Hiring could be the single-most important decision you make in any going business…
The quality of the team you have in your business impacts nearly any and every decision you make.
And so to find, recruit, and especially retain the right employees should be one of the highest-priorities of every entrepreneur, business owner, and executive.
Rainmaker, I can think of very few people who I’d trust more on the topic than the guy who found me, recruited me, and retained me for almost 5 years when I’d professed from the beginning that I wasn’t going to stick around!
I’m referring to Jeff, my first and last marketing boss, my first and probably most influential marketing mentor, and a guy who I count as one of my most important friends and associates in business, whose opinion I trust on almost anything I do. (I don’t always agree, but I trust it.)
Last week Jeff was visiting Nebraska, and we got together for what turned into a 3-hour dinner. During which Jeff revealed something shocking to me…
He’s discovered the secret to ZERO unplanned turnover in key hires!
During the last couple decades, Jeff has worked with a handful of businesses. When he arrived at most of them, they were small. By the time he left, they were all multiples bigger. But with one very important point. He hadn’t just boosted gross revenue. He’d substantially grown actual take-home net profits!
Which means that not only were these businesses making more top-line sales…
Their owners were taking home more and more profits!
And here’s the really interesting, almost hidden statistic Jeff revealed to me…
Before Jeff showed up, these companies were in one of two situations. Some were tiny, basically family businesses with zero outside staff before he showed up. Others were trying to be bigger, but had substantial turnover preventing any real long-term progress from being made.
And yet once Jeff got in and took control of the hiring process, both became companies that people really wanted to work at, and stayed despite “better” opportunities being presented to them.
In fact — and this seems crazy — in the last 15 years I’m the ONLY key hire that quit on Jeff… And he knew from the beginning that I had an expiration date!
There have been front-line, high-turnover positions in these companies (such as phone workers) that have had higher-than-zero turnover rates. But there is a short list of very important distinctions.
— First, the key employees Jeff wanted to keep have stuck around — if they didn’t that would be unplanned turnover.
— Second, Jeff has decided to fire people who didn’t work out — this is planned turnover and has a reduced impact on the business.
— And third, for the high-turnover positions, Jeff built systems into his hiring that lessened this planned turnover’s impact on the business, by ensuring there was a next hire always waiting in the wings.
And what’s happened after Jeff has left?
Well, key employees have basically followed him out the door. And in the long run, turnover rates have significantly increased in these businesses.
Further, the impact on the bottom line has been substantial. I heard one example where it took nearly a 3X increase in gross revenue before the company reached the same level of net profits it was making on Jeff’s last day.
Turnover is expensive to your business — recruiting and retention are worth getting right!
There is a direct financial cost to replacing employees. I did a little homework, and found these stats…
— The turnover cost for a low-paying job isn’t pocket change — it’s about 16% of their annual income. For someone earning $10 per hour, it’s going to cost roughly $3,200 to replace them. That’s equivalent to two months’ worth of pay.
— Mid-range positions are a bit more expensive. Recruiting a new mid-level position, earning $30,000 to $50,000 per year costs roughly 20% of salary. That’s $8,000 to replace a $40,000/year salaried position.
— For highly-skilled positions and especially executives, the cost skyrockets. It can cost up to 213% of an executive’s annual salary to find a suitable replacement. That means it can suck $213,000 right out of your bottom line to find a new $100,000 per year CEO.
But these are just the balance sheet costs…
Turnover has a much bigger (and harder to track) cost to your business. In a high-turnover business, the owner or executive is usually the only one who has been there for any length of time. Which means they’re required to maintain responsibility over a substantial portion of the everyday tasks. This means they’re spending more time working in the business, not on the business. And this certainly inhibits business growth.
Not only that, there’s a multiplier effect when you get a team working together over the long run to meet and exceed goals. The collective effort of a committed group is much stronger than the effort of an ever-changing cast of characters with no real investment in the final outcome (because they’ll likely be gone long before that).
And there’s an X-factor in the culture differences between a consistent team and a high-turnover operation.
When employees are constantly coming and going in your business, it’s got the cultural equivalent of the Starbucks inside a Barnes and Noble bookstore. Sure, at any given moment there may be interesting conversations going on. But ultimately it’s a place and nothing more. Compare that to the community-staple coffee houses that every city and town has. Each has a life of their own, that is vibrant and dynamic but somehow cohesive and continuous. When I walk into The Coffee House in downtown Lincoln today, very little has changed from when I frequented it 15 years ago.
