for good workers from other businesses is adding to voluntary and involuntary termination. To become more competitive, many retailers have increased salaries and benefits for their store level workers, according to the study.
Convenient stores aren’t the only businesses facing higher turnover. Employee turnover at restaurants is on the rise, according to the latest People Report Workforce Index (PRWI). For the first quarter of 2011, the PRWI found that 47 percent of surveyed companies reported increases in hourly worker turnover and 49 percent recorded higher management turnover.
“We’re entering the era of the disengaged as many employees seek alternatives elsewhere,” said Bob Kelleher, CEO of The Employee Engagement Group. Recent research from Glassdoor.com’s employment confidence survey supports Kelleher’s views.
According to the survey, 73 percent of employees say they will leave their job in the future and more than one in three expect to do so within the next three years.
Additionally, MetLife’s 9th annual study of employee benefits trends found that employees hope to land a new job in the next 12 months as employee loyalty wanes. “Very strong” employee loyalty, according to the study, plunged to 47 percent from 59 percent just three years ago.
Kelleher also projected that businesses will not simply return to their pre-recession turnover levels. For instance, if a company’s traditional voluntary turnover dropped from 15 percent to 5 percent, the 10 percent of the workforce that didn’t leave during the past year is now in queue, and will be in addition to the traditional 15 percent voluntary turnover.
The cost of turnover is expensive. The loss of an employee for any reason hits the bottom line and not in a good way. Replacing an employee not only requires time, money, and resources but it requires more sales to recoup the loss. For example, the loss from just one crew member in a fast food restaurant required the sales of an additional 7,613 children’s combo meals at $2.50 each. A clothing store has to sell almost 3,000 pairs of khakis at $35 to recoup the loss of one sales clerk.
Convenience stores and fast food restaurants restaurants (as well as every business in every industry) must prepare for higher turnover and employee disengagement as the economy improves and the unemployment rate declines.
Employee turnover is not a cost of business than can be absorbed. Studies by American Management Association and others report a range between 25 percent and 250 percent of annual salary per exiting employee. While entry-level, lesser skilled positions are at the lower end of the cost range, turnover at these positions cannot be ignored.
A 2010 study by the Canadian Grocery Human Resource Council pegged the cost of turnover for the front line, part time grocery clerk at $1,300. While $1,300 might not seem like a lot, consider that when turnover is in the mid to high 30 percent range (which it is for many grocery stores), a store has to sell between $32,5000 and $65,000 in groceries to recover that cost (assuming a 2 to 4 percent net margin.)
The costs of employee turnover however can be tamed by implementing best practice solutions which include honesty and integrity tests, pre-employment personality job fit tests for convenience stores and fast food restaurants (hospitality), and employee training.
This article originally appeared in The Total View, a weekly online newsletter that focuses on hiring, management and retention strategies. The Total View is written and published by Ira S. Wolfe, president of Success Performance Solutions and is distributed with permission by The Chrysalis Corporation. Subscribe for FREE to The Total View by typing your e-mail address in the newsletter sign-up box on the right side of this page.