Company Costs: Termination vs Training
Well, it happened again. One of your product specialists keeps repeating the same type of mistake over and over again. You’ve tried everything you know to get this person to understand the parameters of the job and work within them. Nevertheless, this specialist continues to operate outside the “swim lanes” you provide and it’s upsetting business operations to straighten out the issues.
Knee-jerk reaction: Get termination paperwork ready
Cost of knee-jerk reaction: Around 6-9 months of that person's annual salary1
If your troublesome employee makes around $50k/yr, using the figure above, it could cost the business $25,000 to $37,500 to terminate and replace the person. These costs are averages and based on opportunity cost, unemployment paid, reduced efficiencies, recruiting budget, temporary help, onboarding training, etc. I know we can find a better way to use that much capital!
Sure, that’s a lot of money, but is this even worth the effort? Well, a SHRM study found that 77% of people that quit their last position could have been retained.2 These aren’t the people who were fired. These people left on their own. Not only is a large sum of money at stake, but you actually have a good shot at retaining most of it through simple techniques you’ll learn now.
Before we think about terminating this employee, let’s first understand what might be going on in the background. You need to understand the perspective of this person if you’re going to have any hope of understanding why incorrect behaviors continue to happen. Only after this first step can we start to make changes that impact your bottom line.
First, pull the employee file and review the application and/or resume. What in the work history or background could cause any miscommunication or ignorance? Why did that employee leave previous employers? You’re looking for a pattern here.
Next, review all interview notes from the hiring process. Did that person indicate an early misunderstanding? If the job was “sold” to them instead of presented clearly, you may different expectations. This is why job descriptions are useful to designate responsibilities, expectations, and reporting relationships.
After those two items are complete, spend some time reviewing all communication you’ve had with this employee. Have you relied too heavily on one medium for communication (email, phone, text, face-to-face)? Do you communicate the same way with your other employees? Favoring one form of communication over another is not bad. It’s just something you should be aware of when running into a reoccurring problem.
Now that you’ve done your research, it’s time to approach the employee DIFFERENTLY.
Whatever method you used previously, switch it up. If your default is email, meet in person. If you have time and budget, going out for coffee to discuss this issue would signify your commitment addressing poor performance. Tell the employee that they are a valuable member of the team, and you want to ensure a continued working relationship based on mutual benefit. This is why you are communicating differently this time.
Here is where you can waste all your efforts.
Be specific and blunt, but do it with tact. The employee needs to leave this meeting with clear understanding that the past behaviors will earn them a termination. This is not the time for scare tactics as they don’t work in the long run. Instead, help the employee know that their continued employment is directly related to how well they do the job and tasks given.
If you start introducing vague concepts like “use your best judgement” or “have ____ show you how to do it”, you’ve just given up on YOUR responsibility. Obviously, this employee has been using all knowledge and resources available at the time. Now is a good time to evaluate if additional training or tools need to be made available.
Remember that dollar amount we calculated earlier? If you were able to get this employee back on track and performing at top levels, how much better would your company be? Let’s remember that the total costs to terminate this hypothetical employee was around $30k. For that amount, you could swap out this under-performer for a complete stranger. Can you guarantee this new hire would perform better for the same pay rate? If you can spend less than $30k on training and/or tools for your current employee and have them begin performing at top levels, you will have saved money!
This is a big, simple concept. Improve your employee performance for less than it costs to replace them. This is how you save money while improving your total business operations!
Quick Synopsis:
It’s expensive to terminate someone. Costs are mostly hidden, but very real.
Analyze why bad behavior continues. Look at the past.
Switch up communication. Observe if you have a pattern.
Clearly convey seriousness of issue. Be blunt, but be kind.
See if you can train/improve employee for less than the cost to replace. Real savings!
Keep in mind this is specifically written for under-performing employees due to education, skills or resources. If the reason for under-performance is not one of these items, further exploration would be necessary.
