Once we’ve been intentional about creating a culture of top-down leadership that provides effective communication on an ongoing basis and we’ve worked to minimize the profitability that’s killed by high voluntary turnover and ongoing recruiting, the next—but indeed no less critical—profitability killer that needs our attention is the cost of disengaged employees. To have any real shot at doing that, we need to understand how widespread this issue truly is, how it impacts individual performance, and how each of those things ultimately affects even the best members of our teams.

But first let’s make sure we’re on the same page. I’m not suggesting we do everything we can to make our employees happy, nor do I believe we can get long-term results by simply working to ensure employee satisfaction. Employee engagement is very different from either of those things. An article on Indeed.com called “How to Improve Employee Engagement” differentiated the three like this:

"Employee engagement is a measurement of how committed an employee is to their employer, how passionate they are about the work they do and how well their personal goals and values align with the mission and objectives of their employer.

An engaged employee is enthusiastic about working with customers and providing them services that generate profit and a good reputation. Not only that, but if your company has an engaged workforce, you’re more likely to retain your current staff—instead of having to frequently spend time and money hiring new employees.

It’s important not to confuse employee engagement with employee satisfaction. While the two may sound similar, they’re actually two different concepts. A satisfied employee is someone who likes their job and feels their employer meets their needs, while an engaged employee is someone who is committed to their work, dedicated to their employer and consistently performs at a high level.

An engaged employee is always satisfied, but someone can be satisfied without being engaged. For example, an employee may be happy with the compensation and job duties, but they may not be emotionally connected to their work or loyal to their employer."

With that perspective in mind, we need to understand the widespread lack of engagement. Over the decade or so that I had hands-on involvement with doing employee engagement surveys, the message most frequently shared with me was that in the best organizations in the world, close to 20 percent of their workforce was actively disengaged, and around 30 percent of their team was actively engaged. The analogy I’ve used most often to describe this has been one with ten folks in a rowboat; the three at the front row just as hard as they possibly can to reach the destination. Two in the very back are working just as hard to sink the boat. In the middle, however, we still have five folks who may or may not be holding oars, but they’re certainly not breaking a sweat in their rowing efforts!

For more on this, you're welcome to reach out to us directly at admin@dove-development.net to get a 45 Day Trial Access to our COMPLETE Leading At The Next Level program or you can check out Wes's recently released book, What's KILLING Your Profitability? (It ALL Boils Down to Leadership!) that was a #1 Best Seller on Amazon!

Any way we slice it, recruiting great candidates to join our team comes with a price tag! When we’re forced to recruit constantly because the business is growing, it’s hard enough—especially in a world where those great candidates are hard to come by. But suppose our voluntary turnover is an issue, and we haven’t provided the best team members we did have with a solid reason to stay. In that case, we can expect those recruiting costs to turn into real profitability killers. While leadership involvement can significantly impact our recruiting process, there’s never a shortage of demands on a leader’s time, so we must be highly intentional about being involved where it can help the most.

Not so long ago, a friend who does high-end video production for a national healthcare system asked for my feedback on streamlining that organization’s orientation process. He told me that each executive team member had a direct role with all new employees. They had approached him about the potential of creating video orientation to replace what they were doing to free up some of that time. He explained that this would also ensure consistency in the message and provide coverage whenever one of those executives wasn’t available. I replied that it certainly would be possible and that both of the things he mentioned could be achieved. But then I shared the comparison of the two management teams I described before—and, more importantly, the feeling I still have about their different levels of involvement all these years later…

Here’s the thing: just showing up and rambling through a canned speech isn’t the secret sauce. The managers who never participated in the weekly orientation sessions I held with new employees from March 2013 until I moved on in October 2014 likely improved retention by NOT interacting with those team members right away! The impact the plant manager made on me in 1996 wasn’t simply because he popped in and talked to us; it was abundantly clear that he meant what he said, and he backed his words up with his actions for as long as I knew him.

I emphasized to my friend that how and when the executives he was working with interacted with their new team members was far less critical than it was for them to be completely genuine in every interaction they had with their teams—and that would never just happen! They need to be very proactive in their approach. While doing that seems far too rare in organizations today, I’m convinced it’s not complicated. I also don’t believe that the majority of executives and owners who aren’t involved in the recruiting process have ill will toward their teams; I think it’s usually a matter of being pulled in all directions, and initiating involvement in the recruiting process or engagement with the folks at all levels of their organization isn’t necessarily the fire that seems to demand their attention the most.

