Employee retention is one of the most important measures of success for any business owner or manager, but also one of the most difficult to achieve. Why is it such a big deal? Research shows that it costs nearly 20% of an hourly employee’s total yearly salary to replace them when they leave, which works out to roughly $4,000 for someone making $10 an hour. Those costs can add up quickly, and get even higher in a tight labor market.Organizations that have to constantly replace a high percentage of their workforce are playing a costly, perpetual game of catch-up just to field a team, let alone develop its people to a high level of performance. And unfortunately, it’s a situation that many companies employing hourly staff find themselves in. Retailers report a 65% turnover rate for hourly in-store positions, and restaurants are even worse at 70%.
What can managers struggling with turnover do to right the ship? A recent survey may have the answers. Researchers from FSG, a social impact consulting firm, asked 1,200 entry-level hourly employees about their experiences in the workplace, with a focus on what compels them to stick with a job. They ultimately identified five key strategies for companies to lower turnover for hourly employees. Below, we’ll break them down and offer a few ideas for how to implement them.
1. Teach your managers people skills
The hourly employees surveyed said that one of the biggest determinants of their job satisfaction was how their managers treated them -- in fact, most of them said this was more important than how much they get paid. But their responses indicated the positive treatment they want isn’t the norm. Nearly half said they struggled at work because a manager treated them unfairly, while 32% of respondents said they’d lost a job at some point due to unfair or disrespectful treatment. Other surveys paint a similarly grim picture -- one administered by Edelman found that 82% of employees don’t trust their bosses to tell them the truth.
These findings make it clear that managers need to be experts on more than just business operations. They also need to know how to connect with the people they’re in charge of, make them feel supported when the job gets tough, and communicate to them why decisions that may feel unfair are necessary to the business’ success.
Several businesses have had success building these traits in managers through targeted training programs. The researchers behind the survey offer the example of HMSHost, a food and beverage retailer focused on travelers, that saw substantial retention increases in hourly associates after implementing a training program for managers to deliver actionable feedback to their employees. McKinsey and Company points to similar success stories in several industries, from mining to retail banking, suggesting that just about any company hiring hourly staff can benefit from manager-focused training.
2. Allow more flexible scheduling
Every manager knows that employees care a lot about scheduling, but FSG’s survey serves as a valuable reminder of just how important it is to them. 83% of hourly employees surveyed said they’d be more likely to stay at a job that them more control over their work schedule. More specifically, respondents said they wanted more flexibility and predictability in when they work.
Luckily, as a manager, the schedule is most likely under your direct control, so changing it should be doable. The trick is figuring out how to give employees more power over their schedules while still ensuring that the business can always field a talented team with enough people to match the ebbs and flows of customer demand.
The Gap managed to do this successfully when it shifted 28 stores to a radically different, more employee-friendly scheduling policy. Some of the changes included the elimination of on-call shifts, 14-day advance scheduling notice, and the debut of an app to let employee offer unwanted shifts to their coworkers on a first-come, first-served basis. Perhaps unsurprisingly, employees were happy with the changes, but that’s not all -- performance actually improved too, with sales increasing 7% despite no increase in foot traffic at participating stores. We offer more advice on how to implement these scheduling policies yourself here and here.
3. Create opportunities for professional development
Surveyed hourly employees indicated they were twice as likely to stick with a job if they felt it offered them the professional development opportunities to launch a long-term career. But only 35% said they were getting those opportunities in their current job. Given how few companies do it, making a concerted effort to provide professional development is a huge opportunity for your company to set itself apart.
There are several ways to do this. One path is to provide opportunities within the company. For instance, Chipotle gives staff a clear breakdown of the career path available to them if they succeed at the company and makes a point of promoting most of its managers from within. Others focus on offering advancement opportunities for employees beyond their time with the company. Starbucks, for example, covers costs for employees to take online courses through Arizona State University, and offers one-on-one guidance to employees considering secondary education. But you don’t have to be an international chain to offer professional development opportunities. Simply Fresh Events, a local caterer in the Washington, D.C. area, offers employees the chance to attend catering industry conferences and workshops throughout their tenure, helping to build a unique culture staff love.
4. Inclusion along with diversity
One of the strengths of the hourly workforce is its diversity. However, FSG’s survey data suggests that different groups weren’t getting equitable experiences or outcomes in the workplace. For example, thinking back to the last section, African-American women surveyed were much less likely than others to say that their job represented a stepping stone to a long-term career. Women were also more likely to report that a manager had treated them unfairly, and industry research reveals that white men are much more likely than other groups to hold manager positions in retail.
Women and minority groups face unique challenges that put them at a higher risk of workplace disengagement. That’s why so many companies are taking deliberate steps to address these groups’ concerns and create a more welcoming workplace for them. Hilton Hotels is a great example. They’ve undertaken several diversity-focused recruiting initiatives and created executive-sponsored affinity groups for different communities of employees, such as African-Americans, LGBTQ employees, the disabled, and others. These efforts have translated to a more effective, engaged workforce at both the corporate and hourly level.
5. Better compensation that goes beyond wages
Finally, the hourly employees said that compensation was another key factor when it comes to retention. Many seemed more concerned with getting enough work rather than upping their hourly wage, with 50% saying they wanted more hours. They also expressed a desire for increased benefits -- mostly healthcare, but also overtime pay, retirement planning, and vacation.
Unlike scheduling, compensation isn’t within the control of most managers. And while most business owners probably wish they could pay staff more or offer better benefits, they obviously have financial constraints that sometimes make this impossible. But the data suggests that for those who can afford it, increased compensation is one of the surest ways to improve retention. Consider the case of Costco. While the average retail sales wage sits at $9.16 per hour, Costco pays its associates an average of $17 per hour, while also offering an impressive benefits package. As a result, Costco has a turnover rate between 6% and 20%, compared to the retail industry average of 65%. That increased retention could be one reason Costco boasts sales per square foot that are more than twice as high as fellow retail juggernaut Walmart.