Small Business Success Podcast: EMPLOYEE ENGAGEMENT & TURNOVER The SCORE Small Business Success Podcast features interviews with the best and brightest in the world of small business, covering topics such as business plans, financing, marketing, human resources, SEO, social media and more. In this podcast, SCORE mentors chat with Linda Lucarelli. * Linda is a native of central Florida. She received a Master's of Science and Personnel Psychology from Florida Tech in Melbourne, Florida. Linda joined Paychex in 2000 and provides HR consultation for small and medium sized clients. Her role is to provide guidance and compliance information regarding handbook policies, training and development on HR laws for managers and employees, job descriptions, comp surveys, and employee relations. Linda how do you define employee engagement? Linda Lucarelli: Employee engagement is an important part of an organization function. What it basically means is having your employees engage and just being able to satisfy the customer and be behind the scenes to make sure that your product or your service is the best that it can be out for your client base. How do you recognize that you have engaged employees? Linda Lucarelli: There's a variety of ways that you can tell. One is obviously if your employees are coming to work and doing their job. That's probably number one. I think the reality and when I meet with clients a lot of it is their first requirement is to come to the company and be able to engage and do their job first. After that, part of that engagement is being part of that organization as a whole by providing feedback, providing recommendations, suggestions, ideas on processes or procedures, just having them as a part of the organization as a whole and making and looking at how the product or the business services their customers or clients. What might some of the positive results be in having engaged employees with your company? Linda Lucarelli: One of the things that we're talking about is certainly hopefully low turnover. When your employees are engaged into the organization and we see a lot of this a lot of times with employee surveys is they want to have a part of what they're doing every day. If they do feel like they're a part of the organization, part of the mission, part of what the company believes in and what they're doing for their clients or customers they are going to be more engaged and therefore be ultimately happier in their job and reducing turnover. Obviously, customer service is a huge a part of that. It is making sure that your employees who interact face-toface with your customers is to make sure that they feel happy and that they represent what your organization is all about when they service those clients. What does a turnover cost a company in dollars? Linda Lucarelli: It could be a variety of figures. A lot of it depends on certainly the position. A highly compensated position might require more of a research, maybe a head hunter is involved, a lot more resources that you may have to look if it's a hard to fill type of position. In general when you're looking at turnover there's what we call direct and indirect cost. That indirect cost is actually the advertising or any amount of money you may have to put out to really select an applicant or to make that you have an applicant pool for that position, a good qualified applicant pool. Advertising obviously any time that the person leaves the organization you have to fill that job, that work and productivity you may save on salary because they're not there and you're budgeting for that but the reality is that productivity is going to be lost so that definitely is a direct cost for the company. In addition to dollar costs there are plenty of non-financial or indirect costs involved with turnover? I imagine in a large company that could be quite substantial. Linda Lucarelli: Yes, it sure can especially in certain industries. You have a lot of industries, that might be restaurants or telemarketing and you have a very, very high turnover. We do have quite a few of those clients. It's very interesting to help our clients in reaching out and trying to select and the best rule of thumb is hire the most qualified candidate. Sometimes that's difficult to do based on your applicant pool.
