Want to deliver "outrageous service"?
Then you must keep turnover low
By Greg Hatcher
There is nothing as frustrating or expensive as having to retrain a new person to be as good as the person who just left you. In fact, one of the most significant costs to any company is that of turnover and retraining new employees. It can take one to two years to get a new employee "up to snuff."
For any business - whether it is operating a gas station or making microcomputer chips - turnover is a hidden cost that many employers overlook. After losing several employees for various reasons in the early years of my business, I decided I was tired of turnover and was going to do everything I could to bring in the best people and keep them. My new strategy is a combination of things I had learned in two different areas.
The first education I got in regard to turnover had nothing to do with my core business of insurance. I had a house I had rented out for quite some time. When I first started renting the house, I tried to charge a rate that was aggressive. I found that I could get renters in, but they would soon find a better deal, and I would have to start all over again: going through credit histories, repainting walls, and making changes to customize the house to the needs of the new renters. Generally, I was a month or two without rent, and I soon learned that one or two months' lost rent ate up a full year or more of the additional profit I made by charging an aggressive rate.
I found that comparable houses to mine in the area were renting for $800 a month. So now I rent mine for $700. I interview candidates who know from shopping the market that this house is $100 below the market. I tell them I will rent them the house for $700 and will not increase the rent if they take care of the little details on the house and keep it in good shape. This approach puts the renter and me on the same team and with the same goal. We want the house to run smoothly with as little hassle as possible for both of us.
When I give my renter a better than average deal, the renter stays in the house, is happy with the deal and feels he has control of the situation. The fact that I have low turnover on this house has saved me a lot of money.
Here's the parallel: When most companies hire someone for a certain position, they try to spend the least amount of money possible to fill that position. A book I read encouraged employers to try just one time to fill the next open position by recruiting the very best employee they could find and paying the person the highest salary the company could afford for that position. I decided to try this philosophy. I hired my first employee under this premise about five years after I was in business, and I have never hired an employee under any other premise since.
Assume you are hiring a receptionist, and the going rate for the position is $18,000 a year. If you interview well and are willing to pay a receptionist $20,000 a year, you will get the best receptionist on the market. The receptionist will not be constantly looking for other jobs where she can make a little more money.
As long as you and the receptionist understand that she is making more than the going rate and you provide the other important factors such as good working conditions, respect and a job she can take pride in, you can keep that receptionist. I have found since we adopted this policy that we only lose employees when spouses get transferred, employees retire or they decide to make a complete industry change.
Of course, salary is not the only consideration in keeping good employees. We also provide a pleasant working environment with private offices and good benefits, and we are generous in regard to personal days, sick pay and other benefits.
The fact that we have been able to reduce our turnover and hire better people by paying just a little bit more has been one of the best moves our company ever made. Our employees don't leave our company to go to work for our competitors.
The magic 10 percent
It is impossible to deliver great service when you constantly have new employees coming in who do not know the ins and outs of your business and are not familiar with the clients. Turnover will always be a part of your business, but if you can keep your turnover to less than 10 percent, you are doing an outstanding job. This means that at least 90 percent of the employees your clients are working with are people who are familiar with their accounts. Ten percent turnover, as opposed to 25 percent, can make a huge difference in your company's bottom line, the morale of your employees and the service your customers receive.
One big advantage of paying our employees a little more is that it makes me feel good. The fact that we have a bunch of All-Stars on our team who are well-paid has done a lot for my self-esteem and pride in our company. It also does a great deal for our entire staff. Everybody wants to work for a winner, and I now find it easier to recruit and get more winners.
In fact, a part of every interview process we have involves the candidate going around and talking with three or four of our employees for 15 minutes and letting them tell him or her what it is like to work for us. Our employees sell a prospective employee on coming to work at The Hatcher Agency. We feel our company is a great place to work, and we want anyone who joins us to feel the same way.
The bottom line: Give your employees a good deal and keep them happy. They will stay with your company a long time and will make your customers happy. Everybody wins.
Greg Hatcher is the author of 55 Steps to Outrageous Service, from which this article was excerpted. By implementing the principles of outrageous service, he has grown his insurance firm, The Hatcher Agency, into the largest health insurance agency in Arkansas.