Contractor Tip of the Month: The Proactive Approach to Employee Turnover

Damian Lang

Being a fan of professional football and a business owner, I am always disappointed when a good player leaves my Cincinnati Bengals for another team and when a good employee leaves one of my companies for another.  

Why do players and employees transfer? Obviously, they must believe there are greater opportunities elsewhere. Often, it works out for them. I mean, who knows what would have happened to Bengals quarterback Joe Burrow had he not transferred to LSU in his junior year of college?

There are plenty of parallels between football and business. Keeping your team together is one of the big ones. Do you have a “Joe Burrow” on the bench? 

I ask this because employee retention is an issue that we deal with every day. It is an expensive problem because, depending on the job, location, and level of responsibility, the costs of employee turnover can range from 30% up to five times their annual compensation. And if this employee has developed strong customer relationships, the financial impact could stretch on for years.

Here is an example that changed how we managed turnover. We had a young all-star whom I had been watching. I had big plans for him to advance in the company. He was smart, savvy, driven, and engaged – all the attributes we look for in leadership.

One afternoon, to my shock and dismay, he walked into my office and submitted his resignation. When I asked why, he told me he had not been treated fairly by his direct boss and disclosed that he had not received a performance evaluation for several years. Ultimately, he did not feel like he was being recognized, valued, or paid for the extra effort he contributed to the team. 

He was resolute in his decision to part ways. After he left, I sat at my desk wondering why the hell my team drove one of our top producers from our company. I wondered if his manager intentionally held him back for fear that someday, this star performer would take his job.

I did not like being on the reactive side of this type of conversation and decided we needed to make a change. As a result of this loss, I developed a process to ensure this would never happen again.

I decided it would be my responsibility to oversee our future rising stars. I monitor the pay and promotions they receive. It is on me to push their directors to promote them and increase their compensation as soon as we see extra value for their work.  

That was a good idea in theory, but as the CEO of a large corporation with locations across the country, I realized it would be impossible for me to know about and keep track of every employee who is showing signs of being a future leader. So, Mark Allen, our Chief Operations Officer, and Becky Hendershot, our Chief People Officer (both of whom helped me create the content for this article), came up with three factors within our control that will help retain our employees.

We call them the three C’s: culture, career path, and compensation. This plan levels the playing field because it focuses on creating a positive workplace that supports our employees, which benefits our companies both in our short and long games.

CULTURE: By far, culture is the most essential element of retaining employees. We spend more of our waking hours with our co-workers than we do with our family. 

So, why not make going to work more like being part of a great family? People stay with companies that have great cultures. If they enjoy where they work, it is not likely they will go down the road for a few extra bucks. 

The reality is that people leave bosses; they do not leave companies. If turnover is high in any specific segment of the business, it is on upper management to observe the attitude of the leader of that division and make sure he or she is upholding our culture expectations. 

CAREER PATH: Have you painted a picture for your people, showing them where they are going and how they are going to get there? 

I am always thinking about the future, and so are our employees. They do not want to be somewhere where there is no opportunity for advancement. 

We want every member of the team to know that their contributions matter. It is our job to show them there are opportunities for career advancement and make sure they understand that hard work comes with financial rewards and promotion opportunities. 

At our companies, people are promoted based on what they do, not who they are. This makes it possible for anyone who has the desire to work their way up through the ranks from entry-level to management. 

COMPENSATION: When evaluating, ask yourself what would happen if this person left. How much would it cost to find, recruit, and train someone to replace them? Consider this for your pay scale plan:

• We pay our low or average-producing employees 10% below the market. We include a plan for improving them to become good employees. 
• We pay our good employees at or 5% above the market.
• We pay our all-stars at least 10% above the market.

Having a clearly defined compensation package is a great way to motivate your team to want to be better performers.

Our three C’s are a proven retention trifecta that has been beneficial as we have grown and expanded. 

Of course, it is not our intention to try to eliminate all turnover. We are intentional with those we let become free agents. It comes down to performance:

• Turnover among low producers is manageable. 
• Turnover among average performers is painful.
• Turnover among all-stars can be deadly.

We are okay with losing underperformers. It benefits the company to be rid of them because they tend to bring morale down. Losing the others, however, is different because we know employees build relationships with customers, and as a result, there is a risk that customers will follow them when they leave. This is particularly true of an all-star. 

Are you addressing turnover, or are you simply reacting to it while tanking your bottom line with expensive recruiting efforts? Do not live in fear of turnover; rather, step back and identify those who truly impact your business, then focus your efforts on developing a strong retention plan that makes your team feel included in the future of your business. 

It is a win for your employees and a win for your company. Now, if only the Bengals could win a few more games!

About The Author
Damian Lang is CEO at Lang Masonry Contractors, JVS Masonry, Buckner and Sons Masonry, Wolf Creek Construction, Buckeye Construction and Restoration, 3 Promise Labor Services, Malta Dynamics Fall Protection and Safety Company, and EZG Manufacturing. To view the products and equipment his companies created to make job sites safer and more efficient, visit his websites at ezgmfg.com or maltadynamics.com. To receive his free e-newsletters or to speak with Damian on his management systems or products, email dlang@watertownenterprises.com, or call 740-749-3512.