Speaker #0According to the Bureau of Labor Statistics, the average tenure of an employee is 4.1 years. The average tenure of an employee in small business is less. And according to those same statistics, 38% of employees quit a job within the first year, and 40% of that 38% quit within the first 90 days. Are you having trouble with your best people leaders? are you having trouble keeping people today we're going to talk to that welcome to the key hire small business podcast your go-to resource for tackling challenges and empowering small business owners to scale successfully our mission is to help unlock your business's full potential my name is corey harlock and i'll be your host me so let's get into this um I was at my Vistage meeting, and if people are listening to this podcast, they know I'm a Vistage guy. And I was at my Vistage meeting, and we got into a conversation about my people leave, I finally get good people, and then they take another job. And the question I asked was, well, how long were they there? And is that longer than your average employee tenure? So let's talk about kind of what is tenure, what is turnover. Tenure is kind of the time someone stays with you, but beyond that I want you to think about it as time and impact. What did they achieve while they were there and the time they were with you? Did they achieve what you wanted them to do? and the time they stayed with you. And turnover is how many people, what's the percentage of people in your business that you have to replace each year. And that number might be 10%. You have 10 employees, you have to replace one each and every year. Sometimes it goes much higher. You have to be honest with yourself. You can't take any mulligans and say, well, that person was about higher. We won't throw them in the mix. What does that look like? And then on top of turnover, you have. additions, hiring in and bringing new people for a growing company. But today specifically, we want to focus on your tenure and your turnover and different ways to think about it and different ways you can think about it that might influence, are you doing a good job or are we doing a bad job of this? And then maybe some ways we can help it. When we talk about hiring people in their tenure, I often talk about hiring and in particular when we're talking about leaders, bringing in a new leader into your business, into a small business, depending on what key owner stage you're in. If you're in that overwhelmed, I need help today. If you're in that unsure, I know I need help, but I don't know what my options are. If you're in the curious, I'm looking to make some changes. What you need to understand is when you bring an expert. into your business, they're going to be an expert at building a particular part or stage of your business. And a way I want you to think about that is when you build a house, there are really three phases to building your house. There are the framers, the guys that lay the foundation, they put up the frame, they do all the heavy, hard manual work to get it framed up. The next phase are the trades. They come in, they run your electric, they run your plumbing, they put up your drywall, they get it kind of put in your windows, or maybe the framers put in your windows, whatever. We got those skilled trade people that are experts in their area of preparing your house. Then you have the third phase, which are the finishers, the people that come in and put in the custom pieces. They do your baseboards, they do your banister, they do your countertops. on and on. I don't need comments about, Corey, you don't understand how a house is made. We're talking in general terms. But I want you to think of the people you bring in, in these terms. The people that build the foundation, the framers, they don't like to and don't want to do and can't do the finishing work. Nor can the finishers, do they want to do the framing? And the electrician certainly doesn't want to do framing. The plumber doesn't want to do finishing work. So we need to think of our business or the operation, the department we're working with, what phase of the operation are we in? Are we building? Are we coming in and burning this to the ground and building it from the ground up? Have we laid the foundation? Do we have a solid foundation by which to build on? So do we need those? um skilled trades type people to come in and take it from 30 finished to 70 80 finished and then the people that like doing that don't like doing the fine detail the tweaking the finalizing of of the small details nor that do they like doing the lift of building the foundation and then the finishers those are your managers who come in and they're more on the maintenance side where Everything is 70, 80% there for what you need to do. And they make small adjustments and changes to what's happening, that kind of continuous improvement to keep you moving in the right direction and keep you able to deliver. So that's what we're talking about today. Tenure and turnover. And are we bringing the right people in for what we need? Some of the biggest mistakes I see a business owner make when we look at doing this type of thing is, the first one is, when they make a hire, they expect them to be there for the rest of their career. If, as a business owner, my average tenure is two years, can I realistically expect to hire someone and expect them to be with me for 20? you can't and in this day and age depending on the age group of the person you're bringing in there's definitely more loyalty in the 45 and above crowd even the 55 and above crowd they tend to stay out stay with you a little longer the young The longer you get, the quicker the transitions within the business. So what does a win look like? We can't expect when we bring someone in that they're going to spend a lifetime with us, but we can look at the time. versus the impact. So if my average tenure is two years, say call it 24, 26 months, and we hire a leader and we pay them a ton of money to come in and they stay with us for 36 months and they accomplish everything we hoped they would do, then they leave to go to another company. Is that a win or a loss? And in my mind, that's a huge win. They were there 20% longer or 30% longer than most people are. And they did their job, whether they were there to build a foundation for you, whether they were there to do that middle work and take the foundation and give it some structure and get it mostly completed, then you can hand it off to that finisher. Or maybe they took it from the middle stage to the finishing stage. And now they're bored because tweaking and continuous improvement and the main... maintenance of this doing the same thing daily doesn't appeal