Employee Retention Is Key To Companies? Bottom Line

When it comes to attracting the right employees, the biggest draw might be pay, but money doesn’t buy happiness. Companies have to offer competitive pay, a comprehensive benefits package and a desirable working atmosphere to keep their employees.

And if those qualities retain employees, then it might cost just as much to lose employees as it does to skimp on the benefits and pay.

According to the Employment Policy Foundation in Washington, D.C., employee turnover costs average 25 percent of an employee’s annual salary. A manufacturing employee with an average salary of $26,500 would cost about $6,625 to hire and train.

Costs

In Benton County, there were 652 job changes in the manufacturing industry for the third quarter of 2004 through the second quarter of 2005, ranking it above all other industries according to the U.S. Census Bureau.

Alpha Packaging Inc. in Greenwood does specialized packaging for clients. About 90 percent of the work done at the facility is manufacturing, said President Mike Stec.

Stec’s company, which began in 1987, has 139 employees, much of whom have been there since the start of the company. And his turnover rate is about 5 percent, he said. That means, out of his 139 employees, he replaces about seven of them annually. That may seem high compared to the national average of 2.6 percent in manufacturing as of June this year. But manufacturing is a fickle industry in Arkansas with jobs continualy being outsourced.

Although Stec wouldn’t give an amount on how much it costs to train his employees, he said there’s a considerable amount of training depending on the position. His workers go through safety training, an apprentice program then onto working as a machine helper before becoming a machine operator.

The trucking industry is known for having difficulties retaining drivers — mostly due to the undesirable aspect of being on the road for weeks at a time.

Chris Kozak, president of Willis Shaw Express Inc. in Elm Springs, said the trucking company has a low 70 percent annual turnover rate, which compared to the national average of more than 100 percent, is good for WSE and its 750 drivers. And keeping a low turnover rate is essential when it costs the company about $3,000 to $5,000 per driver to hire and train. That’s $1.57 million to $2.62 million a year in turnover costs.

And costs to replace an employee can come from areas other than training.

“It’s a no-win situation,” Bob McBride, CEO of McBride Distributing Co. in Fayetteville, said about employee turnover. “When you lose somebody, then you have to train the new person, and during that training period time, we try to pick up the slack. Sometimes we might get overloaded.”

The company, which has 40 employees, distributes Budweiser products wholesale to bars and stores in Washington, Carroll and Baxter counties, relying on sales teams to get the products out. That means losing someone in the sales team could mean a loss in sales.

And finding a pool of employees to hire from is scarce in this area.

“Our biggest problem is the employment field is very shallow,” McBride said. “We’re fighting the unemployment rate, which is low. It’s good to have a low one, until you want someone to work, then it’s a Catch-22.”

Perks

“The compensation piece is one factor in [the retention] equation,” said H.B. Fink, a recruitment consultant with the Johanson Group in Fayetteville. “There are other perks as well other than money.”

Most of the companies, big or small, said having an inviting atmosphere is key.

“We’re really family-oriented here, and we understand if there’s a family problem [employees] need to be off for,” Stec said.

He said if an employee has to miss half of the day, they can make up the time during the second shift or on the weekend.

Randy Mullikin, president and owner of the Mullikin Agency in Fayetteville, said his advertising firm tries to create a family-oriented atmosphere for its employees. It even operates out of a restored older home for ambience.

With only nine employees, Mullikin said he has a low turnover rate, except in the art department, where younger adults come in, get experience and move out. But in all other departments, he’s retained some employees for the entire 12 years the agency has been in business.

Mullikin also offers a benefits package that includes health, dental and vision that is paid for 100 percent by the firm. And it even throws in a 401(k) plan that the company matches 75 cents per $1.

Stec said his company is able to offer competitive benefits that bigger companies offer, which is important to employees who may be deciding between two companies.

For McBride Distributing, there’s an emphasis on having good commission rates for salespeople. That’s kept some of his employees at the 56-year-old company for more than 20 years.

But in the trucking business, it’s much more than just fringe benefits to get and keep the best drivers. It’s about being on a personal level.

“Our values are such that we talk to our drivers quite a bit — moreso than I would say other compares our size,” Kozak said. “My philosophy is if you want good drivers, then you got to have good driving jobs.”

One way to make the grueling job of being a truck driver easier is offering more regional and dedicated routes so drivers can have more home time between trips.

And when they come back to the terminal in Elm Springs, Kozak said his door is always open. That and recognizing its employees is part of the reason the company has office workers and drivers who have spent as long as 40 years at WSE.

And Fink, the recruitment consultant, said the non-monetary things such as recognizing employees with rewards and having team outings make them feel like part of the company family.

At WSE, if a driver stays on for over a year, the trainer who trained them and the recruiter who hired them are rewarded.

“We make a pretty big investment in [the drivers] in time and money, and our expectations are that they’re at least going to stay a year here,” Kozak said.