Finding and Retaining the Right Workforce
Damian Lang
For a business to thrive in today’s economy, the core focus must be on finding and retaining the right workforce. Small businesses are competing against larger companies with larger budgets for top talent. Therefore, in order to attract the best performers, you must provide good wages and benefits packages.
I am sure you have heard the saying, “You always get what you pay for.” This holds true for the products we purchase. However, managers often forget it also holds true when recruiting and retaining a top-quality workforce.
Purchasing a cheap product, only to have it break down within the first week you use it, is frustrating. Trying to save money by underpaying employees, and then losing them to the competition, is not just frustrating; it can cause a company to achieve mediocre results – or worse – operate in the red.
So, if you always get what you pay for, why do contractors pay less and expect to attract and maintain a great team?
Here’s an example of getting what you pay for. I am in the process of having my MXT International truck restored. It is a replica of the one The Rock drove in the movie “Fast and Furious,” so I am excited about getting it finished up. Mike Radosa, who is a friend and a wise businessman, asked me to take him to see the truck while he was in town. So, we dropped in to check on the progress the mechanic was making. We listened as the mechanic explained why he was so far behind schedule in fixing my truck, as well as a few other vehicles he had at his shop.
The mechanic explained that he starts work every day at 6 a.m. and leaves the shop at 8 p.m. for dinner, going to bed shortly thereafter. He repeats this process six days per week to try to stay caught up with his work.
“Why don’t you get some more help, so you don’t have to work yourself to death?” Mike asked.
“I can’t find anyone willing to work, so I only have one employee. With just him and I working, there is no way to keep up with all the vehicles people are wanting me to fix. I hired others, but they either don’t show up for work, or work a short time and quit,” the mechanic replied.
As we were driving away from the mechanic’s shop, Mike told me he knew why the mechanic couldn’t find others to come to work for him. “He won’t pay anyone enough money to come to work or to stay with him. You can’t tell me there aren’t people who would love to work in that beautiful shop, were he offering enough money.”
I agreed with Mike as we discussed both having close to 200 employees, including the 65 I have working at EZG Manufacturing just up the road from the mechanic’s shop. Although it isn’t easy, we always find help when we need it. Yet, this mechanic has several vehicles at his shop waiting to be repaired and can’t find anyone to help. Therefore, he has to work 14 hours a day to keep up.
“Is this guy a reputable mechanic?” Mike asked.
“Yes, he is one of the best in the area,” I replied.
We decided the mechanic could easily charge several more dollars per hour more for his work, and stay just as busy. Then, he could give the extra money he is charging to prospective employees to attract and maintain them. In fact, we discussed how he would get more business, as the right employees would help him finish the vehicles on time.
Studies show that the cost of onboarding an employee is about the cost of a person’s annual salary. In an article on employee retention, Josh Bersin of Bersin by Deloitte outlined factors a business should consider in calculating the “real” cost of losing an employee. These factors include:
- Cost of hiring a new employee, including the advertising, interviewing, screening and hiring
- Cost of management time during the training process
- Lost productivity, since a new employee may need one to two years to reach the productivity of an existing person
- Lost engagement, since other employees may disengage and lose productivity if they see high turnover
- Customer service and errors – for example, new employees taking longer and being less adept at solving problems
- Training costs – for example, a business likely investing 10 percent to 20 percent of an employee’s salary, or more, to train over a two- to three-year timeframe
- Cultural impact, since employees will take the time to question why an employee has left the company
The real cost of employee turnover is unknown, because most companies don’t have systems in place to track exit costs, recruiting, interviewing, hiring, orientation and training, lost productivity, potential customer dissatisfaction, reduced or lost business, administrative costs, and lost expertise. This takes collaboration among human resources, finance, and operations departments to measure these costs.
When determining the amount to pay an employee, ask yourself how much value the person brings to your operation. Let’s say a top-notch bricklayer lays 200 blocks per day, compared to a beginner, who lays 100 per day. If you are charging $3.50 per block for the labor portion only, the extra 100 blocks equal $350 to the bottom line. Based on an eight-hour day, the top-notch bricklayer just added $43.75 per hour ($350 divided by eight hours) more value than the beginner. This would surely merit paying more to retain the best.
My theory on paying employees is simple: Pay each person enough so that if they leave, you will see enough payroll savings to offset the expense of them being gone. Sometimes this can mean paying much more to avoid the pain of losing top performers.
Damian Lang is CEO at Lang Masonry Contractors, Wolf Creek Construction, Malta Dynamics, and EZG Manufacturing. To view the products and equipment his companies created to make jobsites 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.