to them. So they go on to the next challenge, but now we bring in and we need to hire a different person to fill that role. So is that a winner? Isn't it? If they stay longer and they accomplish everything you asked them to do, was that a bad hire? They've helped your tenure. They've increased it on the average and it's, it's acceptable turnover maybe if they. they did what they were supposed to. So quit thinking hiring for life and think hiring for what is my average tenure? How long are people generally here? And can we extend that? Do we think we're going to have them for two, three, four years, depending on who the person is, what we're asking them to do? The second mistake I see people make is they hire for their current need. as a business owner i might i might have a 10 million dollar a year business and i need a sales manager and this is a true story i won't tell you who the the business is my sales manager who was struggling quit. But don't worry, we called our competition and their sales manager is going to come and work for us. Fantastic. Six months later, how's the new sales manager? Great. How are sales? the same because they came from the same business. The business they came from did the same revenue we do. Meaning when they started with you, we hired someone to run a department that was generating $10 million in business. And we hired someone who has $10 million a year of experience. We need to think about capacity. And you may have heard me say this before, an expression or the way I would love you to think about it is if you're a $10 million a year company and you want to grow. to 30, 40, 50 million. Don't hire someone to run your $10 million a year company. Hire someone to run your $30 million a year company currently doing 10 million. And that shift in mindset will help you explain to someone coming in, here we are today, but this isn't where we want to be. We're happy we're here. We've worked really hard to get here, but our goal is way off. in the future. And you're here not to create process and procedure to help us run our $10 million a year company better. You're here to create process and procedure to help us grow into a $30, $40, $50 million a year company. So when it comes to hiring, don't think of where you are today. Think of where you want to be. and look for people with that experience. And more importantly, the key word here is capacity to understand how to help you build your business and get you where you wanna go. Sidebar here is this person could potentially know more about this part of the business than you as a business owner do. So it takes a bit of courage, little humility. some trust to turn a piece of your business over to someone who hasn't worked with you before. They don't know how you do things, but the idea is they, whatever you're doing, they'll know how to improve upon them and move that. next level. So yes, it's a pretty scary situation, but hiring someone with experience and capacity is essential in terms of growing your business, but also understanding in that piece of capacity. what part of the, what stage of the business are we hiring them to help them with? You might say, it's a disaster. You need to burn it to the ground and restart. Then we're looking for a builder, a framer. You might say, we have, I think we have a pretty good foundation, but other than that, we really need to start documenting our process and procedure and make some improvements on how we do things. And we're going to need that person, that skilled electrician or you. plumber, the skilled trades person, or you might say it runs pretty well. I just think that we need some changes and improvements made to get another 10% out of that department. Then we might be looking for that finishing carpenter person that likes doing that fine work. So keep that in mind as you're looking at your next hire. Where am I? What do I truly need this person to do? It's hard, you might need to go get some outside perspective from people because sometimes we think we can handle more than we can and when we get someone in front of us who has bigger experience than us and might want to change what we're doing. It's scary. So we will find a way to talk yourself out of that higher and keep things the way they are. And that's not a. recipe for growth. So something to think about there. The next mistake that a business owner might make when they're looking to hire for longevity, tenure, and, and think. thinking about their turnover is they hire with the wrong experience. And another example I can share with you is I was once engaged by a company who came in and they were, they were being crazy successful. The business of volumes had, had outgrown the capacity and ability of the people running the business. It was clear that that's what was happening. And the owner thought that, man, if I can just get a general manager and here to take some of the heat off me, some of the pressure off me and help inject some ideas into the business, that would be a great idea. And I understand the thinking. The line of thinking made sense, but once we got into that business and looked at it, what we quickly discovered was the operations. side of the business was max. They were producing, the way the operation was running and set up, they were producing as much as they possibly could and to produce more, they were already maybe lacking some safety, maybe lacking some quality control. It wasn't efficient. They needed some lean management to help. uh make the environment safer and more efficient and therefore improve quality and by just demanding more and having people more more hours and longer wasn't the answer it was going to burn out their people there was risk of serious injury because they were running some heavy equipment back there and it just things weren't going to get done correctly so i had to sit down with the business owner and say I don't think the general managers is the answer because sales aren't your problem. Right now it's delivery and your operation is running at a red line, right? And if you run your engine at a red line too long, it melts. It breaks down and you are in the red. We got, I guess the red would be over here. You are in the red. And what I would strongly suggest is the director of operations to come in and help you. streamline your operation. And while they're doing that, they will build capacity and to be able to take on more sales. Once we level up and get in the neighborhood where operations is meeting the demand of your sales. sales team. Not 100%, not done, not everything you need done back there, but we get a lot of things done back there in terms of just some workflows and some lean management, lean manufacturing, some