September 5, 2005
Slowing the revolving door | Companies increasingly are adopting employee retention strategies to boost the bottom line
By Taylor Smith
Debbie Elliott opened her first hair salon in Portland in 1992 in a 750-square-foot building she says was "on the verge of being condemned." The shop on Montrose Avenue afforded Elliott just enough space downstairs to fit a small hair studio. She saved money by living in a cramped apartment upstairs, and her first employee was a customer who answered the salon's telephone and kept track of appointments while Elliott was busy with customers. "I didn't know what I was doing," she says.
But just a few years later, Elliott says she looked up and realized her business, Debbie Elliott Salon and Day Spa, had grown to a dozen employees. She had moved out of the upstairs apartment, replacing her furniture with massage tables and other spa accoutrements. In short, business was going well. But the problem was, she still didn't know what she was doing, Elliott says, even though her workweeks averaged 80-90 hours. She had problems letting go of the reins, she says, and was stretched so thin that making time for her employees was a difficult ˆ if not impossible ˆ proposition. "I had 10 or 12 employees, and I realized I wasn't the kind of leader I wanted to follow," Elliott recalls. "I felt like I was doing too much, and I wasn't doing a good job at any of it."
As a result, in the late 90s Elliott decided she needed to regroup and figure out how to get her fast-growing business back on track. Step one was to extricate herself from the salon floor to concentrate on running the business. Focusing her efforts on managing the salon, she figured, would allow time to become a better leader. Though that meant hanging up her shears and hair color foil, it was a sacrifice Elliott was willing to make. "Most small businesses fail because you're your own best technician," she says.
The next step was to overhaul the way employees functioned within the company. During the early years, Elliott saw a steady stream of stylists come and go, and that constant turnover made the salon more difficult to manage. Part of the turnover problem, she says, was a selfish, me-first workforce culture. Elliott notes that salon workers across the industry regularly receive commissions of as much as 60% for each customer they work with ˆ an arrangement she says breeds competition and an every-stylist-for-himself attitude. "It all becomes about getting paid and not focusing on the customer," she says.
So Elliott scrapped the compensation model, moved each of her employees to an hourly wage and set up a three-tiered employment system in which workers moved from entry-level status to master level. Getting rid of commissions freed up money to invest back into the employees through paid vacations and benefits packages that include health insurance and periodic bonuses. (On the drawing board, says Elliott, are perks such as profit sharing and retirement savings plans.) And the tier system meant that workers at Debbie Elliott Salon and Day Spa had the opportunity for career advancement. "What ends up happening is that people start developing management and leadership skills," says Elliott. "When you're putting people on a career path, it becomes a lot of the reason people want to stay."
For Debbie Elliott, changing the way her salon operates has been instrumental in retaining her skilled workforce of cosmetologists. And those workers' loyalty, she says, has been instrumental in the salon's continued growth in recent years.
Fact is, the rules of the game have changed in recent years ˆ workers don't expect the kind of corporate loyalty their parents enjoyed, and are more apt these days to jump ship when a better opportunity presents itself. Regardless of whether a company is coloring hair or manufacturing cast-iron stoves, it's become increasingly clear to business owners in Maine and beyond that maintaining a stable workforce is a primary ingredient for success. The challenge for many companies, however, is how best to retain that roster of stellar employees once it's assembled.
Flow control
According to Beverly Kaye, a Los Angeles-based human resources consultant and co-author of Love 'Em or Lose 'Em: Getting Good People to Stay (Berrett-Koehler, 2002), companies without an employee retention strategy need to wake up. That's because she believes the U.S. job market is close to being hit by what she calls a "perfect storm." A healthier economy, she says, is going to combine with a shortfall of workers caused by the retirement of the baby boom generation to open up options in the job market during the next few years. And, she says, the increasingly disengaged workers who've been content to stay put during the past few years are going to jump at the chance to better their positions. "Anyone who's been disillusioned with their job or sick of their managers won't be staying put," she says.
When and if Kaye's premonition of a perfect storm comes true is anyone's guess. John Dorrer, director of Labor Market Information Services at the Maine Department of Labor, says even weak economic periods aren't immune to turnover. He points to a Maine DOL survey that found persistent job vacancy rates during 2002 ˆ a period marked by slow economic growth and weak employment. What's important, he says, is that companies pay attention to the issue of workforce retention. "It's clearly one of the primary determinants of an effective workforce," he says. "The more companies succeed in stabilizing their workforce and building up [workers'] skill sets, the more satisfied they're going to be in terms of performance output and productivity."