The secret to reducing the many tangible and intangible costs of turnover is better recruitment and retention. Good news: this is a steady path to boosting profitability!
So… What’s Jeff’s secret to ZERO unplanned turnover?
Well, he actually did a closed-door session with a group of dozens of tech executives a few weeks ago, where he walked them through seven specific factors in recruitment and retention that can drop your effective turnover rate down to the floor…
And I’d be doing both Jeff and his ideas a disservice if I were to try to jam them all in here.
But I will share the high-level summary that I talked through with Jeff. A bit of warning. This is going to seem simple. Maybe even trite. Like mere management platitude. Don’t ignore it on these grounds! Rather, embrace it, use it to reflect on your past hiring and management practices, and apply it in the future. Be mindful of how you’re using it, and what you learn. Then and only then can you unlock and unpack its full impact.
Here’s Jeff’s recommendation…
Establish a clear goal for what you want to achieve… Find the person with the skills and drive to help you reach that goal… Then let them do their job autonomously while also offering any support they need.
Set a goal. Figure out who has what it takes to reach the goal. Then get out of their way.
This is the opposite of micromanagement, and flies in the face of so many management techniques you might learn in business school.
But it works. And it works damn well.
(And it has nothing to do with money, benefits, of workplace perks — those help, but are meaningless without what Jeff recommends. PROOF: when he’s left companies that were posh on these three counts and continued to remain that way after he left, turnover still skyrocketed!)
I actually compared the advice to parenting. While my kids are young, I feel the need (for their health and my sanity) to protect them a bit from their own bad decisions. But as they grow, my goal is to teach them how to be responsible and then let them succeed and fail on their own. Just this morning — and I’m forgetting the context — my wife and I were telling our oldest just how valuable failure actually is as a learning experience. When you fail, you can use it to learn what not to do next time. Point them in the desired direction, then let them figure out what they need to do to get there.
There’s a lot that goes into this, and it will take some trials, failures, and successes on your part, too. Especially if you’re more controlling as a boss, it takes some courage to let go.
Further, this does rely on a selective hiring process, and a willingness to cut people before or after the hire as soon as you realize they’re not right.
But if you commit to this, you’ll eventually start to realize a brighter future…
Imagine life with a capable and committed team dedicated to your success…
Let’s just fast forward a bit and see how this feels.
You’ve dedicated yourself to following Jeff’s recommendations to getting closer to zero unplanned turnover in your business, and they’re starting to pay off.
You feel like the skill level in your business is higher than ever before. The team is building, and actually sticking around. Everybody comes to work just a bit more excited, and they all care about reaching a mutual goal.
In fact, some really awesome things are starting to happen in your business, without you even being involved. Because you’ve given them the flexibility to accomplish important goals by whatever methods they see fit, your team is making progress you’d never expected from them before.
You can finally relax. And while you want to stay involved, your day-to-day ties to the business are growing ever-looser. In fact, you can finally take that vacation you’ve wanted to take (but couldn’t yet)… Ever since you started the business!
And after having “unplugged” from the business from a week, you will come back to discover that the business actually did better WITHOUT you there! (True story from my time with Jeff — when the owner left, sales frequently increased!)
And… As only one but a very important measure of your business’s success… Profits are up and climbing! You’re taking home more and more every month and every year, with less work required on your part.
I don’t know if I can convince Jeff of this…
But sometime early next year, I may be able to get Jeff to really walk through his full story and experience and principles for better recruitment and retention — over the phone — for a select group of business owners.
It would be an investment — but an investment that would quickly be made up and then some through hiring better and keeping the good employees.
Again, I haven’t really cleared this with Jeff before writing this (hi Jeff!) but I imagine this as a series of phone calls really designed to transfer Jeff’s wisdom and experience and methods into you, to give you an immediate and lasting boost in hiring and team-building effectiveness. (Including Q&A or “hot seat” style opportunities for direct feedback on your unique situation and its challenges.)
If this is something you’re interested in, and are ready to write a check in the neighborhood of $1,500 for, you can let me know. Email me directly at [email protected] with “hiring” in the subject line.
Depending on response, I may be able to twist Jeff’s arm to do this sometime in the first quarter of next year. While I ask that you only write me if you’re ready to write the check today, you won’t have to send money to reserve your spot until we’ve nailed down the specific date and details with Jeff.
Looking forward to hearing from you.
Yours for bigger breakthroughs,
Editor, Breakthrough Marketing Secrets