A Shop Owner’s Guide to Recruiting and Retention Aka “Nobody wants to work anymore” is BS Welcome to another JimRant™ about a topic that is near and dear to me: Recruiting and retaining great people. Whenever I’m forced to go to a Christmas party or some sort of social function, I’m always happy when I meet another business owner (manufacturing and non-manufacturing alike) and I get to talk shop instead of sportsball or something. I don’t know sportsball. Talking to another business owner is easy; we already have so much in common that we can discuss: the economy, supply chain, accounting, logistics, and of course, labor. Sometimes things are going great, it seems like we have so much in common, and we’re fighting the same fights…but then they say “but you know, hiring is impossible right now. Nobody wants to work anymore.” That’s usually when the conversation goes downhill and I try to find someone else to talk to, even if I have to talk about sportsball. I don’t believe that “nobody wants to work.” It’s basically the same as saying “I am a shitty boss and I’m cheap.” The employers complaining about the available workforce aren't offering enough to attract and retain quality workers. Every time I’ve had a tough time hiring, I try to look in the mirror and see what’s wrong with ME, not the people I’m trying to hire. Here’s the recipe I use. Feel free to use some of it to help you get the badass staff you need.* *Please keep in mind that my hiring experience is limited to part-time labor, hourly production staff, salaried managers, general and administrative, software engineers, C-level staff, mechanical engineers, sales, and random friends who needed jobs. Your needs may differ. 1. Start with the building A nice work environment is the number one recruiting tool you have. When someone comes in for an interview and you tour them around, what they see is going to make or break the deal. I had one shop owner tell me that he couldn’t get anyone to come work for him even though he was offering identical wages as other shops in the area. The issue was that his shop was dim, dirty, dusty, sweaty, and loud. Why would you want to go work there for $25/hr when for the same money, the competitor down the street has AC, good lights, and toilet seats you wouldn’t be afraid to sit on bare-assed. Does your shop stink? Is it deafening? Poorly lit? Hot? Cold? Remember, the candidate is probably looking at a few options. If you are offering “market rate” but your place is 95 degrees in the summer and 40 degrees in the winter and the bathrooms are gross…it’s highly likely they are going to choose another option. If you are unable to make improvements to the working environment, you may want to consider increasing your wages. The best part of investing in a nicer physical environment? You and your existing employees get to enjoy it too! The environment not only helps you recruit new employees, but it also helps you keep them long term. Of course there are all the other benefits that come with making the building nice…improved quality, accuracy, health, safety, reduced waste…I’ll save that for another day. I have one scenario that I run in my head that helps me create a good working environment: If a father brings his 5 year old son into the shop, I want that son to be proud of where his dad works. “Wow dad! I want to work here when I grow up!” If your shop doesn’t pass that test, you have work to do. Finally, if you also have remote employees, don’t forget to give them a good physical environment as well. Spend the extra couple hundred dollars and get them the GOOD monitors. Buy them the nice laptop. Reimburse them for a good chair. Don’t cheap out here, because remote employees have the most employment opportunities out of your entire staff. Nickel and diming remote staff is a good way to get them to start looking somewhere else. 2. Attract premium people with premium pay Low wages seem to pair with low expectations and low accountability. If you want to have a high performance culture and work environment, you need high performing people. High performing people usually know that they are worth more, and they’re right. I promise you that a guy who is good at his job, enjoys his work, and makes $32/hr will be more productive than two guys making $16/hr. The best candidates aren’t looking for low paying roles. Most often, they aren’t looking at all. In my experience, people making the bare minimum tend to try to do the bare minimum. Well-compensated staff will be looking for ways to improve process, productivity, and reduce waste. They have a vested interest in making the business better, because they enjoy their work and recognize that this job is an opportunity that shouldn’t be squandered. Once in a while I’ll get the opportunity to visit another manufacturing company and talk to their staff. My goal is to seek out the lowest paid guy, and the best paid guy. With the lowest paid, sometimes I’ll see something that could be improved with lean methods, or an opportunity for better quality