BEST BUY TURNOVER RATE
AND EFFECT ON YEARLY SALES

Prepared for
Christy Eros
General Manager of Best Buy
Store #343

Prepared by
Richard Bancroft
Andrew Cordeiro
Corey Webster

December 3, 2007

MEMORANDUM

DATE: December 3, 2007
TO: Christy Eros, General Manager
FROM: Andrew Cordeiro, Richard Bancroft, Corey Webster, Project Team
SUBJECT: Reducing Turnover Rate

Here is the report you requested September 30 on the store turnover rate.

As you suspected, the turnover rate is relatively high for the company and is increasing in our store. This problem has not been brought to attention because both the company and stores yearly sales have been increasing over the past few years. Though the store is doing well, it could be doing much better.

Our employee's are what drives the store and makes it what it is. An increasing turnover rate has a negative effect on the stores bottom line. To support this, we surveyed a number of employees in our store and one of its competitors. The reason for conducting the surveys was to see what other employees thought of this problem. We also wanted to see if any other businesses experienced this, and if they did what solution they had. Some of our findings include various ways to predict and use turnover to prevent it.

It will take a while for these possible solutions to go into effect and they will need some monitoring. One strategy we found that works for other businesses is called an exit interview. If an employee leaves, conduct a closing interview if the employee is willing to, and find out the reasons for their parting. By doing these exit interviews, we are able to apply the information we get, and try to resolve this so other employees do not leave for the same reasons. We have also found various initial interview questions that can prevent future turnover.

I would like to give thanks to the Kate Randall Haley who helped us in our search for evidence, and you Christy Eros for providing our Project Team with six months of both the company and stores turnover rate.

Our team thanks you for giving us the opportunity to work on this assignment. It has been really informative. If any questions arise, feel free to contact any of us.

CONTENTS

EXECUTIVE SUMMARY

This report analyzes Best Buy turnover rate affecting the overall bottom line and presents recommendations on how to avoid a high turnover rate.

Lost Money with Turnover
When an employee takes a job offer, there is also a chance that employee will submit his/her two weeks. For every employee who leaves it costs the company money for wasted orientation and training hours, as well as future costs in order to hire a replacement. It is very understandable that some people leave for personal reasons, since retail corporations usually hire a very diverse staff. Putting personal reasons aside, a majority of employees leave because of what the company is doing or lack thereof.
This waste of money training new employees could be reduced if certain strategies are taken, which would turn into profit and better employee satisfaction. Having an employee staying with the company for more than a short period of time is essential in the retail business. Employees staying for a long period of time lead to: • Knowing the products and product lines better • Selling techniques will improve • Communication skills will significantly increase • Receive better customer loyalty • Increased customer leading to more profit

Exit Interviews Can Save Money
When an employee decides to leave the company, let them go since there is nothing you can do here, but ask them for a moment of your time before they leave for good. Assembling exit interviews are a great way of helping reduce turnover rates. These interviews do not cost any money besides the cost to make copies of them and help gain insight as to why the associate is leaving. The questions should contain why they are leaving and if there is anything that the company can change to better that problem, if the departure was due to the company. Conducting these interviews also helps decide if wages or benefits are too low compared to competitors in the area. If the information in these are taken into serious consideration, the company can in return earn a lower turnover rate and save money.

INTRODUCTION

Employee turnover can be devastating to any company. Retail especially, where employees are counted on more to be knowledgeable about the products and services available. Each year, Best Buy suffers an extreme amount of lost profits and unneeded expenditures due to the turnover of employees.

Over the past few years not only has this particular store’s turnover rate been steadily increasing, but we find this to be a trend throughout the entire company. Trends show that this issue will not solve itself, but there are a few possible solutions that can be discussed.

The purpose of this report is to discover the underlying reasons for employee turnover and to research possible solutions to this epidemic. The report will explore such options as exit interviews, and manager/upper staff evaluations. Included are charts of turnover percentages over time. Any projected number or provided solution is as a suggestion of how to increase revenue or decrease lost profit.

In preparation of this report, the manager of Best Buy Dartmouth, Christy Eros, provided turnover records for the last six months to create a trend that could be charted. We analyzed proposed solutions in various articles scattered throughout various business magazines and online databases.

