Saturday, August 31, 2002

Invest in employee training

Q. I've been looking at my budget and wondering what other HMEs spend on employee training and education, and how that might reduce my cost of employee turnover?

A. You want to think of education and training as an employee benefit. Like any benefit, there is a cost to the bottom line. However, not investing in employee training/education will cost your business much more in low employee morale, cooperation and eventually turnover.

Even the smallest HME can suffer the effects of not investing in training. Employees polled most often rank "need to feel a part of the team" higher than income. There are three kinds of costs associated with losing an employee:

4Direct costs include things like help-wanted advertising, the time/salary costs of interviewing and the various exit procedures, costs of co-workers covering open positions and any overtime for employees who take on a departing worker's tasks.

4Opportunity costs include situations where you're not able to work at capacity and where you can't hire enough people to handle the business you have.

4Indirect costs include things not easily quantified such as loss of organizational knowledge, but which clearly have negative effects on organizational productivity and know-how. In high-turnover situations managers can spend a lot of time figuring out how to staff the position rather than the strategic planning they were hired to do.

Acknowledging some significant variance, an "average" HME business employee costs about $10,000 in turnover costs, or about 50% of the first year salary.

Jim Phillips is president of VGM Financial Services. Reach him at 319-235-6727 or