Idaho Employers Grapple with Rising Turnover Costs

One sign of an improving economy is that voluntary separations from employment increase. As unemployment rate drops, workers feel more confident that they can find work, so they leave  current jobs. The result is increasing turnover for businesses, requiring employers to spend more effort on both recruiting and retaining workers.

Turnover costs are high. The Society for Human Resource Management estimates it costs $3,341 to hire a new employee. For some high-skilled workers, the costs of recruiting a replacement may be as high as two years’ salary. Turnover costs not only include the cost of recruiting new workers but also training and orientation. It also includes the cost of lost business because new workers don’t know how to provide good customer service or accidentally break equipment or products.

Voluntary turnover is on the rise in Idaho as labor markets continue to tighten. Unemployment rates in Idaho edged down from the high levels seen in 2010 and 2011 to low levels. Idaho’s seasonally adjusted unemployment rate in October was 4 percent, considerably lower than the 5.8 percent average for rates from 1978 through 2007.

All but two counties currently have seasonally adjusted unemployment rates below their average from 1978 to 2007. Although most still have rates higher than in the three years before the recession, remember  those were extremely low rates by historic standards and the product of an overheating economy.

More evidence of tighter markets is the increase in job openings and decrease in job applicants. In the first half of 2015, employers listed 70,104 positions with the Idaho Department of Labor, up 20.4 percent from the first half of 2014. In the same period, the number of job applicants registered with the department fell 15.6 percent from 180,122 to 152,075. Job applicants peaked at 254,863 in the first half of 2010, and job openings have more than tripled from 20,464 in the same period.

Idaho employers are using many different tools to address rising turnover.

Assessing the job market: Labor shortages affect some occupations more than others, so employers must become aware of labor market conditions for workers with the skills they require. Then, they can polish their recruitment and retention practices to fill jobs with the best talent.

Changing skills expectations: During the recession and its immediate aftermath, existing employees were unlikely to quit. There were plenty of highly qualified job applicants. Employers became accustomed to having high expectations. They were able to hire new workers who didn’t require any job training. Now, the job market has changed and employers are re-examining  job requirements — which skills an employee must have from day one on the job and what skills can be gained through employer-provided training — and are dusting off job training programs.

Pay and benefits: Many employers are assessing pay and benefits to determine if they need to increase pay or add benefits. The Idaho Department of Labor offers information about occupational wages in various parts of the state on its labor market information website (http://lmi.idaho.gov).

Others are moving to pay-for-performance systems, where workers who do the best job receive pay raises.

Career development: Many employers may focus too much on monetary issues and forget  high potential employees also leave because of inadequate opportunities for promotion and dissatisfaction with company management. Showing employees there are career ladders can go a long way to making them believe they have future at the company.

One way to keep the best workers motivated is giving them opportunities to learn — whether it’s college or vendor classes, internal training or a strong mentor. Supervisors, coaches and mentors who don’t make employees feel valued may be why employees may be walking out the door.

One size doesn’t fit all: Supervisors who know employees well should have insights into what each one needs to feel motivated. For some individuals, it’s mostly about money. For others, it may be a need for more flexible hours so they can handle family issues. Millennials — the generation born between 1983 and 1999 — tend to want more face time with a manager and continuous feedback. Employers who offer these workers more attention will be more likely to retain and keep them motivated.

Analyzing data: Larger companies are using “big data” to learn what kinds of workers fit in best at their organizations and are likely to stay. They also analyze a vast array of data points — job tenure, geography, performance reviews, employee surveys, communication patterns and behavior tests — to determine when someone is likely to leave a post. This should give managers early warning so they can take action before employees jump ship. Micron Technology Inc. — the Boise-based semiconductor and Idaho’s largest manufacturer — uses data in its attempts to reduce turnover among first-year employees. According to a March 14, 2015, Wall Street Journal article, Micron found workers were more likely to leave if they felt their job hadn’t been accurately described when they were hired, so the company is trying to create clearer job descriptions. Data also showed people who relocated for a job were more likely to leave. Analyzing data also helps employers improve the on-boarding process. They learn the best ways to orient, train and motivate new workers.

Contracting out: As Idaho’s labor market tightens, some employers contract out services they offered in house, so they don’t have to deal with issues of hiring and training workers. More businesses say they are also using temporary help agencies to fill positions. Between the first half of 2011 and the first half of 2012, the number of workers at temporary employment agencies in Idaho grew 10.5 percent from 8,378 to 9,258.

Kathryn.Tacke@labor.idaho.gov, regional economist
(208) 799-5000 ext. 3984