There's no catchall solution for drawing up an employee retention plan. A construction company, for example, might use a different method than a financial services company to entice employees to stick around. At the same time, companies in certain industries have to prepare themselves for a higher level of employee turnover than firms in other sectors. For example, the Maine retail industry is averaging a turnover rate of 10.9% this year, according to DOL statistics. That compares to a relatively low 4.9% for the utilities industry.
There are, however, some fairly universal strategies that companies have used to boost employee retention rates. For companies such as Debbie Elliott Salon and Day Spa and Gorham-based stove manufacturer Jøtul North America, the key is to involve employees in the company. "Companies that want to be competitive in the future have to think about how they'll engage their workforce," says Kaye.
Bret Watson, president of Jøtul North America, says the company's employee development program, which was developed roughly two years ago, was authored primarily by its 66 employees. The EDP was put into place earlier this year and represented a significant shift in how Jøtul manufactures its brand of cast-iron stoves. The manufacturing floor was split into four different cells, in which small teams work to drill cast-metal components or assemble fireboxes before sending the partially finished product to the next cell.
A major benefit, says Watson, is that employees get the opportunity to move from cell to cell as their skills increase. That crosstraining, he says, is beneficial for the company because it cuts down on the number of repetitive stress injuries ˆ and, therefore, on the number of costly workers' comp claims. From the employees' perspective, crosstraining makes the job more interesting ˆ as well as offering a higher wage in exchange for a higher skill level. "We're really focused on continuous flow," says Watson. "The more we can crosstrain, the more we can ensure that we don't disrupt the flow."
According to Watson, Jøtul has seen dramatic results since implementing the development program. The turnover rate in the company's assembly division has gone down by a full 50%, he says, which will translate into additional sales of up to 8,000 units this year ˆ a $6 million boost in revenues. What's more, Watson says the company's products have left Gorham in better shape, as evidenced by the fact that the total number of warranty claims has shrunk so far this year. "It's so important that we keep people because we know that our quality isn't as good when we have higher turnover rates," he says.
Dog or squirrel?
Rich Hussey, vice president of human resources at Hussey Seating Company in North Berwick, says he often has trouble ferreting out highly skilled workers with strong manufacturing and organizational experience. And once he gets them on board, Hussey is understandably loath to see such workers walk out the door. As a result, the company last year worked with an organizational consultant to formalize a retention strategy that includes an emphasis on leadership training and professional development, as well as perks like above-average compensation packages. "On the strategy and operations side, we've identified some positions that are very critical in the value chain and that make customers and shareholders happy," says Hussey.
That strategy this year has helped trim turnover among such "A"-level employees from 15% to roughly 10%. (Hussey declined to identify how many of the company's 220 workers are identified as A-level employees.) Overall, the company's turnover rate is 10%-15%, which compares favorably to what Hussey says is the average turnover rate of 10%-25% for manufacturing firms in southern Maine.
Hussey credits the relatively low turnover rate to the company's family-oriented workforce culture as well as competitive wages and a solid benefits package. Hussey Seating also offers its employees perks like a program that funds 100% of education costs for employees who want to go back to school. In late August, the company put on a mini college fair for its employees, inviting representatives from a handful of local schools such as the University of Southern Maine and York County Community College to discuss course options with employees. Hussey says roughly 20% of the company's 220 workers took advantage of the tuition reimbursement program last semester.
Debbie Elliott knows firsthand the role education can play in keeping a happy and satisfied workforce. In the late 90s, she enrolled in an associate degree program to study organizational leadership at the University of Maine in Biddeford. Elliott began applying classroom lessons into the real-world environment at the salon, including evaluating the kind of work for which each of her employees was best suited. A cosmetologist who didn't like working on her feet, reasoned Elliott, was better off stationed behind the manicure desk. "You could hire a dog to climb a tree," she says, " but wouldn't it be easier to hire a squirrel?"
With a workplace culture that Elliott says stresses each worker's individual strengths, she's been able to retain workers much longer than the industry average of 12-18 months. These days, the average employee at Debbie Elliott Salon and Day Spa sticks around for three years; and a portion of Elliott's staff has been there since she moved the business to its current location off of Forest Avenue in 1999.
Meanwhile, Elliott has continued her academic career, earning a master's degree in organizational leadership at Antioch University Graduate School in Keene, N.H. (She currently is pursuing her Ph.D. in leadership and change at Antioch, though she took a leave of absence to open a second Debbie Elliott Salon and Day Spa in Newport.) The next step, she says, is to turn her business into a combination salon and teaching academy, where cosmetologists will be able to receive accreditation toward an advanced degree for the work they're doing. To that end, Elliott is working with an executive coach, her practicum advisor from her master's program, to formalize the mentoring process she's had in place for years. "For a cosmetology license, you need [to log] 1,500 hours in the state of Maine," she says. "But that's nowhere near enough ˆ not just for this industry, but for life. We do far more than hire somebody and teach them how to cut hair. I think we should come out of it with some business or academic sense."