The indirect cost is all that lost time and also your co-workers or the employees that have to be part of that new hire's on boarding as far as training or any resources that might be taken away from the regular productivity of an employee is going to be actually lost because you're helping that new employee come on board. What kind of tools can a company use to get the right person? I mean I've seen the DISC, those tests and other kinds of tests and Briggs Myers (Myers-Briggs) and what do you recommend as far as getting the best selection of employees for your company? Linda Lucarelli: It's a great question. I think selection sometimes is really the hardest thing to do as a manager. When you address a discipline or termination or that you usually go by performance and you're handling that. When you think about selection, you're meeting a stranger for the first time. You may spend not enough time with that person and vet them to your organization. I think some things to consider when you're a hiring manager is a little bit of the big picture. I think sometimes we miss such a corporate culture or those things about the company that the employee needs to be a part of. If you're a fast-paced company or a little bit of chaos or a company that seems to be very fast in decision making in that, you need a personality in somebody who can certainly qualify for the job, but also meet the requirements for what it is like to fit into that job and fit into that corporate culture. I think sometimes as managers we just make sure that they can do the job instead of really spending some time with them and also maybe get other people involved. If they are going to be working in a particular team, maybe have some of those team members as long as they feel comfortable with asking the correct questions be involved in that interview process, maybe that selection process that applicant can actually come in and mentor a little bit or just job oversight, like a job realistic preview we call which basically means that you're getting a general good feel for what that job is and really job shadow a little bit. I think that's a great indicator to get an idea if that particular person is the right fit for your organization both skill and being able to fit into the organization as a whole. Typically how much time should a company allow to make the decision whether this is the right person that we hired or maybe is it sixty or ninety or a hundred and twenty days where they say, this isn t really going to work. We made a mistake and we're sorry, but we've got to part ways. How would you respond to that? Linda Lucarelli: In the state of Florida and many other states you do generally have a ninety-day introductory period. What that basically allows you to do is from both sides, both the employee as a new employee and the organization is to access if that employee is really going to meet the needs of your organization, both skill level and making sure that they can fit into the rules and policies and stuff like that. It's really important for those managers to spend some quality time with that new employee and really on-board them or do the orientation. I would suggest that you have some kind of a check sheet or something you can identify progression of that employee in their job as far as training, understanding policies and procedures, making sure that they understand the product, the client base those kind of things. It is important for that first ninety days especially because it does tie in to unemployment claims. Generally if you do as a company let somebody go or if it does not work out during that first ninety days, then you would not be entitled to the unemployment claim that is possibly going to be filed. Employment is a two-way street so the employer could dismiss the employee or the employee might say, "This isn't right for me," but what are some of the reasons that an employee might leave their company? Linda Lucarelli: Dennis that's a great question and there's a variety of different reasons why obviously an employee might leave. I think generally we probably think "Oh it's more money," automatically and that's not always the case. It is important to make sure you feel comfortable as an organization with your compensation planning. I think market analysis, getting an idea of what the compensation salaries are for those different positions in your organization, your benefit packages, a variety of different fringe benefits is important for the organization as a whole for growth and for retention.
It is also important to make sure that you are as a manager involved in your employees. That's where that employee engagement goes in together. If you see that an employee who was very much engaged is backing off, not involved in meetings, maybe doesn't give a lot of feedback anymore, maybe becomes negative, those might be signs that that employee is not happy. Part of the reason why people leave an organization is just really they again we had mentioned at the beginning of the podcast is they're not engaged anymore. They may not feel like their valued, that they're respected in the workspace. They may feel like there's a lack of growth or opportunity so it is important as an organization to always be thinking about how to grow the skill level of your employees, provide them opportunity, let them be creative if you're allowed to do that, a variety of different things besides compensation certainly could be a reason, maybe somebody is very uncomfortable with their manager. They're not comfortable with the way the person communicates with them. Communication skills for managers are vital to make sure you feel like you are having a one-on-one dialogue and it's not just you do this or you do that. Employees are much more engaged in their work environment and that tends to prepare employees to be happier. What should you discuss in the way of an exit