Is it cheaper to retain? Or fire? Part II


Q&A with Dave Nichols - Is it cheaper to retain an employee? Or fire them? 

In part one of this two-part series, we reviewed how to determine the cause of your employee's poor performance. Once you've determined the cause, then use the following formulas to figure the most cost effective solution. 

Being a manager, supervisor, or owner - hiring and firing is part of the job description. But when faced with an underperforming or problem employee, you may find yourself at a crossroads of cost.

Cost assessment
To determine the most cost efficient plan of action, consider the following approximations.

Terminating - (recruiting costs + 6 -12 months salary  = termination cost)
The cost of terminating and finding a new employee encompasses recruiting costs such as newspaper ads and social media advertising, in addition to the cost of one half to one full year of the employee's salary to train and get fully involved with the company.

Retention - (salary costs + outside training = retention cost)
To keep an employee, you'll want to figure the cost of their salary and benefits (about 25% of their salary) plus the cost of needed outside training. Cost of outside training could range anywhere from $400 to $5,000, plus travel.

Hidden Value
A hidden value to your termination or retention evaluation should also be loyalty. A team member who is coached and starts to have success because of the coaching, whether that be performance related or behavioral related, can become a cheerleader for the company and help drive loyalty to the rest of the team. A company's culture is one thing that needs to be constantly nurtured and having loyal and supportive team members makes the task of nurturing much easier.

What it boils down to is the likelihood that training can fix or improve the issue that is at the root of the employee's performance or behavioral issue. If training is a viable option, the cheapest solution is to train and retain. If the issue is beyond repair, firing and replacing the employee is certainly your best solution.

Dave Nichols is a Regional Training Manager with HVAC Learning Solutions.


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