CONSTRUCTION Accounting ARTICLE -
Contractor Looks to Turn Around Turnover

Target Audience: Construction Industry Professionals, General Contractors, Construction Accountants

A medical facilities contractor in a large suburban area had a problem. In just one year, 10 workers had left his employ, with many heading to local upstart competitors. The contractor suspected the high turnover was contributing to the company’s suddenly slumping profits.

For some insight, he turned to his construction accountant. She confirmed his fears, noting that he was looking at increased expenses for recruiting, interviewing and overtime, as well as reduced productivity from lost skilled workers and demoralized existing ones. Fortunately, she also had some ideas for turning things around.

A simple formula

First, using a simple formula for estimating the cost of turnover, his cpa helped him put a number on the problem.

The Department of Labor estimates that it costs at least 33% of an employee’s annual base salary to replace that lost employee. So they multiplied that figure by the number of employees that had left (10) and their average salary ($40,000) to determine his total turnover costs: $40,000 × 10 × 0.33 = $132,000. Seeing that figure was powerful motivation for the contractor to nip this quandary in the bud.

Armed with info

To find the root cause, his accountant suggested that he interview his company’s top performers for feedback on increasing job satisfaction. Many said that management needed to communicate better and offer better training — two common requests he’d fielded from unsatisfied workers.

Armed with that information, the contractor and his management team developed robust training and mentoring programs — consulting with his CPA on cost and budgeting issues, of course. A new employee orientation included staff introductions, discussions of goals and expectations, and job shadowing — while ongoing training for employees continually improved their skills.

The contractor handpicked several employees with strong interpersonal skills to lead the mentoring program and gave them detailed instructions on the program’s goals. He also revamped his hiring practices to ensure that, going forward, the right people would be in place from the start.

Last, thanks to a referral from his accountant, the contractor worked with an HR consultant to develop detailed job descriptions with specific skill requirements for the vacant positions. The consultant also advised the contractor to cast a wide net for the best talent and have applicants interview with multiple people in the organization.

Positions filled

Although these changes took time and money, the contractor was glad to have worked closely with his CPA on this issue. He began filling the vacancies and looking forward to the day when the money he’d been spending on turnover would be contributing to his construction company’s bottom line instead.

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