Author’s Cut: Losing people? Do the math before you refill a position

Kevin Marasco, CMO at Zenefits
Feb 23, 2022

We’ve all felt the pain of losing employees this year, whether they’re folks from your own business or servers at a local restaurant.  On this special Author’s Cut episode of POPS!, host Didi D’Errico dives into the financial costs of losing staff with Kevin Marasco, Zenefits’s Chief Marketing Officer and co-author of People Operations. He […]

We’ve all felt the pain of losing employees this year, whether they’re folks from your own business or servers at a local restaurant. 

On this special Author’s Cut episode of POPS!, host Didi D’Errico dives into the financial costs of losing staff with Kevin Marasco, Zenefits’s Chief Marketing Officer and co-author of People Operations. He reveals why the real cost of losing star players and even unmotivated employees is significant, and how to get ahead of it.

After you listen:

Ask a SMB Workplace Question and get featured on POPS! The People Ops podcast.

On this episode, you’ll hear: 

  • [01:20 – 03:30] How losing unmotivated employees takes a toll on your business
  • [03:30 – 07:00] Motivating your people with play, potential, and purpose
  • [07:15 – 10:45] Calculating the true cost of losing employees
  • [10:45 – 14:00] Getting ahead of employee loss

Transcript

Didi: This is Author’s Cut, POPS show from Zenefits, where we give you exclusive insights, tips, and even hacks from the authors of our selling books, people, operations, to help you make work, work better on your host Didi D’Errico. This year provided endless examples of the pain of losing employees, whether they’re folks from your own business or whether they’re help making the stores, restaurants, school, bus in need and garbage services, we rely on every day run.

In this episode, we’re diving into the financial costs of losing staff and know this. The real cost of losing star players and even losing unmotivated employees is significant, especially if you’re a small business, because you’re likely the one who’s got to absorb that work when you leave. And today we’re going to talk more about that with Kevin Marasco, one of the authors of People Operations, the bestselling book that inspired this podcast. So let’s start with, who’s leaving the business and why should companies care about not only losing their greatest star employees, but also those who weren’t maybe really. 

Kevin: Recent research that we did shows that half of employees are actually considering leaving right now, uh, over the next, you know, six to 12 months.

So I think part of the question is who’s leaving a lot of people and perhaps a bigger question who’s going to leave and the future. Um, so if it’s not happening, To you now there’s odds are that it will be soon. So I think one of the things that’s interesting is it’s not for sure superstars are leaving.

They have a lot of opportunity. And in many industries, you know, they’re being actively recruited from aggressive offers in terms of compensation, uh, equity sign-on bonuses, perks, benefits, all types of incentives, monetary, and otherwise. But really employees had every level and degree of competency also have opportunity and really unprecedented gap in terms of supply and demand.

Right now, talk a little 

Didi: bit about, uh, you know, what opportunities are squandered when organizations are only looking at hiring, replacing the superstar. 

Kevin: Perhaps the biggest overlooked opportunities, what I would call the middle. And there was a pretty neat article in HBR, uh, years ago. And it was like something along the lines of the hidden, the dirty little sales coaching secret.

And it was like too often people focus just on the bottom performers or top performers. And typically there’s a bell curve, right. And you know, you might have 10 to 15 to 20% of people being top performers and maybe 10 to 50% as bottom performers. Well, then you have 60, 70% in the middle. And even when you break that down by units, if it’s, you know, whatever the unit of productivity is in your company, your industry, when you started to do the math, you quickly realize the.

Leave her in the business is this, this big middle, and how do you, up-level the output of, you know, kind of folks in the middle, so to speak. And so if you’re not thinking about that from a coaching and a development and a productivity standpoint, as well as a retention aspect, you know, you’re missing out on a, on a massive opportunity and also.

Didi: So let’s talk a little bit about that. Moving the middle and moving the star players, moving people forward, you know, is it really all about making sure you hire the right people to start out with? Or is there more to. 

Kevin: I think there’s more to it. It starts with hiring for sure. But, uh, there’s a common thread that should go from recruiting through onboarding and ramping of employees through retention and re recruiting.

And a lot of it comes down to, you know, it’s, it’s more than just the skills and capabilities that you hire someone for, but yeah. Yeah. More about the attitude, the ambition, you know, their grit, their growth mindset, the work environment, things that historically have been thought of as a little bit less tangible.

But, but I think what people are realizing they’re really real. And it’s some of these things that ultimately are true motivators for employees. And so it’s a company’s ability to. Unlock and these true motivators and connect, use them as leavers to connect with employees. And so that starts at recruiting, but again, it goes through the entire employee life cycle.

