Combatting Retail Turnover: The ROI of Employee Education

Retail has historically experienced high employee turnover, leading many companies in this sector to simply accept and incorporate this trend into their business models. The prevailing logic has been that it's more cost effective to continually hire and train new employees than to increase wages or invest in other strategies to retain staff.

This approach may have been financially sound when the labor market was less competitive and minimum wages were lower. However, in the current climate of a tighter labor market and rising minimum wages, investing in retail employees to enhance retention can be more profitable. Employee education programs, for instance, offer significant benefits in retention, resulting in a more engaged workforce. These programs not only attract talent but also contribute to developing internal talent and management pipelines.

Creating an in-house employee education program has traditionally been a complex and daunting endeavor. However, with the advent of online learning technologies, companies can now implement effective and economical educational programs. These programs promise a substantial return on investment (ROI), making them an attractive option for contemporary retail businesses.

The High Turnover Norm

The Bureau of Labor Statistics reports that U.S. retail organizations experience an average employee turnover rate of approximately 60 percent. While such a high turnover rate would be alarming in most industries, retail businesses have historically considered it an inherent cost of their operations, relying on continuous recruitment to offset the high attrition rate. A study by American Progress, a Washington, D.C.-based think tank, revealed that the cost of replacing high-turnover, low-wage employees amounts to about 16 percent of the employee's annual salary. Considering the median annual salary for a retail worker in the U.S. is around $30,600, the average cost to replace an employee is approximately $4,896. It's important to note that this figure mainly accounts for recruiting expenses. Additional costs, which are not included in this calculation, can accumulate from factors such as decreased sales and compromised customer service due to the inexperience of new hires. These additional costs significantly contribute to the overall financial impact of high employee turnover in the retail sector.

The Retention and Branding Power of Workforce Education

Reducing turnover is best accomplished by instilling a sense of purpose in a company’s employees. This can be realized through mission alignment, charismatic leadership, or focusing on an employee’s value and self-worth. It's this last area that a comprehensive education program can nurture by providing employees with an opportunity to pursue new skills and knowledge, while also providing a pathway to better prospects for their families.

These programs are easier to set up than ever before as, in recent years, workforce education programs have gone digital, offering user-friendly online platforms for at-home learning. For employers, these digital offerings enable quick program deployment and provide learning flexibility that accommodates the variable schedules of shift-based work.

By motivating employees through education, organizations dramatically increase their retention. This occurs both during their course of study when the learning benefit is tied to continued employment, as well as after program completion. For instance, in the cases of Starbucks and Chipotle, two prominent retailers that invest in their employees' education, participating employees stay with the company over 50 percent longer than non-participants at Starbucks and at a rate 3.5 times greater at Chipotle. These statistics underscore the value of education programs in reducing turnover and enhancing employee loyalty and engagement.

Additionally, investing in employees provides an uplift to the overall brand. Consumers want to buy from brands that care about their employees. Widely advertising a workforce education program can both attract high-quality employees and provide positive coverage for the brand itself as a socially conscious retailer.

Education Focus Areas for Retail Employees

To maximize retention and attraction, offering retail employees compelling education offerings that are both valuable for their current roles and potential future ones is critical. The goal should be providing a better future for that frontline worker, whether at that retail organization or in the next step of their career. Ultimately, even if an employee departs after completing a tech boot camp or bachelor’s degree, their tenure is likely to be longer, and their engagement higher, compared to if these opportunities weren't available. Plus, they’ll be lifelong customers and brand promoters!

The following are sought-after educational offerings in a workforce education program for retail employees:

• Technology skills and certifications: Technology roles, at retail companies as elsewhere, are in high demand. Offering IT certifications, coding boot camps, and other technology degrees prepares these employees for the jobs of the future.
• Language learning: Many retail employees are interested in furthering their language competencies, whether that's through English Language Learning classes or the pursuit of a foreign language, such as Spanish. Either will help your team members better connect with customers.
• Leadership courses: Leadership training can prepare frontline employees for leadership roles at retail outlets while also fostering a sense of value and purpose. Even if an employee isn’t interested in taking on a management position, they may still want the opportunity to expand their circle of responsibilities. This approach aligns with the idea that investing in employees' skills and personal growth should be a long-term strategy that benefits both employers and employees.
• Bachelor’s Degrees: Degree attainment presents significant value to frontline employees by imparting not only specialized knowledge in their chosen majors but also essential skills like critical thinking and teamwork. These skills are particularly advantageous in management roles. As reported by the Association of Public and Land-Grant Universities (APLU), individuals with degrees earn, on average, 84 percent more than their counterparts whose highest educational achievement is a high school diploma.

Final Thoughts

The era when retailers could accept high turnover as the status quo is long past. To succeed in today’s business environment, retailers must take steps to retain their existing talent. To that end, workforce education is a proven strategy that can significantly improve retention, while also reducing costs and driving long-term success.

Jonathan Lau is chief operating officer of InStride, a global provider of strategic workforce education for companies that need to align their talent and workforce needs with business goals.