RSS 2.0 FeedVol. 3, No. 5, May 2007, Featured Articles
Meet in the Middle
How and why to reduce the cost of employee turnover
It’s the bane of most casino middle managers—employee turnover. The employees come; the employees go. Sometimes it’s like a revolving door.
Many managers assume most of their new employees won’t make it past the first 100 days. They don’t even want to get to know these people until it appears they will stay for awhile. Why bother when it’s likely they will walk out the door within three months?
Why should you, the middle manager, bother? Why should you do everything you can to help your employees succeed in a very demanding line of work? It all comes down to money.
Simply put, your casino is in business to make a profit, and the bottom line takes a hit every time an employee quits. Sure, you know it costs money to hire a replacement, but you really have no idea just how expensive turnover is. Turnover is incredibly expensive and it comes right out of profits.
If you think I’m exaggerating, take a look at some numbers from the U.S. Bureau of Labor Statistics and Cornell University.
The government puts turnover in perspective. According to the bureau, the typical American worker holds nine different jobs before age 32. Overall, U.S. voluntary turnover (they quit rather than being fired) increased slightly to 23.4 percent in 2006, up from 22.7 percent the previous year. The highest turnover by far is in the accommodation and food services sector at 56.4 percent and the leisure and hospitality sector at 52.2 percent. Some sources say employee turnover is as high as 200 percent to 300 percent per year in the hospitality industry. If that doesn’t paint a clear picture of how serious a problem turnover is, I don’t know what does.
Here are some numbers that will knock your socks off. Last December, Cornell released research of the hospitality industry with a focus on hotels and resorts. But the university’s findings can easily apply to casinos as well.
Here is what the university discovered. The cost of replacing employees in less complex jobs is $5,693.89 per new hire. Read that again—per new hire! The cost of replacing someone in a complex job jumps to $9,932.05—and the majority of positions at casinos are more complex. If a casino has 1,000 employees and 40 percent turnover, the annual cost of that revolving employment door runs in the millions of dollars. In reality, many casinos have 80 percent turnover or worse.
But there’s more. Cornell researchers say if a business is “mid-market and below,” turnover may only be costing $4,434.57 per person. On the other hand, if the business is upscale, that cost skyrockets to $12,135.85 per person. Thus, if a casino has a vision statement that includes words and phrases such as pre-eminent, leader, destination resort and the number-one destination, its cost per lost employee probably is about $12,000. Look at your turnover and do the math. That is a lot of money going down the drain.
You’re probably shaking your head and muttering there’s no way it can cost that much just to replace one employee. Cornell took a look at that, too, and what they found shows that costs quickly add up. Cornell identified five major categories that contribute to the total cost of replacing an employee. They are pre-departure, recruitment, selection, orientation and training, and lost productivity. Cornell even broke those categories down into line item expenses and it was enlightening.
Let’s focus on productivity because that’s something middle managers can easily gauge for themselves day to day. This is the area that has the greatest impact from turnover. Productivity that is lost when people fly out the back door is overwhelming. It’s not just the direct loss of productivity from the person who left, but also the effect that departure has on the people who remain. It doesn’t matter if the person who left was not a good worker, the rest of the people around them are affected by the loss. That creates stress. They feel like they’ve lost a part of themselves and their productivity drops.
Research shows that managers hold most of the keys to keeping employees on the job. So do your part. Step up and help your employees find a reason to show up for work every day. Show them how to do a good job. Help them succeed. Praise them when they get it right. If every middle manager at a casino did that, the revolving door would slow considerably, profits would climb and everyone would be much happier.
Many managers assume most of their new employees won’t make it past the first 100 days. They don’t even want to get to know these people until it appears they will stay for awhile. Why bother when it’s likely they will walk out the door within three months?
Why should you, the middle manager, bother? Why should you do everything you can to help your employees succeed in a very demanding line of work? It all comes down to money.
Simply put, your casino is in business to make a profit, and the bottom line takes a hit every time an employee quits. Sure, you know it costs money to hire a replacement, but you really have no idea just how expensive turnover is. Turnover is incredibly expensive and it comes right out of profits.
If you think I’m exaggerating, take a look at some numbers from the U.S. Bureau of Labor Statistics and Cornell University.
The government puts turnover in perspective. According to the bureau, the typical American worker holds nine different jobs before age 32. Overall, U.S. voluntary turnover (they quit rather than being fired) increased slightly to 23.4 percent in 2006, up from 22.7 percent the previous year. The highest turnover by far is in the accommodation and food services sector at 56.4 percent and the leisure and hospitality sector at 52.2 percent. Some sources say employee turnover is as high as 200 percent to 300 percent per year in the hospitality industry. If that doesn’t paint a clear picture of how serious a problem turnover is, I don’t know what does.
Here are some numbers that will knock your socks off. Last December, Cornell released research of the hospitality industry with a focus on hotels and resorts. But the university’s findings can easily apply to casinos as well.
Here is what the university discovered. The cost of replacing employees in less complex jobs is $5,693.89 per new hire. Read that again—per new hire! The cost of replacing someone in a complex job jumps to $9,932.05—and the majority of positions at casinos are more complex. If a casino has 1,000 employees and 40 percent turnover, the annual cost of that revolving employment door runs in the millions of dollars. In reality, many casinos have 80 percent turnover or worse.
But there’s more. Cornell researchers say if a business is “mid-market and below,” turnover may only be costing $4,434.57 per person. On the other hand, if the business is upscale, that cost skyrockets to $12,135.85 per person. Thus, if a casino has a vision statement that includes words and phrases such as pre-eminent, leader, destination resort and the number-one destination, its cost per lost employee probably is about $12,000. Look at your turnover and do the math. That is a lot of money going down the drain.
You’re probably shaking your head and muttering there’s no way it can cost that much just to replace one employee. Cornell took a look at that, too, and what they found shows that costs quickly add up. Cornell identified five major categories that contribute to the total cost of replacing an employee. They are pre-departure, recruitment, selection, orientation and training, and lost productivity. Cornell even broke those categories down into line item expenses and it was enlightening.
Let’s focus on productivity because that’s something middle managers can easily gauge for themselves day to day. This is the area that has the greatest impact from turnover. Productivity that is lost when people fly out the back door is overwhelming. It’s not just the direct loss of productivity from the person who left, but also the effect that departure has on the people who remain. It doesn’t matter if the person who left was not a good worker, the rest of the people around them are affected by the loss. That creates stress. They feel like they’ve lost a part of themselves and their productivity drops.
Research shows that managers hold most of the keys to keeping employees on the job. So do your part. Step up and help your employees find a reason to show up for work every day. Show them how to do a good job. Help them succeed. Praise them when they get it right. If every middle manager at a casino did that, the revolving door would slow considerably, profits would climb and everyone would be much happier.
Martin R. Baird is CEO of Robinson & Associates, Inc., a customer service consulting firm that works with casinos around the world. He is creator of the company's Advocate Development System, and author of Advocate Index: An Operational Tool.
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