Q: I am facing increased costs of operations and am considering downsizing. My employees are good workers. Is there another option to giving raises to those that remain?

A: Some have labeled it "the worst problem in the retail industry." It may be a bit of hyperbole, but the costs of employee turnover are not to be discounted. One national study estimated the cost to find, hire and train a single “minimum wage” employee to be approximately $3,300, or 15% of annual salary. This does not even include the costs for onboarding, training, errors and lower productivity until the employee gets up to speed; also the effect on other employees' productivity. When these are added in, some estimates range from $5,000-10,000. This still ignores the effect high employee churn can have on your customers' experiences. That, in and of itself, can ruin a business.

If you look at national data for two of the biggest sectors in the economy, the turnover rates are a staggering 70% for both retail and hospitality. One would suspect costs and turnover rates in some Florida counties might be even higher, given the tightness of the local job market. Most business people acknowledge that the #1 problem is finding workers to fill jobs, particularly at the lower end of the wage scale, given the high cost of living and the lack of good public transportation. All this points to the greater need to manage employee turnover.

Where to begin? Here are some tips:

• Hire the right people in the first place. Look carefully at their work histories, check references, conduct thorough interviews using interviewers that know what they are doing. If you are unsure how to interview, there is a lot of good information on the Internet. It’s also a good idea to use a job application that has been developed by an attorney familiar with employment practices. Also, be realistic in explaining the demands of the job. New hires will find out the truth soon enough. Better to be open about it up front than having to invest more time and money on a poor fit.
• Pay people fairly. Given the cost of turnover, paying the bare minimum will likely cost you more over time. As the saying goes, “You get what you pay for.”
• Devote the necessary time to onboarding and training. Doing it well will get them up the productivity curve faster, as well as lead to happier customers and co-workers.
• Demonstrate respect at all times and treat people fairly and equitably. Also, be generous with your praise for a job well done. Recognition goes a long way.
• Involve employees in decisions that affect them. Not only is this good practice, but with their input the decisions will often be better.
• Try to staff adequately. It will decrease stress on employees, keep them fresh, which means fewer mistakes and better customer relations, and provide more flexibility for the boss.

These are not all the answers, but following these practices will help you contain employee turnover, make your life easier and also retain your customers.

Gray Poehler is a volunteer with the Naples Chapter of SCORE.

A SCORE counselor since 2005, Gray Poehler owned and operated an independent insurance agency with 20 employees and two locations. He has earned the Certified Insurance Counselor designation and is familiar with both personal and commercial property and casualty insurance. Areas of expertise include: Business Finance and Accounting; Business Strategy and Planning; Business Operations; Human Resources and Internal Communications; Sales, Marketing and Public Relations.

To learn more about management issues of small businesses, contact the SCORE office nearest you.