As investors to a company, you consideration is not necessarily how much the average person in the company gets paid. In the attachments to the annual report, the top compensation is given to all shareholders and you expect the company to pay what is necessary to maintain its ability to continually make profits. The issue of employees leaving is the cost of people voluntary leaving too high. If a person leaves the process is a new one needs to be hired ( first looking through the pool of qualified people), interview sessions, and attempting to pick the best one for the job. The next cost is training the person so they are capable to do the job they have been hired to do, it ranges the expectations are it may take a month to 6 months of training once hired. In the HR department, there are resources needed to be used in selecting people.

Understanding in all jobs in the company, people will leave, some sooner than others. The reason why they leave is the issue of the book The 7 Hidden Reasons Employees Leave by Leigh Branham, American Management Association, NY, 2012. The first issue to look at is turnover of employees – if a company has 300 employees with an average salary of $35,000 and turnover of 15% or 45 people, the cost to the employer is $1,575,000. The cost to recruit is about 1 x salary. If the turnover could be reduced because in 31 cases or 70% were fixable, the savings is $1,100,000 per year. In addition when there is less turnover, it can mean the workforce is more productive, less absent from work and more gets done. The issue for investors is why do people voluntary leave a company and is there something the company can do which it is not doing to ensure people stay longer and work harder?

The first concern is what should be the acceptable cost of turnover, given that there will be something, because no company is perfect for every individual. We also know the baby boom group is moving through increasing numbers of retirement, which means keeping talent or people will be a larger issue for many companies as there will be shortage of bodies. The first thing to acknowledge is generally companies do a good job in the hiring stage, it is after the hiring where most turnover is avoidable. Exit surveys reveal many left from something the company is doing or not doing and most of the issues do not relate to pay. Pay is something everyone working for somebody else wants more, but most learn to live off what they get paid. In the great recession we have seen people work long hours for 2 or 3 companies because at one they do not get enough hours at the first job. The issue then is not people wanting to work but to make enough to satisfy their daily needs of the family. The issue of senior management and management managing their departments plays a greater role than pay, and that is something that is fixable.

The 7 Hidden reasons are:

1. The job or workplace was not as promised.

2, There was a mismatch between job and person.

3. There was too little coaching and feedback.

4. There was too few growth and advancement opportunities.

5. Workers felt devalued and unrecognized.

6. There was stress from overwork, conflict and work-life imbalance.

7. Works had lost trust and confidence in senior leaders.

more in part 2 and 3

Linking to dividend paying stocks, there is a saying, People join companies, but they leave managers. If you think about your career, eventually you will come to the same conclusion because similar to school there were teachers you liked better than others. If you have worked for people, there have been managers you liked better than others. The ones you liked better, you were likely more productive; the ones you did not like you likely looked around at other companies or departments or something. From an investor point of view, the issue is what costs are we accepting as investors and what costs can be reduced. If turnover is too high and thus costing too much and there are savings which can be done with reduced turnover, more effective management, then an investor you want to know and what is the company doing about it.

There are more questions than answers, till the next time – to raising questions