“But intangible costs, like loss of good will and damage to a builder’s name, are even more costly. And a builder can never recoup those costs,” he says.
To minimize such costs, many builders are doing everything they can to keep their employees. These days, a good base salary and bonus structure isn’t enough. Builders are recognizing the value of employee satisfaction, and are implementing innovative training initiatives aimed at recognition, growth, and quality relationships.
Out with the old, in with the new
New employees come with both tangible and intangible costs. Among the tangible are recruiting costs, which comprises both advertising expenses as well as time spent writing job descriptions, reviewing resumes, and interviewing; relocation costs, including temporary housing and orientation to a new city; and payroll, tax, and benefit set-up.
Intangible costs include slower productivity while new employees learn the ropes. If a construction superintendent who had been managing between 15 and 30 houses leaves, it may take the new employee several weeks, if not months, to get a handle on things. Beyond simply overseeing construction, it takes time for the new employee to know what to say (and not say) to a customer. Ed Snider, Vice President of Training and Safety for Beazer Homes, attests to the cost of miscommunication. “Any new employee not knowing the right thing to say can lead to increased construction costs, increased service costs, and perhaps even increased litigation costs.”
Employee loss can mean
business loss
The costs associated with a new employee are often considered. However, these can be inconsequential when compared with those attributed to the employee who’s leaving. Tangible costs include the administrative work necessary to remove the employee from payroll, benefits, and taxes. Other costs may involve severance pay, or pay owed for vacation or comp time.
It’s the intangible costs, however, that can make the most waves. The day that unhappy employees give their notice may be the same day they really check out of the job. Sure, they may report to work for a few more weeks, but their minds are already immersed in their new freedom. A wandering mind is sure to lead to a few dropped balls. The quality of construction may degrade as a result of missed inspections, poor supervision, unclean jobsites, or apathy. Mis-scheduling, the job site not being ready, or materials not being there may adversely affect trades. Relations with customers and vendors may also be compromised due to lack of attention and last-minute delays.
Poor quality, unclean jobsites, missed meetings or closing dates…all these can quickly make a customer very unhappy. Joe Sabella, Regional Vice President of Construction at Ryland Homes, knows well the costs of an unhappy customer. He recognizes that issues that result from a dissatisfied employee can translate to loss of customer referrals, as well as reduced chance of a customer’s repurchasing. “Through customer satisfaction surveys, Ryland knows what a satisfied customer brings to the company by way of referrals and it is substantial,” he says. Now, think of the customer whose house is not completed on time, resulting in a missed closing date and, consequently, needing to move twice in order to sell their existing home. A referral from this customer? Not likely.
Another damaging aspect of turnover is what Carpitella describes as “last rites” given by the employee’s peer group. Here’s how it works: John tells Todd why Randy’s leaving (“Can you believe the company did that to him?”), and Todd tells Sue and Jose and Kate, all of whom tell their three best buds. The result is that negativity spreads through the company, causing distraction and unwanted dialogue.
Carpitella recently worked with a builder who was experiencing a 30% turnover of their superintendent/project manager group. This builder did a local satisfaction study over 24 months of all people who bought new homes, not just that builder’s product. The builder was surprised to learn that his company’s perception dramatically suffered because of the poor perceptions generated by word-of-mouth from unhappy employees. This builder also found that another effect of turnover is dissatisfied employees who keep in touch with friends from their old company, generating discontent by comparing the bad traits of the old company with the good of the new.
Depending on the job and the builder, some companies may choose to cut an employee loose and pay the two weeks salary to avoid the associated risks of keeping an unsatisfied employee around.
Can you really afford turnover?
The costs of turnover add up quickly, and can exceed two times the costs of the employee’s base salary. Damage to a builder’s name and customer dis-satisfaction resulting from poor quality and delays can be even more costly, and can never be recouped.
Keeping good employees is critical for minimizing such loss.
Keep ‘em happy
Recognizing the costs of turnover, John Wieland Homes, one of the nation’s largest home builders, has implemented an innovative employee training program targeted at employee satisfaction. Selected two years in a row as one of the top 100 global training organizations by Training Magazine, John Wieland Homes teaches managers to invest in their employees daily. Based on research on job satisfaction as well as their own employee satisfaction results (which they incorporate into their classes), they believe that turnover is most directly related to interpersonal relationships, particularly with supervisors. So they teach managers how to provide achievement, responsibility, and growth opportunities for their team members.
In 1998, John Wieland had 35% turnover and implemented their first training programs. Now Wieland University offers 27 targeted training programs, and turnover is down to 18%. “The results are phenomenal, “ says Laura McMurrain, Vice President of Organizational Development for John Wieland Homes, “considering that typical turnover in the construction industry is 35%.”
Despite the current slow economy, the U.S. will face a shortage of more than 10 million workers in about seven years, according to projections of the U.S. Bureau of Labor Statistics, so retaining good employees is vital. “Home building companies compete for talent not only with each other, but with companies in other industries, and people want to work for a company that fulfills their need for growth and achievement,” McMurrain says.
Carpitella agrees that trust, open communications, and good relations with supervisors are critical to employee satisfaction. “If employees are able to establish relationships with supervisors, they are more likely to stay with a company. Supervisors who show genuine interest in their employees, instead of giving the idea that they are irreproach-able, will build trust better with them,” he says.
He also cites recognition, fairness, involvement in the business, decision making, career opportunities, being part of a winning team and company, and continuous learning as important factors in retaining employees.
“People are more committed to their discipline than their company, so if employees feel like they’re consistently growing and learning, they’re more likely to stay with the company,” Carpitella says.
Michael Dickens, CEO of BuildIQ, Inc. agrees that opportunities for learning are a key part of a happy employee infrastructure. BuildIQ offers online training to production home builders. “An employer’s investment in training their employees is recognized as an investment in the development of their individual careers. Making this training opportunity both easy and effective for the employees benefits the company by having a more knowledgeable, more productive workforce,” says Dickens.
Don’t make waves
Ripples of change will inevitably affect a business. But minimizing turnover by keeping employees happy will save a builder a lot of grief, as well as a lot of money.
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