If your store chain is plagued with turnover as many in our industry are, then employee retention should be an integral part of your store manager bonus compensation. One lost cashier is estimated to cost a company a minimum $2,500. That figure includes replacement cost, new employee errors, and lost sales. Employee retention should be a number one goal for most retail units, but we rarely see it as a stated goal in store manager bonus programs.
Why do store manager programs ignore turnover if it is so costly? At Meridian, we frequently see labor hours, inventory control including shrink, cash shorts, etc. in manager bonus programs. But if you take a moment to think why most of these problems are occurring, it’s due to turnover. We have traced the root cause of excess payroll costs, shrink, miss-rings, and cash shorts to turnover. So why not compensate store managers for something that is the cause, rather than the effect?
Any retention goal must be set realistically (to the manager, not just you!) on a store-by-store basis to be effective. To get started adding retention to your bonus program, first calculate actual turnover on a store-by-store basis if you haven’t already done so.
For each store, record the number of employees that left that store’s employment during the past 12 months. (If the employee transferred to another position within your company, do not count that as a turnover.) Now take that number of lost employees and divide it by the number of employees needed to run each store. The result is your turnover percentage. For instance, if you lost 50 people, and need 20 to run your store, your turnover was 250%.
As you calculate, one question that may arise is how to treat part-time help. If you use part-time workers, you must include them in both your exit count and total employee count. If you speculate that your company’s turnover is significantly higher in part-time employees, you may want to calculate two turnover figures separately per store, one for full-time and one for part-time.
Next, chart the turnover rates for all of your stores on a single spreadsheet. This visual presentation allows you to easily detect both stellar and problem stores. You will also use this chart as a tool during your next step, working with each store manager to develop base, improvement, and stretch goals for employee retention.
Adding realistic retention goals to manager pay programs will provide many ancillary benefits to your company. Retention goals automatically create a culture where each employee is respected and valued. Store managers become more willing and flexible about working with challenging employees and employee challenges. In addition, managers who serve in a hiring capacity will more carefully screen potential employees, not just hiring the first warm body but instead, looking for those who will stay and add value to your company.
Implement and reward retention goals and your company will win, your managers will win, your cashiers will win, and your customers will win. What could be better?