For more on this, you're welcome to reach out to us directly at admin@dove-development.net to get a 45 Day Trial Access to our COMPLETE Leading At The Next Level program or you can check out Wes's recently released book, What's KILLING Your Profitability? (It ALL Boils Down to Leadership!) that was a #1 Best Seller on Amazon!

Earlier, I mentioned starting a job on March 12, 1996, that I thought would get me through college and how much that organization invested into hiring forty of the one thousand or so candidates who applied. I didn’t share how much of that investment came during the first two weeks we were on the payroll. The company certainly had a lot of time and money tied up in the process before we ever set foot on the property: several rounds of off-site interviews, competency testing at the local tech school, background checks, and drug screens—which shouldn’t be confused with “drug testing” because testing drugs was a bit more taboo back then. That all carried a hefty price tag, even back in the ’90s, but not nearly as much as the organization invested by having all forty of us go through two full weeks of orientation!

At that point, the starting wage for hourly positions at that facility was $9.48 per hour before factoring in any of the benefits—some of the best in the Shenandoah Valley at the time. They paid each of us almost $1,000 to sit in training rooms for two solid weeks, some of which covered the processes and procedures we’d soon be expected to follow to the letter. Still, there was just as much face time with the local management team.

I won’t pretend like I remember the majority of the material that was shared over the course of those two weeks. My point here isn’t to make a case for whether or not that much time was necessary. But I do remember like it was yesterday the impression the plant manager made with us from day one and how he walked the talk for the next few years until he retired. What stood out the most to me was his focus on the importance of safety, his making sure we knew he was always approachable, and his emphasis on paying little attention to the rumor mill. Regarding rumors, he assured us we’d hear at least one every day and said we should start one of our own if we didn’t!

While joking about us starting rumors, he was incredibly serious about safety and how approachable he was. I saw him on the shop floor interacting with the off-shift crew I was part of more in my first month than I had seen the construction foreman at the job I came from in the entire year I worked there—and that foreman was only responsible for the six or eight of us on that one crew.

Fast-forward to late 2013 and most of 2014. I was doing almost all the hiring for that facility I started with in March of 1996. At that point, the amount of time we were given to complete all the new hire paperwork, cover all the rules and regs, and introduce the new employees to our safety and quality processes was limited to just four hours. Those new team members spent the rest of their first day engaged in something similar to what they were hired for. I’m still not making a case for whether the time for the orientation process was good or bad. Still, I will challenge you to consider which version of orientation in that same facility provided the new folks coming on board with more exposure to the local leadership team. Since I’m too impatient to give you much time to guess, I’ll lay it out for you! During my final eighteen months with the company, when I hired around 225 people, I don’t remember a single instance where the plant manager even said hello to one group of new employees. To that end, the only managers who were regularly involved in the orientation process were the safety manager and the quality manager, both of whom I consider close friends still today—which is likely tied to the fact that they gave a crap about the people we were bringing into the organization…

Here’s one more question: If you worked in that facility under both of those management teams, which would you be more likely to recommend to your friends or family as a place to consider when they were looking for employment?

For more on this, you're welcome to reach out to us directly at admin@dove-development.net to get a 45 Day Trial Access to our COMPLETE Leading At The Next Level program or you can check out Wes's recently released book, What's KILLING Your Profitability? (It ALL Boils Down to Leadership!) that was a #1 Best Seller on Amazon!

Having just wrapped up our look at how high turnover kills so much of an organization’s profitability, it makes sense to shift our focus to the costs involved with recruiting. If we can provide our best team members with a solid reason to stay, the pressure to add anyone with a pulse to the team should be nearly nonexistent. But any time we have to fill a critical role, attracting great candidates comes with a high price tag! As we take aim at this profitability killer, we need to come to terms with what the total costs are (because most organizations don’t capture nearly all of them) and how having a strong leadership culture improves the entire process. Then, we’ll tie it all together with some steps any leader can take to develop a strong pipeline of future team members.

For more on this, you're welcome to reach out to us directly at admin@dove-development.net to get a 45 Day Trial Access to our COMPLETE Leading At The Next Level program or you can check out Wes's recently released book, What's KILLING Your Profitability? (It ALL Boils Down to Leadership!) that was a #1 Best Seller on Amazon!