control, or perhaps a process could be faster. When I bring this up, more often than not I’ll hear something like: - They don’t pay me to think - That’s above my pay grade - I just punch the clock and do what they tell me There’s zero motivation to make things better, because he feels like he’s getting taken advantage of in the first place. Or, it’s likely that the guy is just lazy, which would explain the low wage in the first place. To figure out which is which, try this test: If someone ever says “that’s above my paygrade”, offer them a healthy increase, with the caveat that now it IS at their paygrade. Call their bluff. I’ve had it go both ways; sometimes it’s like a lightswitch goes off inside them and they turn into one of our best. The ones that don’t step up are separated because they did't hold up their end of the bargain. It’s a win-win either way. You either get a high performer, or you make room for one to come in the door. Talking to the highest paid guy, the conversation is totally different. Usually he’s telling me about the recent improvements he’s recommended, the efficiencies he’s found, what he’s thinking about for the future. It’s because he’s invested, he knows that continued improvement on his part will result in continued opportunities. At the end of the day, you get what you pay for. Nickel and dime someone and they will return the favor. Generosity is almost always reciprocated, and if it’s not, there will be a line of people ready to take their place. Because of our reputation, wages, and benefits, when we post for an entry level position we’ll get a few hundred applications to choose from. I can’t overstate how powerful this is. We get the pick of the litter. Too many employers are forced to pick between 3-5 candidates, and sometimes they have to choose “the best of the worst” and make due. With the right combination of compensation, environment, and benefits, you get to choose from the top 10, not the bottom 10. 3. “I can’t afford to pay more!” Wrong. It’s almost free. Pay is an investment, not a cost. A good employee can add hundreds of thousands of dollars to your bottom line, and a bad one can cost you the same or more. Trying to save money on labor is a nice, slow way to strangle the business until it’s dead. Premium pay for premium people has dozens of benefits that easily outweigh the cost: - More accountability - Increased quality - Better attendance - Staff tends to “give a shit” more than if you are underpaying - Premium employees attract other high quality staff. The reverse is also true I’ve noticed that employers who pay well tend to have a smaller overall headcount, similar overall payroll cost, and superior productivity compared to a low-paying business of similar size. They are doing the same (or greater) amount of production, but with better, more effective labor. The right team is more affordable than you think. Premium pay also helps reduce turnover. And turnover is way more expensive than it looks on a spreadsheet. The true cost of underpaying employees is greater than the cost of paying a good wage in the first place. I’ve seen so many business owners locked in a never ending cycle of turnover due to trying to save a few bucks, when in reality it’s costing them a fortune in recruiting, training, and loss of knowledge. People have a really hard time calculating intangibles, so here’s how I think about the hidden expenses of high turnover: - Recruiting costs. Each time we post an ad for a job, it costs us between $300 and $3,000, using Indeed, Linkedin, or other channels (X is free and awesome though). This cost can be 10x-20x for a position that requires a headhunter. We also have to account for the time invested by our HR and recruiting staff, probably another $2,000-$3,000 per head once everything is all said and done. - Training time and resources. Training for our hourly production staff usually takes 40-80 hours, during which time the new staff member is getting paid, but not contributing much to the final product. At $25/hr, that’s another $1,000-$2,000 invested. For engineering and management staff who have a longer ramp up time, those numbers can get into 6-figures. If the person leaves, all that investment is gone and you’re starting all over. - Loss of institutional knowledge. This is the big one. Even though we train hourly staff for 40-80 hours, typical new staff members don't get really good until about 6 months in. For some positions, it can take years to become an expert. However, once they get really good at their job, they are performing at a level 2x-5x (10x?) higher than when they first started. So if you lose an experienced staff member, it’s really like losing 2-5 new hires. This effect is even greater as you go up the chain to skilled labor, management, and especially engineering. JimMath™ says that the loss of knowledge for most hourly staff could easily be worth $18,000-$50,000…even more at higher levels. Losing a skilled engineer could cost you 6-7 figures in total replacement cost. All of those costs add up. It’s pretty easy to see that you might be able to find another $5-$10/hr to offer if you can reduce turnover. Just pay people well in the first place. Losing them is expensive. 