Didi: And are there things that you’re seeing maybe particularly in this environment or this environment just makes it that much more glaring of, what’s not motivating employees. It’s contributing to the folks that aren’t in the middle, but that are somewhere lagging around the edges. 

Kevin: Yeah, well, there’s lots of philosophies on motivators and one is money.

And there’s a, there’s a point in varying points of view on that. Another is, uh, you know, from know Daniel Pink’s philosophy is autonomy, mastery and purpose. That’s another philosophy. And then there’s McGregor and Doshi. You know, I call it P three, which is basically play potential and purpose. And, and as those being the true motivators and, and converse to that as detractors of being, you know, Pressure economic pressure and inertia, but there’s some commonalities regardless of philosophy.

And these are the things that we’re seeing surge in importance right now. Not just, you know, the compensation. Yes. That is a part of it. When there’s the ability to switch jobs and get a sign-on bonus or a bump in salary. And then, you know, depending on how. That impacts a person’s life and their personal motivators.

That can be a factor, but the bigger factors are things like development. What can I learn? What type of coaching am I going to get? And how is this going to build career equity over the longterm? You know, for me, uh, what about leadership culture? The work environment, flexibility. My ability to. Work-life priorities.

How do I balance or integrate those in what’s this employee experience like, and these experiential aspects of work are things that are surging and people are today play, placing more importance on and something that absolutely should be factored in, in terms of companies recruiting and retention strategy.

Yeah, 

Didi: I read something last week. I think it was a post by Arianna Huffington that talked about this huge flip from thinking about living your life through the cracks of your job, to living your job through the cracks of your life. And is it the balance or is it maybe even just kind of reassessing the whole thing as you talk about those motivators, those intrinsic motivators.

Play purpose and potential. The more that you can tap into something that feels like you’re in the right place for you is super huge. And it’s, I don’t know if it’s a, it’s a revolution or what exactly, but there’s a, there’s a lot moving right now that that employers want to pay attention to. And so. And then we can dig into the dollars and cents of all of it.

You know, how does a company calculate the cost of losing employees? Uh, obviously there’s just the gut check of, oh my gosh. You know, the they’re going to find a new one, but you know what needs to go into a really robust analysis and maybe, um, start with there and talk about what people are overlooking when they’re thinking about turnover.

Kevin: Missteps is the thinking about just the actual cost to hire someone? What have I have to pay them? What is the recruiting cost? I have to pay a head hunter or is there a cost to pay with ZipRecruiter or indeed to, to source folks or whatever. And those are real dollars. You know, you have to write checks for rights.

Uh, that tend to be the first thing that come to mind. But what’s often overlooked is the opportunity cost to the business. And the real cost comes to the impact that not having an employee or having an unmotivated employee and going through that life cycle from when they’re unmotivated, looking for a new job, find a new job.

You might even have a gap where you have a period of time where you don’t have someone doing that work that needs to be performed. And then on the other side of the ramp, What’s the lost productivity to the business. And it really depends on the role. So like a couple of quick examples, sales, if it’s a revenue producing role, you know, and in our business, we know what our quota is for a sales rep.

It’s, you know, around $60,000 per month. So every month we don’t have that person, that’s the revenue we’re missing. Right. And if it takes, you know, three to four months on average for the whole life cycle to have. Productivity back to where it was when we lost someone, you can quickly do the math. They asked $300,000, that’s the cost.

And you could go down the line, you know, customer, customer facing roles in, you know, in a restaurant. And what’s the, what’s the impact that has to not being able to serve customers, lost capacity. That’s the true cost is, is when you have, uh, any disruption and someone who’s productive and then have to wind that down.

Then recruit them and then ramp someone back up and everything that happens in between and through those three stages. and that domino effect, right? So when they’re not doing all that they should be doing, their peers are picking up or you’re picking up, or somebody is picking up the slack, which means then you in turn are doing less than you were supposed to be doing and so on and so on.

Didi: And the whole snowball builds. 

Kevin: Right. That’s right. If you start double-clicking so to speak, like you realize it’s all these row of dominoes that happens and okay. If there’s knowledge that walks out the door well, does someone know how to do that? And then does it become all of a sudden other people trying to pick up the slack?

Well, then they’re at risk of becoming burnout and then them leaving 

and if it’s someone responsible for signing new customers, well, okay. You look at the loss revenue of not getting those customers, but what about the lifetime value of those customers?