The high cost of turnover shows up on a balance sheet because it’s a considerable profitability killer. Still, a company’s bank account isn’t the only thing that takes a hit when great team members are making conscious decisions to jump ship! Just as top-down leadership and poor communication play a part in so many other areas of how a business operates, high voluntary turnover impacts far more than just the need to stick a NOW HIRING sign along the street in front of the building…

An article I found on Indeed.com called “Hidden Employee Turnover Costs: 7 to Consider” lists these:

• The hiring process
• Onboarding and training
• Productivity
• Engagement
• Morale and company culture
• Work quality
• The time the role is empty

In far too many cases, the only costs I’ve seen organizations consider with turnover are those tied directly to the hiring process—and even then, it’s usually just the expenses that have been paid to an external source: a recruiter, a newspaper or hiring platform, the background check and drug screen fees, etc. I’ve rarely seen a company calculate the internal costs tied to the time invested in creating the job post or screening candidates. Those two alone can be significant even before considering the other six on that list.

In the fourth lesson of our Recruitment, Retention, & Culture course, we cover the importance of a robust onboarding process (not to be confused with the few minutes many businesses dedicate to what they call “orientation” on an employee’s first day) and the financial impact effective onboarding can have, so I won’t hash all of that out again here. We’ll also go into specific detail later on, showing how much profitability is killed by poor engagement and low morale. Just know that high voluntary turnover weighs heavily into both. Right now, let’s stick with how this particular profitability killer spills over into productivity, work quality, the impact of an empty role, and how those things always reach the customer we’re serving.

In our Leading At The Next Level program, I shared a lesson where I cited statistics about the time it takes for a new employee to be profitable. In short, the study I referenced showed that the break-even point for an organization hiring someone new was usually around six months, meaning that that team member was costing the company money until that point—just on their individual productivity. There was even more cost involved when you consider that anyone training them also lost productive time.

Additionally, which employees are most likely to make quality-related errors? I realize this is part of the training curve, but it still comes at a cost… These mistakes lead to work being redone in the best-case scenario, the product being scrapped in many cases, or even an inferior product or service reaching our customer—which generally has a far higher long-term cost than either of the other possibilities!

So what about costs related to the role being empty? Depending on the role type, it could take weeks or even months to find the right person in the best of times. But when voluntary turnover is already high, this is even more difficult and tends to stretch the time out even longer. What happens to the work during this time? If you’ve ever been in a salaried role and had several weeks of paid time off left over at the end of the year, you know where I’m going with this; the work still HAS to get done… As salaried employees, we take it with us on our vacation or don’t take the time off. When a critical position is empty, that work lands on someone else’s desk—someone who already has a full plate. Sometimes, those folks absorb it by working extra hours, but other times, things fall through the cracks. Either way, this is an added cost of turnover that hardly ever gets captured.

Unfortunately, it doesn’t stop there. Let’s look briefly at how this can impact our work performance and the overall company culture before unpacking specific ways to give our best team members a reason to stay.

For more on this, you're welcome to reach out to us directly at admin@dove-development.net to get a 45 Day Trial Access to our COMPLETE Leading At The Next Level program or you can check out Wes's recently released book, What's KILLING Your Profitability? (It ALL Boils Down to Leadership!) that was a #1 Best Seller on Amazon!

Over the last several years, I’ve frequently referenced this study:

According to a Gallup study, “The U.S. Bureau of Labor Statistics has found that the U.S. voluntary turnover rate is 23.4% annually. It’s generally estimated that replacing an employee costs a business one-half to five times that employee’s annual salary. So, if 25% of a business’ workforce leaves and the average pay is $35,000, it could cost a 100-person firm between $438,000 and $4 million a year to replace employees.”

While I believe that alone makes a strong point about how expensive turnover is in an organization, the cost of high turnover can be so much more—and that’s the next profitability killer we’ll address!

Nearly every time I’ve shared that with a group of leaders, I’ve challenged them to consider how even the most conservative numbers in that quote impact the profitability of their organization. Still, this only captures part of the picture. First, let’s consider how much a company’s average wage is today since the minimum wage has nearly doubled in the last two years—going from $7.25/hour to $12/hour in Virginia as I share this, with $15/hour being the widely discussed target that’s likely to be achieved sooner than later. Now let’s factor in the combination of the Covid pandemic and the “Great Resignation” that’s resulted in Help Wanted signs at just about any business we drive by or walk into on any given day. At the risk of having a flag thrown on me for piling on, think about companies like Sheetz or Walmart offering $17-18/hour as a starting wage for full-time positions combined with the significantly higher minimum wage, which all but forces companies to increase even the entry-level wage for skilled and semi-skilled roles that had been between $14-$17 per hour as recently as 2019. Oh, and we can hardly pretend that all this doesn’t spill over into every other pay range up the company ladder!