safety procedures, professional management stuff done back there. then we can start looking at sale and we can start ramping sales up again because we would have built capacity into your organization so that's what i mean when i say i want you to think about am i hiring for the right experience i hear a lot when i talk to a small business owner and i say we need to get you a professional the response sometimes is look we brought someone in with all kinds of experience and paid them a ton of money and they didn't do anything And when you dig into that, it's all true. They spent a lot of money on someone with really good experience and they did not meet the objectives that related before them, but they didn't have the right experience to do the job. They weren't specialized or in the case of the general manager, maybe it was they were a salesperson who had dabbled in operations or their experience was 30% up, 70% sales. And when people get busy, they will. always revert back to where they're the most comfortable. So even though the operation needed the most attention, the individual would spend most of their time in sales, driving sales, therefore putting more pressure on the operation, therefore causing more chaos and confusion and deliveries being late or quality being suffered or quality suffering, whatever it might be. So just having someone who, when someone shows up on your doorstep and at first blush they look like they could do a, they could help me, you need to step back and take a little time. and understand exactly what their experience is and does it fit with what you need maybe they come from a large corporation where all the policies and procedures are very defined and they become that finisher who's just making small tweaks, but you need someone who can build a foundation. And that's not their jam. That's not what they've had to do throughout their career working for these large corporations because that stuff is pretty set in stone. And to be honest with you, that's one of the biggest transition challenges is bringing someone from a large corporation into a small business where it's more entrepreneurial. you have to wear a lot of different hats they will often struggle um you know they call them the inbox manager they're just used they sit in their desk and wait for someone to send them an email asking them to do something and then they spring into action and we know in a small business that just doesn't work we need someone who's out there looking for stuff to do, because if you look hard enough, you will find more than enough stuff to do in a small business. So it's understanding that experience and hiring for the right experience. So what we outlined is some of the mistakes is. hiring people and expecting them to stay for lifetime versus understanding what our what our average tenure is and seeing if if they stay that long or a little longer, can they accomplish the objectives we're hiring them to do? Then if we break that down, what are those objectives? So we need to make sure we're hiring for capacity. So not hiring for today's revenue, but hiring for where we want to go the future revenues, so we can responsibly grow into that growth with the leadership of some experts who are really good at doing what they're doing and assisting the business owner, making them look great. And the final piece then is, okay, we understand this person might only be with us for two, three, five years. We've clearly defined what they need to do. if they if they stayed here three years and they could accomplish x that'd be a huge win for us now we need to understand what experience we need to go out and find so we need to define what that is and again use your framer trades people finishing carpenter analogy see where you fall on that scale Hey, it's Cory. And if you like what you're hearing, give this episode a thumbs up and subscribe or follow to get reminders of new episodes of the Key Hire Small Business Podcast. So those are kind of the mistakes we see. So what advice would I give to a business owner who's kind of endeavoring to, they've decided or they've come to the realization that, okay, my current lead leadership, the people I have in my business are amazing. They've gotten me here, but I need a little more jam. I need a little more horsepower in my business. I need a little more expertise. How can we do this? So if we follow the understand the role. understand capacity and understand experience, what can we do once we get them in? So we need to understand what turnover looks like. And I've talked about this already. Where are you in your business? Some businesses, if you pay at the bottom of the scale and offer good training and produce good people, you will be a feeder for the big players. That's how it works, because they know if the big companies keep stealing your people, that's a compliment, because they know you're hiring good people and you're training them well and underpaying them. So they just need to come to the table with some more money if it's an hourly rate or whatever it is, and they're going to leave. because everyone wants to improve their station in life. And if that's where you are, that's cool. Own it, put your arms around it and know that's what you are and create a great pipeline of people. And I did a show earlier back on how to create a talent pipeline and just keep rolling people through there. And if you can keep them, or if you know after two years, they're poaching everyone after two years, at 18 months, go to them and create a program that will keep them excited to be with you or maybe make them a trainer, give them incentive, loop them into the business before those companies come and take their temperature and get them excited to stay with you. And maybe some of them will say, no, I got a really good gig here. These guys are treating me really well. If you pay top dollar and you're losing people, it could be a couple of things. It could be people aren't feeling fulfilled in the role. They might not be challenged enough. And these are all conversations you should be having with your key people and taking their temperature and seeing where they are. There's a story. I once heard about a top employee who was, their review was coming up and they resigned. And their boss said, you can't quit. Your review is coming up. We were just going to give you a raise and promote you. And the person. said in return that's funny i thought i was getting fired because there was no feedback loop there was nothing there and your best people no matter how old they are how senior they are need you as a business owner to let them know you're doing a great job and you're important to the business. That is one of the key