Hiring can be a bigger cost than payroll if not done right
Have you ever calculated the cost of hiring a new employee? It’s not cheap.
In fact, research from Center for American Progress, citing 11 research papers published over a 15-year period, determined that the average cost to a company of turning over a highly skilled job can be more than 200% of the annual compensation for that role once training costs, lost productivity and hiring expenses are counted.
This could mean tens of thousands of dollars per employee. In other words, you can’t afford to have a high turnover rate in your firm. Instead of greenlighting new hires to make up for turnover on your team, why not look within your organization to make the best use of the talent you have? One of the best strategies to retain employees is to invest in their training and development.
Your business model is predicated on client retention. Therefore, retaining employees in your firm should be a part of that business model, too. If you don’t consider employee retention as an important planning issue, you’ll expose your business to many negative side effects including the following:
One of the biggest complaints that I hear from firm owners is that they don’t have the time or in-house resources to provide additional training outside of new-hire training.
High costs: As mentioned, high costs are perhaps the biggest downside of employee turnover. Your firm cannot afford to regularly spend thousands of dollars to fill positions in the firm.
Lost time: The second biggest issue with high employee turnover is lost time and productivity. It can take weeks or even months to find and place the right employee in a position. Each time you lose an employee, you have to reinvent the wheel and start the recruiting process all over again. This is time intensive and takes away from productively servicing your existing clients.
Poor team dynamics: Finally, employee turnover is directly related to poor team dynamics or a lack of teamwork. If people are constantly coming and going, it’s hard to establish a cohesive work environment in which co-workers can rely on each other and work as a team. In the end, this can have a negative impact on your clients, and it inhibits positive employee morale and job satisfaction.
Just as adding kindling to an existing fire will make it grow, adding new employees to a firm that may be going through employee retention pains will just exacerbate the issue. Refocusing your attention to training and further developing your team’s skills is a great way to utilize the talent you’ve already got while communicating your commitment and investment in them.
Many firms we have worked with do not have a systematic or disciplined way of training and developing employees. Unfortunately, they are not alone, and industrywide, this is starting to become a serious problem. If you want employee training and development to be a mainstay in your business plan, then it needs to become second nature to employees.
Create and promote a culture of learning: You must establish a culture of learning wherein employees are encouraged to regularly identify deficiencies in their jobs and request training. Employees should never feel ashamed for needing help. They should feel empowered to recognize their own areas for improvement and be given the resources and coaching to develop a plan.
One method for creating open dialogue on development is to meet on a regular basis and ask employees questions such as:
- What additional skills, knowledge or tools will you require to accomplish your goals?
- What developmental actions will you take?
- What two or three things do you need from me as your manager to make your job better?
These questions can get a conversation started and help you and your employee to discuss development and training plans.
Many firms do not have a systematic or disciplined way of training and developing employees and it's becoming a serious problem.
Most firms lack continuity in training employees. Organizations often front-load a new employee with extensive training, then offer no learning opportunities after the first six months or year. This is a mistake. If you want to embrace a culture of learning, you need to plan for training opportunities from day one through the duration of the employee’s time at your firm. There should never be a point in an employee’s tenure that the company says, “You know everything you can know.” There’s always something more to learn.
Always keep in mind that a culture of learning starts at the very top of your organization. Employees must see that leadership sets an example. If the firm owners and managers are regularly investing in their own training by attending seminars and conferences, then the entry-level employees are more likely to feel comfortable doing the same.
Let your employees choose the training topics: Nobody knows your employees better than themselves. Therefore, let them choose the training that they need to do their job better. Letting employees choose their own training topics and targets also shows them that the organization cares about them. It helps build loyalty, and loyalty increases productivity. Loyal employees are more engaged. Engaged employees are more productive. When it comes down to it, letting employees choose training topics is a smart move for employee development and satisfaction.
Utilize internal and outside training resources: Formal training is the exception, rather than the rule at most advisory firms. But options for such formalized programs are diverse and can include such things as certifications and designations, technology systems training through vendor seminars and training on firmwide processes for critical tasks. Such programs can offer a boost to performance by expanding the skill set of employees as the firm grows. They can also help motivate staff and instill pride in their work. In sum, training programs can play a large role in enhancing both the qualitative and quantitative performance of the firm.
One of the biggest complaints that I hear from firm owners is that they don’t have the time or in-house resources to provide additional training outside of new-hire training. There are a number of vendors offering video-based and online training that can be accessed remotely. Custodians are a great resource for training seminars and industry conferences, both online and in person. Connect your employees with these programs and allow them the time and flexibility to attend and complete such programs. As a best practice, I do recommend that you ask your employees who attend industry seminars and conferences to report back to the team about the key takeaways and lessons, and to make recommendations as to how the information can be incorporated into the firm’s operations and practices. This type of learning and development goal can also make for an ideal individual incentive metric, and perhaps a financial reward for an employee taking personal responsibility for their career development.
Start mentorship programs: One way to encourage ongoing training is to develop a mentorship program. Mentorship programs look different in all organizations, but in theory, mentorships pair junior-level employees with more senior professionals in the firm. The purpose of these programs is engage employees and to close knowledge gaps in the firm. I am encouraged to see more firms adopting ad hoc or more formal mentoring programs to help develop future leaders at the firm. For firms that don’t have mentorship programs, there are a number of industry organizations that offer resources. The Financial Planning Association offers MentorMatch and The National Association of Professional Financial Advisors offers Mentor Engage. These programs provide opportunities to connect individuals both as mentors and mentees.
On a final note, establishing training and developing programs in your firm will make you more attractive to younger talent when you are ready to fill a position. Recruits that are newer to the job market believe in the value of training and want the opportunity to advance their careers. They are aware of the competitive world they live in, and want a job that provides training opportunities that can satisfy their need to stay ahead of the curve.
A survey conducted by PwC asked millennials, “Which of the following characteristics make an organization compelling to work for?" Just over half (52%) noted opportunities for career progression as an attractive characteristic in an employer. That ranked higher than monetary compensation (44% listed competitive wages and financial incentives as a compelling factor). Excellent training and development programs came in third, with 35% of millennials noting it as an appealing draw.
If your overall human capital strategy does not place training and career development as a top priority, you will be at a competitive disadvantage at not only retaining top talent but recruiting it as well.
Employees are an investment, not an expense. While the investment in continuing education and training may seem expensive, it’s pennies when compared to the cost of losing an employee and hiring a replacement. This should be the mantra as advisory firms consider the challenge of employee development and retention. To get the best work from your employees, you have to invest in your investment. Creating a loyal, skilled and motivated staff does not just happen overnight. It requires a disciplined plan with developmental training, continued learning and steady follow-through.