But just a few years later, Elliott says she looked up and realized her business, Debbie Elliott Salon and Day Spa, had grown to a dozen employees. She had moved out of the upstairs apartment, replacing her furniture with massage tables and other spa accoutrements. In short, business was going well. But the problem was, she still didn't know what she was doing, Elliott says, even though her workweeks averaged 80-90 hours. She had problems letting go of the reins, she says, and was stretched so thin that making time for her employees was a difficult ˆ if not impossible ˆ proposition. "I had 10 or 12 employees, and I realized I wasn't the kind of leader I wanted to follow," Elliott recalls. "I felt like I was doing too much, and I wasn't doing a good job at any of it."
As a result, in the late 90s Elliott decided she needed to regroup and figure out how to get her fast-growing business back on track. Step one was to extricate herself from the salon floor to concentrate on running the business. Focusing her efforts on managing the salon, she figured, would allow time to become a better leader. Though that meant hanging up her shears and hair color foil, it was a sacrifice Elliott was willing to make. "Most small businesses fail because you're your own best technician," she says.
The next step was to overhaul the way employees functioned within the company. During the early years, Elliott saw a steady stream of stylists come and go, and that constant turnover made the salon more difficult to manage. Part of the turnover problem, she says, was a selfish, me-first workforce culture. Elliott notes that salon workers across the industry regularly receive commissions of as much as 60% for each customer they work with ˆ an arrangement she says breeds competition and an every-stylist-for-himself attitude. "It all becomes about getting paid and not focusing on the customer," she says.
So Elliott scrapped the compensation model, moved each of her employees to an hourly wage and set up a three-tiered employment system in which workers moved from entry-level status to master level. Getting rid of commissions freed up money to invest back into the employees through paid vacations and benefits packages that include health insurance and periodic bonuses. (On the drawing board, says Elliott, are perks such as profit sharing and retirement savings plans.) And the tier system meant that workers at Debbie Elliott Salon and Day Spa had the opportunity for career advancement. "What ends up happening is that people start developing management and leadership skills," says Elliott. "When you're putting people on a career path, it becomes a lot of the reason people want to stay."
For Debbie Elliott, changing the way her salon operates has been instrumental in retaining her skilled workforce of cosmetologists. And those workers' loyalty, she says, has been instrumental in the salon's continued growth in recent years.
Fact is, the rules of the game have changed in recent years ˆ workers don't expect the kind of corporate loyalty their parents enjoyed, and are more apt these days to jump ship when a better opportunity presents itself. Regardless of whether a company is coloring hair or manufacturing cast-iron stoves, it's become increasingly clear to business owners in Maine and beyond that maintaining a stable workforce is a primary ingredient for success. The challenge for many companies, however, is how best to retain that roster of stellar employees once it's assembled.
Flow control
According to Beverly Kaye, a Los Angeles-based human resources consultant and co-author of Love 'Em or Lose 'Em: Getting Good People to Stay (Berrett-Koehler, 2002), companies without an employee retention strategy need to wake up. That's because she believes the U.S. job market is close to being hit by what she calls a "perfect storm." A healthier economy, she says, is going to combine with a shortfall of workers caused by the retirement of the baby boom generation to open up options in the job market during the next few years. And, she says, the increasingly disengaged workers who've been content to stay put during the past few years are going to jump at the chance to better their positions. "Anyone who's been disillusioned with their job or sick of their managers won't be staying put," she says.
When and if Kaye's premonition of a perfect storm comes true is anyone's guess. John Dorrer, director of Labor Market Information Services at the Maine Department of Labor, says even weak economic periods aren't immune to turnover. He points to a Maine DOL survey that found persistent job vacancy rates during 2002 ˆ a period marked by slow economic growth and weak employment. What's important, he says, is that companies pay attention to the issue of workforce retention. "It's clearly one of the primary determinants of an effective workforce," he says. "The more companies succeed in stabilizing their workforce and building up [workers'] skill sets, the more satisfied they're going to be in terms of performance output and productivity."
There's no catchall solution for drawing up an employee retention plan. A construction company, for example, might use a different method than a financial services company to entice employees to stick around. At the same time, companies in certain industries have to prepare themselves for a higher level of employee turnover than firms in other sectors. For example, the Maine retail industry is averaging a turnover rate of 10.9% this year, according to DOL statistics. That compares to a relatively low 4.9% for the utilities industry.