factors. People will stay in an environment where they feel valued and the culture is strong over money. They will take the culture and the appreciation and the, and the good vibes over a couple extra bucks. So this becomes very important. You need to understand the needs and wants of your people in particular, your key people, if they're very. very valuable to you, you need to be able to talk to them and say, hey, here's another thing you need to understand. If you have good people, it's not if they're getting calls. We know they're getting calls. People are trying to call them and say, hey, I got it. Why don't you come with us? We're going to pay you more. We're better. We can do this. And promising them the moon. and so the conversation should start like that i know you're getting offers and i really appreciate that you're you're hanging in there with us i want you to keep hanging in with us what can i do what do you need from me if one of your best people said look i've been here five years and i know the pto program is i got to be here for or i've been here three years and i got to stay for five years to get an extra week of pto but my kids are gone away to school and my wife and I want to do some traveling, if you could break the rules and give me an extra week of PTO, that extra week of PTO is, the cost to you is minimal versus replacing a top performer. You can't compare the two. If you let that person walk, the opportunity or the odds, the probabilities of you getting someone as good or better than them are minuscule. The probabilities of you getting someone worse than them are very high. And the probabilities of you getting someone that you're going to have to retrain, and it will take them three, six, nine, 12 months to get even close to the productivity of that all-star employee. Is that worth an extra week of vacation? I would think it is. Maybe they say, I'd like to lead a project, or I heard you guys talking about this, I would like to be involved. Loop them in. Maybe they say, yeah, some people are calling me and I'm starting to understand that I might be underpaid in this market. Okay, let's talk about that. What would it take for you to stay? If they say, if you could give me an extra five or six grand on my base, that would do it. 500 bucks a month to keep your best person. Maybe it makes sense. So we talk about this tenure and there are ways to increase it. And it's just to talk to your people and listen to them and see what they want. And sometimes they just run their course and that's okay. Sometimes people say, Hey, I think I've done everything I can do here. And unless I become the owner or you're giving me shares in your company, I think it's time for me to go. go try something else and they transition out, that's okay. That's okay. If they've done what they said they were going to do, if they were there for three years and they didn't, well, that's kind of you on, on you as a business owner for not managing that and being on top of it. The other thing to do is if someone does take an offer from a rival company and you know, that company and you think, yeah, they can pay more, but it's not a fun place to work. give them a soft place to land and say to them hey i appreciate i get it you want to go over there and um i can't afford to match what they're doing uh but if it doesn't work out we'd always love to have you back you've been great for us and you you've always been a pro for us and i love working with you and it's a huge loss for us so if you ever want to come back just give me a call happy to talk to you there's another angle instead of being upset that they're leaving yeah happy for them celebrate say good for you this looks like a great move for you if it doesn't work out you know you can always come back some will some won't but you might as well maximize your probabilities of being able to recruit that person or have them come back and maybe they learn something while they're away that year or 18 months that they can bring back to your business and say hey i have some ideas maybe i'm ready for a leadership role let's talk so there are a lot of good things you can do as a small business owner to improve your tenure and to measure it right when we measure it it's time plus impact not just time and i want you to think about that people that leave that accomplish what you wanted them to do that sucks they leave but maybe it's time for them to leave if you don't have anything to offer them to challenge them in the ways they want to be challenged we can also be proactive we know people are getting contacted so go have a conversation with them take the temperature how are things going really love having you i know you're probably getting some calls here i've had a couple calls okay well What are your thoughts? And they might say, man, don't worry about it. I love it here. I'm not going anywhere. To which you should reply, thank you. But if you had ever changes, you got to let me know. They might say, eh, a little more time off or a little more on my base would be great. Or, and then you need to measure that and say, is that week of vacation or five or 10K on their base, a thousand dollars. Say you give them $12,000 increase on their base. Is that $1,000 a month a better investment than letting them leave and trying to find someone as good where the probability is going to be very low? So just some things to think about when we talked about, like, as I said, I was at my Visage group last week and someone said, you know, we keep losing all our good people. And I said, well, hold on. How long were they there? You know, and we got into this conversation about. Are we being realistic about how long we expect people to stay with us? And if people are leaving too soon, that's on us as business owners. Why are they leaving? Let's understand that. If it's a bad culture, we've got to fix culture. If it's people coming and knocking on the door with more money and more bells and whistles, we can have a conversation. If they've just run their course and they're... They understand they need to make a change because if they stay with you, they might feel stagnant and won't be able to perform at the level they have. That's OK, too. But let's let's investigate, walk through and then give people a safe place to land. If they do leave like, look, I really need to go. They're promising me all this stuff. I'd be crazy not to go. And if you can't offer it, celebrate them. But let them know, hey, if it doesn't work out, we're here because. We appreciate you and we value the work you're doing, the work you have done for us. So I hope that gives you some information in terms of how to look at your turnover and tenure of your employees.