interview? Linda Lucarelli: That's a good question. Generally a lot of exit interviews are like templates. Basically they're going to ask just general questions. What do you like about the organization? What you didn't like? What it can also do is help you identify maybe red flags. Is there a trend of if you ask questions about what did your manager do that you liked? What did your manager do that you did not like? Did you have an opportunity to have an open door conversation or open door policy with your manager? Were they open to that? Do you feel like any complaints or concerns were addressed and how were they addressed? A lot of times managers will address issues with employees, but basically it's a conversation like, "We can't do that because it's just been the way it is for the last twenty years," rather than really thinking about the question that might be asked and finding out if there is another way of doing something or a more productive way. Just a variety of different questions about really what was your opportunity level? Do you feel like you were paid fairly for the job you did? That's a great question because it may give you some feedback as a company. If you get a lot of trends that are saying, "I wasn't paid well for the job," and you get turnover for that, that might be a time for you to look at your compensation and make sure that you feel comfortable with the decisions for your compensation and also how you manage your employees. Those are two big factors in an exit interview that should be able to come out. Does an employee handbook help in either clarifying policies so that an employee knows where they stand, what the rules are? Does that help at all with employee engagement and minimizing turnover? Linda Lucarelli: Yeah, I think it is a good resource and a good tool. A lot of it obviously we have the EEO or the legal side for you as a company to provide certain policies that you're required as an employer to communicate to your employees all the way from nondiscrimination laws to maybe family medical leave and these kind of legal pieces. Besides the legal part, it is really just a... It's a rule book. It's the dos and the don'ts of the organization. What it does is just grounds you on how we want to treat our employees and what we think is important. Sometimes I'll look at handbooks and I see that it's always what you don't get. We always try to emphasize these are the benefits. This is the rule and the policy about what you can do, but also rules or policies and guidelines about limitations on what you could do. Obviously important information about laws and what may be the repercussions might be if there is a violation of a company policy. Especially now with social media, a lot of the people are on social media now, very vocal about certain things in part of their life both work and personal so it important to make sure that companies have good strong policies to monitor and make sure that they are providing the proper policies for the organization. That's why it's important to update and look at that every year or two to make sure that because things do change in an organization
and you want to make sure that policies are up to date for what's going on in the current organization and current culture of the company. Linda what are some of the benefits that you've see that are maybe most beneficial to reinforce employee engagement and minimize turnover? Linda Lucarelli: I think the best thing is like I said is really getting them involved. Part of that is really along with our training for this particular subject is about corporate culture. What does your culture for your organization say about your company? Are you a learning organization where it's important for all of your employees to learn new skills, to do Web-x s, to be able to have an opportunity to be engaged and be a part of the organization as a whole. Most organizations do have what we call mission or a vision statement. It basically outlines really the meaning of the organization. What is the organization for? What do we believe in? What are our values? It is important for your employees to be a part of that mission? The problem comes about sometimes is when the mission or those values are not executed or communicated to the employees or maybe it's a start-up company and you have not created that mission yet or maybe the organization has gone through downsizing or some economic turn and therefore there's some concern and there's layoffs so people don't have motivation in that. It is important for owners and managers of an organization to come together and be the cheerleader of the company and to say, "We might have had some tough times, but this is what we're going to do. We're lean, mean, ready to go in the future and this is what our message and we want you to be a part of that message." What do you see in the way of specific benefits like vacation time, sick days, comp time and other benefits like that? What do companies typically do that works well in those areas? Linda Lucarelli: We're seeing so many changes obviously with healthcare reform and what's required and compliance on that arena. We are seeing a lot more and what's interesting with HR laws now is most of us probably see that there's not a whole lot of things specifically coming out of Congress. What's happening in the HR field and with employment laws is a lot of it becoming state driven, meaning the state may have and their legislative team may have certain policies or certain rules in place or different types of laws that may impact employers and that could result in mandatory sick time which we're seeing across the country. A lot of ordinances, a lot of counties are saying, "Hey if you're an employer in this particular city or county, you're required to do up to three or five days." Usually what they say is about five days or forty hours of sick time. That's coming down