There are, however, some fairly universal strategies that companies have used to boost employee retention rates. For companies such as Debbie Elliott Salon and Day Spa and Gorham-based stove manufacturer Jøtul North America, the key is to involve employees in the company. "Companies that want to be competitive in the future have to think about how they'll engage their workforce," says Kaye.
Bret Watson, president of Jøtul North America, says the company's employee development program, which was developed roughly two years ago, was authored primarily by its 66 employees. The EDP was put into place earlier this year and represented a significant shift in how Jøtul manufactures its brand of cast-iron stoves. The manufacturing floor was split into four different cells, in which small teams work to drill cast-metal components or assemble fireboxes before sending the partially finished product to the next cell.
A major benefit, says Watson, is that employees get the opportunity to move from cell to cell as their skills increase. That crosstraining, he says, is beneficial for the company because it cuts down on the number of repetitive stress injuries ˆ and, therefore, on the number of costly workers' comp claims. From the employees' perspective, crosstraining makes the job more interesting ˆ as well as offering a higher wage in exchange for a higher skill level. "We're really focused on continuous flow," says Watson. "The more we can crosstrain, the more we can ensure that we don't disrupt the flow."
According to Watson, Jøtul has seen dramatic results since implementing the development program. The turnover rate in the company's assembly division has gone down by a full 50%, he says, which will translate into additional sales of up to 8,000 units this year ˆ a $6 million boost in revenues. What's more, Watson says the company's products have left Gorham in better shape, as evidenced by the fact that the total number of warranty claims has shrunk so far this year. "It's so important that we keep people because we know that our quality isn't as good when we have higher turnover rates," he says.
Dog or squirrel?
Rich Hussey, vice president of human resources at Hussey Seating Company in North Berwick, says he often has trouble ferreting out highly skilled workers with strong manufacturing and organizational experience. And once he gets them on board, Hussey is understandably loath to see such workers walk out the door. As a result, the company last year worked with an organizational consultant to formalize a retention strategy that includes an emphasis on leadership training and professional development, as well as perks like above-average compensation packages. "On the strategy and operations side, we've identified some positions that are very critical in the value chain and that make customers and shareholders happy," says Hussey.
That strategy this year has helped trim turnover among such "A"-level employees from 15% to roughly 10%. (Hussey declined to identify how many of the company's 220 workers are identified as A-level employees.) Overall, the company's turnover rate is 10%-15%, which compares favorably to what Hussey says is the average turnover rate of 10%-25% for manufacturing firms in southern Maine.
Hussey credits the relatively low turnover rate to the company's family-oriented workforce culture as well as competitive wages and a solid benefits package. Hussey Seating also offers its employees perks like a program that funds 100% of education costs for employees who want to go back to school. In late August, the company put on a mini college fair for its employees, inviting representatives from a handful of local schools such as the University of Southern Maine and York County Community College to discuss course options with employees. Hussey says roughly 20% of the company's 220 workers took advantage of the tuition reimbursement program last semester.
Debbie Elliott knows firsthand the role education can play in keeping a happy and satisfied workforce. In the late 90s, she enrolled in an associate degree program to study organizational leadership at the University of Maine in Biddeford. Elliott began applying classroom lessons into the real-world environment at the salon, including evaluating the kind of work for which each of her employees was best suited. A cosmetologist who didn't like working on her feet, reasoned Elliott, was better off stationed behind the manicure desk. "You could hire a dog to climb a tree," she says, " but wouldn't it be easier to hire a squirrel?"
With a workplace culture that Elliott says stresses each worker's individual strengths, she's been able to retain workers much longer than the industry average of 12-18 months. These days, the average employee at Debbie Elliott Salon and Day Spa sticks around for three years; and a portion of Elliott's staff has been there since she moved the business to its current location off of Forest Avenue in 1999.
Meanwhile, Elliott has continued her academic career, earning a master's degree in organizational leadership at Antioch University Graduate School in Keene, N.H. (She currently is pursuing her Ph.D. in leadership and change at Antioch, though she took a leave of absence to open a second Debbie Elliott Salon and Day Spa in Newport.) The next step, she says, is to turn her business into a combination salon and teaching academy, where cosmetologists will be able to receive accreditation toward an advanced degree for the work they're doing. To that end, Elliott is working with an executive coach, her practicum advisor from her master's program, to formalize the mentoring process she's had in place for years. "For a cosmetology license, you need [to log] 1,500 hours in the state of Maine," she says. "But that's nowhere near enough ˆ not just for this industry, but for life. We do far more than hire somebody and teach them how to cut hair. I think we should come out of it with some business or academic sense."
Most Recent
Most Recent
Comments