I’m convinced that $438,000 for a 100-person company, the low-end referenced in that now-dated Gallup study, no longer exists. When I see starting wages for full-time retail positions at or above that $35k annual salary in the sleepy (and beautiful) Shenandoah Valley, where the cost of living has traditionally been way lower than the larger metropolitan areas only an hour or so away, I have a tough time imagining many organizations maintaining an average salary under $50,000. And everything I’ve hit on to this point has been tied to those BLS norms. So just how much is the cost of high turnover, and how can we capture the profit it’s killing?

Before we begin working through any of that, though, let’s ensure we’re on the same page with exactly what turnover I’m referring to—because it ain’t all bad! Let’s be honest; there are times when turnover is necessary. That doesn’t mean it’s not difficult or there’s no cost involved. Still, every business will have situations to deal with where performance isn’t where it should be, or someone isn’t aligned with the culture or values. And occasionally, we get to celebrate a team member’s retirement… We won’t be addressing either of those. The turnover I’ve always been most focused on minimizing, regardless of how high it is, has been the voluntary kind, the kind where a great team member chooses to leave, and it could have been prevented. I believe that’s a significant profitability killer, and two of the things we’ve addressed recently—top-down leadership and poor communication—play a role in driving our turnover percentage up.

For more on this, you're welcome to reach out to us directly at admin@dove-development.net to get a 45 Day Trial Access to our COMPLETE Leading At The Next Level program or you can check out Wes's recently released book, What's KILLING Your Profitability? (It ALL Boils Down to Leadership!) that was a #1 Best Seller on Amazon!

Once we’ve come to terms with just how high the cost of poor communication can be and how any poor communication skills in our organizations add fuel to other fires that are killing our profitability, we have plenty of reason to address the lack of communication between our managers and employees. Let’s be honest, though: if doing it were as simple as saying it, would there be any need to discuss it here?

We’ve already worked through many of the effects of poor communication in the workplace, so I won’t hash them all out again now. What I will do, though, is suggest that I’m not sure I’ve ever met someone who wanted to communicate ineffectively with their team—or anyone else for that matter. All too often, I believe it simply boils down to not having the right tools for the job (or even knowing those tools exist)!

Most everyone I know is familiar with some variation of the Golden Rule: do unto others as you’d have them do unto you. Truthfully, our society would have much less crap going on if we all did a better job of following it. But while the Golden Rule may solve many of the issues we see in the headlines on any given day, breaking it may be just what we need to address the profitability killer of poor communication.

One evening several years ago, I received a text message from my son asking, “How do I get people to do what I tell them to do?” He was working second shift in a manufacturing facility at the time, and it was his first evening filling in as a backup lead for the assembly line he had been part of for a couple of years. I answered, “Call me tomorrow morning, because that’s not something I can answer in a text.”

When he called the following morning, the first thing I needed to know to have any hope of providing him with solid feedback was why he was asking: did he have team members who weren’t doing what they were required to do, or did he believe they were capable of accomplishing more? He was quick to explain that the line team was great! He said they were already the most productive on the shift, but he felt like they could do even better, and he wondered how he could bring that out in them.

As a dad, I still get excited all these years later when I think back to that conversation. The fact that Matt, in his early twenties at the time, saw more potential in his team and wanted to learn how he could bring it out in them was something I just haven’t seen very often. But getting the results he was hoping for from “having them do what he told them to” wouldn’t be as simple as making a blanket statement to them all at the beginning of the shift. Only a few of them would have responded positively to him if he had communicated with them how he wanted to be communicated with… Like me, Matt is pretty direct and to the point. He thrives on being challenged and will go out of his way to accomplish a task, especially if someone doesn’t think he can!

Matt could have taken that approach, but I’m positive the results wouldn’t have been anything close to what he hoped for. Instead, we discussed how he could break the Golden Rule with each team member and do unto them as they would want rather than how he would want. Because I knew each of the folks working with him, I was able to give him specific insight that helped him achieve the goal in his initial text message. I was also able to provide him with a simple approach for doing the same thing with anyone else moving forward. He was excited to put it into practice; it was just a matter of understanding how.

For more on this, you're welcome to reach out to us directly at admin@dove-development.net to get a 45 Day Trial Access to our COMPLETE Leading At The Next Level program or you can check out Wes's recently released book, What's KILLING Your Profitability? (It ALL Boils Down to Leadership!) that was a #1 Best Seller on Amazon!