a lot of times. Sometimes these things are forced upon employers. Florida is not one of those heavy handed legislative states so a lot of it is up to the organization as a whole to define that. The other trend is a lot of PTO time, paid time off versus traditional vacation bank, sick bank, personal days. A lot of times people or organizations will combine all those numbers and give you two to three weeks which allows you to basically to take the time off that you need for you and your family and it's not necessarily a dissected what the reason is. It's just PTO. There's still an approval process and those kind of things, but in general it's more just one bucket that you pull from rather than three or two separate buckets. We see a lot of trends on PTO policies. Fred Dunayer: Linda you mentioned a little while ago social media and I have a follow-up question on that, back in the day when I was working in a large corporation we had some public relations and media training but that was when there was only a few channels that would be expressed, now everybody has a Facebook page or everybody can have a LinkedIn page. How do you encourage what you might call evangelism for a company and its products while at the same time discouraging things that you wouldn't want published about the company? Linda Lucarelli: Honestly there are not a lot of particular laws that are coming out of the legislation piece on social media. This is a new phenomenon in the last four or five years of what companies are dealing with. Social media is really two fold. One what can the employer do to use social media as an advantage of the organization? Obviously we have a
lot of companies that have websites or they may have a Facebook page or Twitter or things like that if you follow a product or something like that. It's great, great advertising. It's a great medium for organizations. The other side of it is how do we refrain or make sure employees might not be using social media to have detriment to the organization. There's not a whole lot of clear cut laws. A lot of this stuff is actually going through more of the court system and if somebody is maybe terminated for using social media the question is, is it a violation of certain rights that you have as an employee. Really they're guided by what we call the National Labor Relations Act which is the governing body that regulates really what they call concerted activity meaning you have certain activities in the workforce that an employee is allowed to engage in. That's why a coherent very clear policy on what you can and cannot do as an employee to communicate the boundaries basically in social media as far as obviously if the client list or any proprietary information or any financials get out to competitors. Those are some things that obviously you can as an employer protect yourself with. There's also things that employees are allowed to do and say even if it's off hours that they have a right to do without you retaliating or terminating. It really is very important to have good clear cut policies and for your management team and HR team to understand those boundaries and what you can and cannot do to regulate that in your workplace. Fred Dunayer: I suppose what you're saying then is to at least number one, think about it, because I doubt that a whole lot of employee manuals at this point have a social media section in them and that people really do need to update their manual to stay on top of these kinds of changes. Linda Lucarelli: Absolutely. That is the key and I'll be honest with you, Paychex just really created the social media policy a few years ago. It's in all of our handbooks for our clients. It's something we certainly look at. It is new, technically new in the last four or five, six years. It is something that we monitor, that we communicate to our employees. We have a variety of training that we do for our companies and organizations which is great to walk them through what all the social media rules are and stuff. The first line of defense is that policy is to protect your business overall. With full disclosure I have to admit that I've been not only a customer of Paychex in the past but that you worked with me. Linda Lucarelli: Yes. We've had conversations and that's how we've known each other. You do a great job with your handbook. On the employee benefits, I still have another question, wouldn't competition play a major factor in benefits that are given by a company? For example if I know my competitor is giving three weeks after two years or whatever of vacation time, then that's something I've got to consider if I'm going after the same pool of potential employees, isn't it? Linda Lucarelli: Absolutely. Besides "compensation" as far as your actual salary that you can do market analysis is, there are surveys sometimes they have to be purchased in that, or maybe your associations if you're involved in any of that, they might be able to provide you resources on what is kind of the standard. In general, I see and part of this too is about what we call a work-life policy in your organization is we know everybody is very busy. We know that technology has changed the workplace tremendously in the last several years, people working from home a lot more. It is important to make sure that you integrate how we work nowadays with technology and with your goals for the organization and so forth to making sure you have a good compensation package, both obviously direct compensation with your employees and the salary that they receive and the benefits but also the fringe benefits of the work-life programs. Generally, we see up to two weeks up to five years, five years you get generally three weeks of vacation, again plus holiday, obviously most organizations do have a certain amount of holidays that they may put out there, six, seven, eight depending on their organization throughout the year.
