Entrepreneur Insight

Keeping Your Staff Happy: How to Boost Employee Retention

Putting people before profit can generate better results.

Spending more time with his 250 employees at team lunches every Monday, frequent happy hours, and annual company retreats are a top priority for Thomas Nguyen, a partner and co-founder of Peli Peli, a Houston-based South African restaurant group.

Delving deeper and getting to know employees has increased the eight-year-old restaurant company’s retention rates. While retention is a challenge across many industries, it is even more difficult to tackle in restaurant and service-oriented businesses—where the turnover is at least 62.6 percent—because individuals can easily find a job at another competitor, claims Nguyen. Peli Peli is working to beat the industry’s retention averages. The company’s chefs typically work for four-to-six years, while management stays for two-to-four years; at the corporate level, employees remain for two to three years.

“While we spend plenty of time talking about business, we spend more time socially with them to get to know them better as people and friends,” Nguyen says.

Why retention is crucial

High turnover results in companies spending thousands of dollars annually because of having to hire, conduct orientation, and train new employees frequently. The costs can range from $12,000 to as much as $75,000, which includes sourcing, interviewing, onboarding and lost production, says Brenda Campbell, a human resources director at Helpshift, a San Francisco-based customer service software company.

A higher retention rate often boosts the morale of current employees because they do not have to fear their job security.

“The company culture and morale takes a hit because the employee that is terminated or leaves was not a good fit, and it has a negative effect,” she says.

While retention is harder in some industries where employees, such as coders and data scientists, are in high demand and can seek high salaries, other industries do not offer enough growth potential, according to a 2017 survey conducted by Robert Half, a Menlo Park, Calif.-based staffing company. The survey revealed that 42 percent of workers said they plan to find another job during the next year and the number skyrockets to 68 percent for employees who are 18 to 34 years old.

Free food or entertainment such as ping pong tables often fail because they are not personalized and are perks that employees can only enjoy while they remain working in the office, says Scott Dicke, director of permanent placement services with Robert Half Finance and Accounting.

“They do not provide any relief from the many challenges that people face at home on a daily basis,” he says.

The survey demonstrated that the top reasons people wanted to seek a new job were, limited opportunities for career growth or advancement (14 percent), inadequate salary and benefits (39 percent), and unhappiness with management (25 percent). Another 10 percent said they were bored with the job, and three percent of those surveyed stated it was due to a lack of recognition.

Incentives and policies that are successful

Obtaining a higher retention rate is challenging and many employers do not have the conviction that they can find a solution for it, says Leon Chen, co-founder, along with his wife, of Tiff's Treats, an Austin, Texas-based warm delivery cookie company with more than 28 stores.

Simply offering salary or bonus increases belies common beliefs, but employees are largely motivated by recognition from their co-workers and bosses.

“There are no shortcuts in life and business,” he says. “You can offer gimmicks, but people want to be a part of something. What I’ve learned is that sometimes it’s not about the money.”

Since the company was founded in 1999, Chen’s focus has been to treat employees like colleagues, teammates and partners. Promoting employees and creating opportunities for them to grow their career is also crucial, he says. This strategy has been successful, and some of the company’s original delivery drivers are now working as executives within the company, including the first four delivery drivers who were hired.

“Three out of four graduated from college and got other jobs but came back to Tiff’s over time,” he shares.

One of these former drivers is the new store development director, who manages the construction of Tiff stores, another is the vice president of operations, two others work as Texas marketing directors, and one is now the Chief Financial Officer.

Many of the other employees in management also began their careers at the company as delivery drivers or kitchen helpers, and have now advanced to serve in roles such as the chief retail officer, employee engagement and training director, and the accounts payable manager.

“Their happiness at work also affects their personal happiness, and as an employer, I feel responsible for their happiness,” Chen says. “I want them to do well, not just for me, but also in life because it is surprising how intertwined it can be, since life sometimes gets in the way.”

At Tiff’s Treats, the average tenure of all the employees is 1.5 years, while it is 4.8 years for executives. The turnover rate in 2015 was 92.9 percent in 2015, but declined to 84.1 percent in 2016, he reports.

During its orientation, Peli Peli places great emphasis on getting to know the employees, describing their company culture, and even giving them reasons why they should not work with the company, says Nguyen.

“We realize not everyone is a good fit and instead of convincing them to work for us, we have learned from our mistakes and spend more time on all the reasons why past employees have not,” he says. “Fit and culture are the big points during orientation.”

Companies offering better benefits, such as lengthier maternity or paternity plans or flexible work arrangements are demonstrating to their employees that they “truly care about the person who works for them, not just the many hours they are spending in the office,” says Dicke.

When employees believe their managers care about them even when they are off the clock instills a “deep-rooted sense of loyalty to their company that in-office perks cannot achieve,” he says.

When employees put extra effort in their work, managers need to reward and recognize it. Millennials are big fans of recognition and being told they have done a good job, Chen says.

“The smile on their faces when you recognize them in a room is great,” he says. “We also teach managers that saying thank you to employees is very important and is ingrained in me. It’s something we encourage and has been done since the early days. A simple thank you goes a long way.”

Tiff’s Treats has always encouraged its employees to work more hours so they could meet the 30-hour a week threshold to receive healthcare benefits, since before the Affordable Care Act was mandated in 2015.

“We encouraged our hourly workers to get up to that because we wanted them to have healthcare benefits,” he says.

Offering competitive wages has helped in lowering their turnover rates. In April the company gave over 500 employees a $1 an hour raises for its hourly employees and $1,000 increase for salaried workers.

“That was a huge hit financially all at once, but our team is worth it,” Chen says. “The raises will probably mean an extra $750,000 to $1 million in expenses over the next eight to 12 months, but we believe they deserve the best-in-class pay.”

An open office layout at Peli Peli’s corporate office shows employees that the managers are always accessible, says Nguyen.

“This helps them get to know us, and vice versa,” he says.

Being honest and communicating about the company’s challenges and its future also instills more confidence with employees.

“We are a start-up with a ton of changes that occur every month,” shares Nguyen. “We are transparent about our company's struggles and prospects, and great ideas are quickly implemented. As a result, our employees feel the true intentions that we have for them and they appreciate that their words and input are truly valued.”