4. Get rid of assholes, increase retention “People don’t quit jobs, they quit managers” Okay, you tidied up your building a bit, the toilets are clean, and you’re paying above market. Nice! You’re close. The final ingredient is to have zero tolerance for assholes (I’ll call them jerks from here on out because my editor/wife said I sound too crude). Get them out of the building immediately if you want to retain your best staff. Example from my past: About 25 years ago I was working at a small family-owned company here in Reno, maybe 10-12 staff. There was this one guy, total jerk, we’ll call him CJ. He wasn’t my boss, but he was responsible for a chunk of the team. His department was a revolving door of people…staff was constantly quitting because he would lose his temper and blow up at them, or he’d be a hypocrite, or talk behind their back, or a combination of all the above. Employees who were quitting would tell the owners directly “I love this place, but I can’t work with CJ.” I saw this happen maybe 6 times during the year that I worked there. I ended up quitting too…but it’s because I started dating the boss's daughter and I couldn’t have my boss also be my father-in-law lol. We’ve been married for 20 years now. Anyway, even though I wasn’t working there anymore, I was connected to the ownership so I’d continue to hear about how this guy made so-and-so quit, yet again. FAST FORWARD 25 years and holy shit, this guy is STILL causing retention issues. I can’t imagine how much this has cost the company over the last two-plus-decades. For whatever reason, no one has had the balls to separate from this guy, and it’s probably cost the company millions of dollars in recruiting, knowledge loss, and opportunity cost. An interesting consequence of all this is that jerks tend to be able to tolerate other jerks pretty well…so now there is an ecosystem of jerks in that department, which magnifies the overall effect. The worst part is that CJ was responsible for teaching new hires a very specialized skill. And in more than one instance, an employee quit and started a competing shop. CJ single-handedly created more competition for this company than any other factor I can think of. Don’t tolerate jerks. They are expensive. Pro tip: If you have a good environment, good pay, but high turnover…and you can’t identify any jerks on staff…you might be the jerk. 5. Personality is more important than skillset A common frustration I hear from shop owners besides “nobody wants to work anymore” is “I can’t seem to hire for this ultra rare and dying skill!” They seem surprised that there isn’t an abundance of manual lathe operators that can program a punch card machine. I always hire based on personality first, and skillset second. Even if it’s for a rare skillset, such as “advanced computational geometry,” personality plays the biggest role in the decision. The right personality can learn just about anything, but you can’t teach personality. I’ve tried a few times, unsuccessfully. I believe that high performing people learn their most important skills by the time they are 18-20. Parents (and the military) have more influence in the success of their kids than any boss ever will. For example, one of our interview “tests” is to take the candidate out to the shop floor and show them around. Before we go through the doors, I grab something heavy with two hands (like a box or tote) and head towards the door. The best people will jump ahead, grab the door and open it for me. They just “get it.” I’m sure their dad yelled at them to “grab the door for me, damn it!” enough times to make an impression. I guarantee they know how to hold a flashlight steady too. On the opposite end of the spectrum, it can be fun when we have someone that watches me struggle to open the door for 30 seconds, trying to balance the box on my knee, maybe I drop a few times while they sit there with their hands in their pockets. Not gonna make it here. We also have a rule called “never walk past a piece of trash” if you see it on the floor. So as we’re walking with the candidate, I’ll pick up little bits of cardboard or stray metal scrap that might have rolled into the aisle. The best candidates will mimic this behavior, and it’s a huge green flag to hire them. Little things like that tell you that their parents did a good job on them, and they’ll probably be a pleasure to work with. With the right training program, good standard operating procedures, and great leadership, you can take anyone with a good personality and turn them into whatever you need them to be. 6. Put it all together Fair pay, positive environment, and effective retention strategies are both cheaper than you think and more valuable than you think. If you believe nobody wants to work anymore, take a look in the mirror and reassess your practices and invest in your workforce.