I was asked to investigate the reasons for the high payroll costs of Best Buy Limited during the past year. A thorough investigation led to understanding that the current turnover rate may be the reason for the issue. The present report demonstrates how turnover affects payroll costs and offers two ways of addressing the problem that will benefit the company in multiple ways.
Traditionally, the retail business is associated with high turnover for various reasons. Even though Best Buy’s rates (32%) are well below the national average of 60%, it remains a considerable financial burden (Van Abbema). The cost of turnover consists of the price of hiring, onboarding, training, development, and cost of time of unfilled role. The simple formula mentioned by Altman and information about Best Buy staffing presented by van Abbema was used to calculate the approximate annual cost of turnover. The calculations presented in Table 1 show the financial burden associated with the present turnover rate.
Table 1. Best Buy Annual Cost of Turnover.
The results of the calculation need to be explained since it may be wrongly thought to be too high. Even though the cost of hiring, onboarding, development, and unfilled time is an evaluation made by experts, it may be trusted since replacing an employee is a complicated matter. Hiring costs include the time of HR managers, the termination payments, and the fees for advertisements on websites, social media, radio, television, and newspapers. Additionally, administering all the hires and termination fees requires the company to keep an extensive HR staff. In short, the calculations presented in Table 1 are relatively accurate evaluations.
There are several strategies Best Buy can adopt to decrease the turnover rate. First, Best Buy Limited should focus on the development of its staff instead of offering high payments. According to Altman, growth is fundamental to human happiness, especially when speaking about younger generations. Therefore, one of the suggestions is to put the best efforts into describing and presenting career opportunities for all the employees as well as providing relevant training for them to acquire desirable skills. Second, I recommend developing an atmosphere of care for the employees. It can be achieved by systematically gathering feedback from employees and address their needs. The suggestions will reduce the turnover rate by 10 percent in a year, which will result in $400 million of savings for the company. Additionally, according to the company’s mission statement, Best Buy relies on its employees to address the unmet needs of its customers (“Best Buy Mission”). Therefore, holding on to employees is a viable strategy to adhere to the company’s values.
Works Cited
Altman, Jack. “How much does Employee Turnover Really Cost?” Huffpost. 2017.
“Best Buy Mission, Vision & Values.” Comparably, Web.
Van Abbema, Alex. “How Best Buy cut its staff turnover more than 30 percent in four years.” Minneapolis/St. Paul Business Journal. 2018.