THE HIGH COST OF TURNOVER
Revenue Lost In Transaction

It would be irresponsible, and foolish to think that there is a possible solution to completely eradicate unneeded turnover. Employees will leave for their reasons, and it is the employers’ responsibility to respond to it in an effective manner. But it would be even more effective to decrease the number of employees who leave in the first place. It is estimated that the cost of turnover could be anywhere between 25-30% of the employees yearly salary including benefits, according to InsightLink Communications (Branham 2007). Figure 1 shows the turnover for both the company and the store. As you can see it fluctuates, but it still leaves much room for improvement.

[pic]
Figure 1. Employee turnover in Best Buy.

Some turnover in a firm is even desirable. New sales people bring new abilities, ideas, approaches, and keep the organization from being to stagnant (Holmes and Schmitz, 1996). "However, high turnover sends a very clear signal that something is wrong with the organization" (Adidam 2006).

Losing Investments

Not only does a high turnover rate effect a companies' yearly sales but it is also very costly. When you lose an employee, the agency loses its investment in its personnel and the learning curve has to be climbed again (Taylor 2005). What we mean by this is when personel are hired they go through weeks of training and depending on what position the company is hiring for, it gets very costly. What is even more costly is when one loses that employee, because then the whole process has to be redone and once again your are spending money on training of that position. Not only are you losing money spent on training, but there are also hidden costs such as productivity loss, workplace safety issues, and morale damage. "An improved selection process that assesses candidates' turnover risk and motivational fit early in the hiring process helps reduce turnover that translates into organization profitability" (O'Connel 2007). Some staff turnover is inevitable, but you can reduce it by listening to your employees, and you can minimize its impact on clients with a good continuity plan (Taylor 2005).

INTERVIEWING
Interviewing Best Buy Staff
According to Adidam (2006) there is a strong correlation between employees and their management. "Thirty four of respondents said that better management support would help them make there job easier" (Adidam 2006). Only 15 percent of employees wanted better compensations and seventy two percent of responding managers said that turnover hurts their companies' business. After surveying the employees at Best Buy we saw a positive correlation with the sources we found. Interviews were conducted to twenty associates. All of these associates work for Best Buy store number 343, and all work in different departments of the store. Interviewing throughout the store instead of just one department ensures the diversity of answers given.

The questions contained multiple open ended answers in order to receive what the associate was really thinking. Of course, there were some basic closed questions as well. No names are being presented maintain anonymity.

The Results

Even though input was collected from the entirety of the store, most answers resembled one another. Taking this into consideration this enabled our team to assemble graphs with both closed and open ended answers. Figure 2 shows how many employees think that the turnover rate in this particular store (343) is high or low, and what the reasons are.

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Figure 2. Employees’ responses to turnover rate.

More than half of the surveyed employees think that the turnover rate is exceptionally high, rather than low. Why do these thirteen employees think that the turnover rate is so high? The popular answer was wages, with nothing and management trailing behind. Employees being underpaid for their knowledge and communication skills, sometimes, results in the employee thinking that there may be a lack of career growth opportunity. This is actually one of the top reasons employees leave, this will be explained in further detail on page six.wages and favoritism with management, which increases turnover.
Figure 3 shows how employees think that turnover is affecting the bottom line. This corresponds to what Figure 2 had shown, more people think turnover rate is high, and therefore the company’s bottom line is affected.
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Figure 3. Employees respond if turnover affects our Bottom Line.

EXIT INTERVIEWS
The major strategy that has worked to reduce turnover for many companies is the exit interview. By asking an employee the reasons why he or she left, much insight is gained. It will become evident whether the employee left for “push” reasons or “pull” reasons. If they are “push” reasons, where an employee leaves due to malcontent with their current job, then it would be a good thing to research this. If it is a “pull” reason, in which they are leaving do to better job opportunity or a higher salary, then it would be wise to challenge other competitors wages, and benefits.

Conducting Exit Interviews

In conducting exit interviews you do not want to focus solely on why an employee leaves, but what experience they have, and what kind of attitude they bring to work. If there is a written part of the exit interview, it would be beneficial to include an open-ended question so that the employee may add personal comments, and specific suggestions (Levin 2007).
Take into account the employees view of the company, including how they cope with the culture of the company, and how well they meshed with others. We would want a very in depth look at how they perceive the company from within. “Incorporate key attitudinal measures such as the employees satisfaction with the job itself, an assessment of the organization’s work culture and effectiveness of its various lines of communication, how well the employee’s job responsibilities were defined, perceived opportunities for advancement and the employee’s perspective on the amount of training, feedback and recognition received.” (Levin 2007)
To be completely effective the interview has to be recognized by the former employee to have the relevancy to be researched at the highest level, and to actually help solve problems.