Like if there’s, you know, repeat purchases, then there’s also an operational roles. It can put key business initiatives at risk, you know, someone who’s responsible for opening a new facility or location or manufacturing center or product line. If that puts that at risk, what impact does that have to the business?

 it’s easy to get myopic and Hey, what’s the cost where you can get a little bit even stingy on, okay, Hey, this person wants this much money. And it’s like, okay, well that’s this much more than we used to pay for this role. But if you kind of flip it for a second and say, Hey, what’s the true opportunity loss of the business.

Kevin: And then that sometimes can reframe what you’re willing to invest in, in labor and people and benefits and intangibles to basically recruit and then, and also retain. 

Didi: Nevermind keeping you up at night, but how does that not just make you sick as a, as an employer right now. And how do you start thinking about it today in ways that you can more holistically get ahead of it, as opposed to kind of waiting for the other shoe to drop, if you will, and in today’s volatile.

 there’s a few things that you can do first is it starts with understanding the true cost, because if you understand, understand the true cost, especially of certain positions, it can help you think about what the investment opportunity is, How you should be investing in your people in your workforce and kind of getting less out of my topic, thinking about and thinking about it holistically.

Kevin: Okay. Hey, maybe, maybe we should reevaluate some key investments, like re redoing our, our benefits program. So, but that starts with understanding the true cost and not just compared to what you do. Second is reducing turnover is a big one. I think there’s a neat opportunity here to get at what, you know, two, for one, you can make some investments focus on some programs that can help simultaneously with retention and with recruiting.

And a lot of this comes to investing in employee experience and true. Yeah, we talked about it in a book under first understanding the two motivators of your people, and then building an employee experience that caters to those, you know, what development and coaching opportunities you would providing on an ongoing basis that become part of our core employee value proposition.

What do we stand for? What is our purpose and how can people connect to that? How can we provide more flexible work arrangements that can help retain people? It can also help recruit new folks because there may be, you know, watering holes. So to speak that, now you can go and recruit from that before you couldn’t due to the increase of flexibility, what type of work environment do we want to provide?

How are we building purpose, play potential and autonomy into our day-to-day work experiences? So those things thinking rethinking the employee experience. And including fundamental things like, Hey, we used to be in an office now, maybe we go, you know, we’re going to hybrid. That’s going to, that could help with recruiting and retention.

And then I think the last thing, the third would be what I’d call like pipelining and re recruiting. And even if you don’t have active positions, We’re in an environment where data shows we were at risk and we need to always be recruiting and building pipelines of potential candidates. And there’s ways you can use your employee experience to, you know, use that as a magnet, so to speak, to, you know, get people interested in your company.

And just educating them on what you’re doing, you know, networking, tapping into the networks of your employees. You know, a lot of focus now on diversity recruiting, going into overlook talent pools, educating them about your company, your employee value proposition. Even if there’s not an immediate opportunity, you know, you’re basically building a pipeline of potential candidates in the event.

You do need one, you have folks, you know, on the ready to reach out to and approach. And the last part of that is kind of simultaneously recruiting your existing team and knowing the market is what it is. You know, obviously need to be checking in with employees, but also investing in that employee experience, reevaluating your own compensation and benefits and everything.

Because if you don’t pay for it now, you’re going to be paying for. 

 I really love this idea. You know, the combination of the, no, what you’ve got, create a potential for what you might need and then pay attention to the people that are there. And it sounds as simple. I think, you know, getting people lined up and started in their jobs and getting them successful, many companies, especially small businesses kind of turn to the next.

Didi: Pinpoint, right. It’s a great, I’ve got this, somebody in this job we’re going, it’s great. But it’s like, how do you reinvest in, in, in reconnect, especially as many, today are hybrid, right? And you’re not seeing those people then that, you know, doubling down on making sure you’re checking, checking in with those people is even that much more important, 

Any parting thoughts, Kevin, before I wrap up. 

 if it’s not already top of mind for everyone, it absolutely should be, or will be. And I think my advice is just to be proactive audit. I know something, you know, even that we’re doing internally, we just had an executive offsite planning and re recruiting as a, it was a topic.

Kevin: And I think it’s companies in every industry and space should be, it should be. 

Didi: If you’re listening to today’s show and you’re interested in doing a full cost analysis about losing your team members, check out the link below to the guidebook for employee motivation. There’s actually a section in there to walk you through a cost calculator and as a special incentive to.

We’ll be giving away 10 copies of the people operations book for the first 10 people who reply and send me a [email protected]

 

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Every week, we share the decisions, struggles, and successes for keeping up with an evolving workforce and a changing workplace. No matter if you’ve been in HR or are just getting started, this combination of transformational stories with actionable ideas, as well as context on hot issues, keeps you up-to-date while answering the questions you didn’t even know you had.

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