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Connections and the Cost of Turnover  

Connections count in the casino industry. The term usually means who you know determines how much "pull" you have. There's another meaning of connections, though, that counts on the bottom line. The stronger the bond - the connection - between employees and a company, the less likely they will loaf, steal, or leave. That means lower turnover costs.

Loss of productivity and loss by theft are somewhat difficult to quantify, though they're nonetheless expensive and damaging to EBITDA. Losses from employee turnover, however, can be measured with reasonable precision. The results can be both sobering and instructive.

Studies among many human resources professionals conclude that in the United States, the average cost for recruiting, screening and interviewing, processing, training, and culturally acclimating a new employee is equal to a year's salary for that employee. Many say that these costs equal 1.5 times the annual salary. This does not include intangible costs such as low productivity during initial employment, accidents, breakage, mistakes, customer dissatisfaction with poor service, and the like. Those costs are significant, but can be difficult to pin down.

Using just the yardstick of one year's salary as a basis, consider this example of turnover impact in a "typical" gaming company. The figures are based on broad industry averages. As they say in car ads, your mileage may vary. A company with 2,000 employees experiencing 50% annual turnover (even greater rates are not uncommon) must replace 1,000 employees every year. If the average salary per employee is $30,000, the turnover cost is $30 million. What manager wouldn't salivate to have an extra $30 million added to the EBITDA? For companies with multiple facilities, the impact is even more staggering. An organization with five such properties, for example, is faced with annual turnover costs of $150 million!

With most energy sector stocks continuing to languish in the shadow of Wall Street indifference, the company that could add $150 million to its bottom line would certainly get some attention and emerge into the light. Of course, these are theoretical values (though realistically representative), and it's unlikely that any gaming company can eliminate turnover entirely. However, the figures illustrate just how important controlling turnover is to profitability.

How to control turnover generally baffles corporate executives. Most view it as a necessary evil, an unavoidable expense of the somewhat transient gaming industry culture. A growing body of in-depth employee research shows that turnover can, in fact, be moderated - by building connections.

The evidence from this research reveals that the bonds of relationships within a company play a significant role in employee attitudes. If the relationships are strong and positive, employees are far less likely to slough off on the job. If employees feel connected to the company, they are far less likely to consider it okay to pilfer. If employees consider themselves "in the loop" - wanted and needed, and most of all, respected - they are less likely to be lured away or leave in a huff.

Reducing turnover has the corollary effect of helping to increase revenues. If lower employee turnover can influence customer retention by only 2%, it amounts to adding one full week of revenue to the bottom line at no additional cost (52 weeks X 2% equals 1.04 weeks). It also reduces marketing costs. It's much cheaper to keep a customer than to win a new one. For every ten dollars spent to woo a new customer, it only costs one dollar to keep one.

Building strong connections requires sincere and persistent attention to enhancing communication, mutual respect, pride in the company and being part of the team, mutual exchange, and employee satisfaction. A cohesive, multi-disciplinary strategic plan helps coordinate the effort for maximum synergy.

It's axiomatic that the closer an employee is to the fountainhead of the company's vision, the stronger the bond, the more powerful the connection is likely to be. Almost universally, upper echelon employees tend to be the most satisfied with their jobs and are less inclined to defect than are the lower level employees. These upper-level employees are most likely to be in the communication loop. By bringing top management and all other personnel closer together, line-level employees - where the turnover problem is usually greatest - begin to feel some warmth from the vision that radiates from above. Instead of feeling like mushrooms (kept in the dark and fed manure), they begin to take root and resist the winds of wanderlust.

Though reducing turnover by any significant amount may seem out of reach, it's less intimidating when viewed in this perspective: in the example given above, to achieve a very modest 10% reduction in turnover requires keeping every employee on the job only four weeks longer. Unless a workplace environment is really hellish, it should be practical to persuade an employee to stick around for another month.

Building relationships and forging strong connections is not without cost. It takes investment of time, resources, and money. However, the return on investment yields big rewards on the bottom line.

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