Reasons Employees Leave

Employees are going to leave for various reasons, some of which are unavoidable of course, but most turnover is due to lack of understanding of the culture of the company
More reasons for turnover include:

· Unmet Job Expectations - When someone applies for a job, whether they know it or not they have already developed a distinct view of the company, and when something is skewed in their opinion it will stick with them. If this happens ultimately too often, then an employee will become disgruntled and most likely search for a better opportunity.

· Job-person mismatches - This will sometimes happen if a friend has a friend apply to a job, without knowing what the job entails, just so that they can work together. When the employee becomes faced with responsibility, they don't respond well to it.

· Lack of coaching and feedback - There is nothing more scary than not knowing what you are doing while you're on the clock. Fear of losing your job, and of making a very costly mistake can make you very meek, and unwilling to take on extra responsibility.

· Perceived lack of career growth opportunity - When there is no promotions from within the company to lead positions, employees feel as though there is no reason to work harder. If they work harder, whats their reward?

· Feeling devalued and unrecognized -People want to know they are wanted. They want to hear that they are appreciated and welcomed at their place of work. When they are not, they tend to seek out positions where they will feel more confident.

· Stress and burnout due to overwork and life/work imbalance - This is an issue that can exponentially create problems throughout a company. If someone loses their job, it is likely to put more responsibility onto another employee, sometimes to the point of resignation. This only creates a larger problem for the employees left at work.

· Loss of trust and confidence in senior leaders - If you cannot trust your leaders, you cannot trust what they stand for, and although the leadership responsibility is usually spread around many people, it does not take much to shake someone’s faith and confidence in a lead position.
(Source: The Seven Hidden Reasons Employees Leave, Leigh Branham,© 2005, AMACON Books)

CONCLUSION AND RECOMMENDATIONS

What we’ve learned from the data collected is that turnover may not affect the stores bottom line directly, but it is the hidden costs that are costly to a company. As we’ve previously stated, when turnover occurs we have to implement the training process once again and at the same time are losing productivity. We all realize that it will be a challenge overcoming turnover. It is a slow process and is going to take some time to see returns. But we believe from the sources that we found and data we collected, implementing Taylor's (2005) 6 step process to decrease turnover is very low cost and effective. Just by implementing a few easy strategy’s we believe that Best Buy would see a major turnaround in turnover:

• Exit Interviews - find out reasons people are leaving. Gather as much information from former employees as possible. • Promote from within - provides us with a boost of morale and an easy way of maintaining the same culture and goals. • Keep in touch with employees - Make work a caring environment. Employees are welcome and appreciated when they come to work.
These are just a few of the low cost effective ways of decreasing turnover (Taylor 2005). Resulting in an increase in productivity and a decrease in money spent on training and hiring new employees.

Works Cited

Taylor, Dale. "6 ways to keep your staff". Medical Marketing and Media, Vol. 40, Iss. 9; pg. 87, 2 pgs. ABI/INFORM Dateline database. United States--US. 11 November 2007. http://proquest.umi.com/pqdweb ?did=901691881&Fmt=4&clientId ?533&RQT?09&VName=PQD

O'Connel, Mathew. "The cost of employee turnover". Industrial Industrial Management. Norcross: Jan/Feb 2007. Vol. 49, Iss. 1; pg. 14, 7 pgs. ABI/INFORM Dateline database. United States--US. 11 November 2007. http://proquest.umi.com/pqdweb ?did=1219118031&Fmt=4&clientId ?533&RQT?09&VName=PQD

Levin, Greg. "Are exit interviews a way out of turnover hell? -- Exit interviews are a way to identify consistent trends, patterns and themes and to reduce future turnover on a large scale". Call Center Magazine. San Francisco: Jan 2007. Vol. 20, Iss. 1; pg. 34. ABI/INFORM Dateline database. United States--US. 11 November 2007.http://proquest.umi.com/pqdweb ?did=1188347741&Fmt=3&clientId ?533&RQT?09&VName=PQD

Saul, Karen. "It pays to minimize staff turnover". Credit Union Magazine. Madison: Jun 2007. Vol. 73, Iss. 6; pg. 94, 1 pgs. ABI/INFORM Dateline database United States--US. 11 November 2007. http://proquest.umi.com/pqdweb ?did=1284541541&Fmt=3&clientId ?533&RQT?09&VName=PQD

Employee Survey. "Turnover Rate and Sales." Survey. 1-10 November 2007.

Eros, Christy. "Turnover Rate and Goals." Interview. 1 November 2007.