That's the standard is still that two weeks after maybe six months or a year, but the question is are you more flexible about letting them take that time off? Obviously our topic today is employee engagement and turnover, but unfortunately sometimes the things don't work out. We discussed the exit interview briefly, but what is some of the best ways to terminate an employee? How much time should you spend with them? What should you go over? What shouldn't you go over? Some dos and don'ts. Linda Lucarelli: Great question. The first thing we tell employers is that it should not be a surprise. If you're employee is surprised that you are making a decision to terminate their employment that's not a good sign. The reason we say that is because employees should have a proper form of discipline process or discussion before that decision is made. Basically if there is a job performance or some kind of policy violation or whatever is happening with the employee it is critical especially with our litigious society is we need to make sure that as managers and organizations that we have a good training process for our managers on how to handle difficult employees or employees who are not performing at standard and start a documentation and a dialogue and written documentation for you as the employer to show that this is a performance related issue or this is because the employee is not doing their job or following the rules or coming to work or whatever the specifics are. In making that decision to terminate, hopefully you have a good dialogue and maybe in the last six months, year, three months whatever is happening with that employee that there has been what we call progressive discipline, a variety of documentation starting verbal, written, maybe a final written warning to communicate that the employee may be in jeopardy of losing their job and it's documented so it's not a surprise. good? Why should a company track turnover costs and are there any guidelines for what's bad and what's Linda Lucarelli: Generally right now actually the last numbers that came out in 2013 was about a three percent turnover which is probably not that high. Now depending on industry you're going to see sometimes they're ten percent or twelve, fifteen percent so that's probably pretty high. You have to assess that based on your industry and what's going on. There's just going to be some industries that have high turnover, telemarketing, restaurants, retail, those tend to have a little bit higher turnover. What you're wanting to do is really combine that direct and indirect cost to get an idea. Generally, they estimate turnover cost can range basically one or two times the salary of the employee that's leaving. It could run into a good twenty, a lot of people don't realize it could be twenty-five thousand dollars before you actually get somebody up and running, but again by the time the productivity of the person who's leaving hopefully you may have to pay out vacation time or any kind of benefits. Obviously the process of recruiting or any kind of advertising and most of the advertising nowadays is really very cost effective. I know a big piece for small businesses is Craigslist. It's very interesting how that website has become a job seeker and job generator. It's very, very interesting because it's free. A lot of people go on Craigslist to look at especially locally types of businesses. That's a cost effective way for organizations to use their service to be able to grow their applicant pool. We know that a lot of employees now are working from home. You mentioned corporate culture. How do you promote a corporate culture when so many of your employees may not be on site? Linda Lucarelli: That's a great question. I think it is important to make sure that you have some good policies when it comes to how you engage your employees in that reality. Technology is going to be a big piece of it. Again, just things like we're doing as far as skyping or making sure maybe once a year that you do have maybe an offsite meeting or have those people that might be offsite from the organization or maybe live in another state or something is to be a part of that day-to-day feeling that they are part of the team.
Part of it is just making sure they're connected either to their team, to a mentor, to their manager, having one on ones maybe every couple of weeks, making sure if there's any kind of meeting of the team that they're included even if it's via Skype or a conference call, making sure that they're in the know because that's the big piece is sometimes they feel very isolated and it is up to that organization to make sure that they are distributing that information and just email after email is not going to do it. It's not going to get them motivated and happy. I mean a part of that job happiness and job satisfaction again it's a good question. If you did employee surveys or got an idea of how because some employees just really do like the interaction of a community of a workplace, maybe working from home is not a good match for them. A lot of that is a discussion because we're seeing more and more companies go remote is you want to make sure that you feel comfortable with those people and what the job is and what the expectation is and the responsibility. Linda, is there anything else that our listeners should know about this topic, maybe one or two things that they can take with them? Linda Lucarelli: I think the important thing again is and we always tie this to corporate culture is what does your company mean and do you communicate that from the beginning of an employee's inception into your company. It really starts the first time they go into your organization. It starts the first time they might look at your website. It starts the first time that they maybe interview for a job or hire or put a resume in for your job. Is it a smooth transition? Does it seem like its chaotic? Are there pieces that are missing that are disorganized? Is it a situation where an employee is or an applicant who comes in the front door is welcomed? Does your mission and your value and your company culture represent your organization? Do you have really that environment that wants to hire the best and wants to get the best out of your employees? How do you communicate from the onset? Again, the consistency of providing that throughout the employee life cycle all the way until the end of their history with your organization. The best thing to do I think is to incorporate your culture. Do the best you can to develop what your company means and make sure that your employees are a part of that message. Linda, thank you. That was great and thanks for being our guest today on Been There Done That. Linda Lucarelli: Thank you so much. It was great to be here. Fred Dunayer: Thanks Linda. Speaker 1: You've been listening to the Score Small Business Success Podcast Been There Done That. The opinions of the hosts and guests are theirs and do not necessarily reflect those of Score. If you would like to hear more podcasts, get a free mentor, view a transcript of this podcast or would like more information about the services we provide you can call Score at 800-634-0245 or visit our website at www.score.org, again that's 800-634-0245 or visit the website at www.score.org.