Staffing Industry Turnover Reduction Tool

Introduction

The Turnover Reduction Spreadsheet is a tool designed for a staffing company to use with their client to financially justify a wage increase (or other working condition changes) for the temporary associates.  It has proven successful in the past by engaging clients in seeing the true cost of staffing turnover and how they can save time and money by making some simple changes.

While it is counterintuitive, some low-paying companies actually spend more when it comes to workforce management than higher-paying companies.  The reason is that turnover is expensive!  Turnover extracts a myriad of costs including high overtime, additional training costs, reduced productivity due to unfilled positions, customer complaints, damaged equipment or product, and management distraction.

This tool is designed primarily to address increasing wages as a method of reducing turnover and saving your client money, but make no mistake there are other workplace issues that can cause turnover, including:

  • Extensive mandatory overtime
  • Inconsistent schedules or short-term assignments
  • Difficult line managers who don’t treat temporary associates the way they ought to be treated
  • Insufficient training and/or excessive expectations

The tool was intentionally created in Excel to make it easy to adapt to the exact circumstances of a particular client’s turnover issue.  You have the power to edit the Excel file to customize the analysis to your situation with any client.

You may be wondering why your workers’ compensation insurance company is providing a turnover reduction tool.  The answer begins with our core value of,

“Insurance is simply a vehicle – our real business is delivering solutions designed to improve the operations of our insureds.”

The outcomes generated by this tool yield significant benefits to everyone involved – your temporary associates, your client, your company, and your workers’ compensation carrier.  Avoiding the curse of turnover quite literally creates a win/win/win/win scenario.  Let’s explore why this is the case…

  • The win is clear for your temporary associates – they make more money and/or receive improved working conditions.
  • Your client gets a higher quality employee and a more productive workforce while saving money at the same time.
  • Your company increases sales due to the higher wage rates which yields more gross profit dollars. Further, because turnover is reduced you lower recruiting costs and administrative time which combined with the increased gross profit should improve your bottom-line.
  • Finally, by reducing turnover, there are fewer employees who are brand new to the job, which is statistically the most dangerous and injury prone time. Having less turnover and more tenured employees reduces the rate of injury and the total cost of injuries which can ultimately reduce your Workers’ Compensation premiums while making your insurance carrier very happy.

How to Use the Turnover Reduction Tool

Begin by going to the ‘Assumptions’ tab and reviewing the values for each of the assumptions.  The default values are a good starting point and have been used successfully during past client presentations.

The next, and most important step is selecting the ‘Data Input’ tab of the spreadsheet and filling in the Client Cost Assumptions in column B.  You may or may not have data for every item – for example if you do not pass along the cost of drug screens to the client you would leave that item empty.

For some of the items, such as the Client Hiring Manager Salary or Average Number of Hours Training Manager Spends with New Temporary Associate, you may have to contact the client, or make an educated guess.  When presenting the completed analysis to the client you can confirm or edit your educated guesses.

Your applicant tracking system should be able to provide you with data to complete:

  • Average number of temporary employees
  • Number of temporary employees who turned over
  • Current wage rate

Below the Client Cost Assumptions, you will find a section for Staffing Company Cost Assumptions.  This section is optional, but if completed the ‘Staffing Co Savings’ tab will show you the savings that should accrue to your company by making the change.  It sure feels good when you see that you will be saving thousands of dollars while at the same time providing a better wage or other working conditions for your temporary associates!

Presenting to Your Client

Print out the ‘Client Turnover Cost Calc’ tab of the spreadsheet.  It should be formatted to provide three pages of information:

  1. Client Cost Assumptions
  2. Cost of Turnover Calculation
  3. Turnover Reduction Savings Analysis

The success of this tool hinges on your ability to build credibility with your client in the numbers being presented.  It is recommended that the presentation begin by going through each of the Client Cost Assumptions in detail.  You likely made educated guesses for some of the data points in this section and now is the time to confirm or change the data as needed.  The importance of this step cannot be overemphasized – the client must feel the assumptions are credible or the analysis will have little impact.

When it comes to the Proposed Hourly Wage and the New Estimated Turnover Rate, your knowledge of the local labor market must inspire confidence in your client that these are reliable numbers.  If you have conducted any labor market studies or have direct experience with similar clients, it would be ideal.  As a last resort, there is a tab labeled ‘Turnover Study’ that can provide an estimate based on a study conducted with over 40 national employers employing blue-collar workers from across the United States.

With your client now having confidence in the assumptions, it is time to show them what turnover is costing their organization.  You will often find a client is surprised and somewhat skeptical of the cost shown.  This is where your effort in confirming the assumptions becomes so important – if they agree on the individual assumptions, they must concede the general accuracy of the cost of turnover.

Now, the fun part.  Show them how much they can save through paying their temporary associates more (or making other worksite changes).  Congratulations, you have provided real consulting value to your client!

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