Sometimes we’re going to come across an employee who brings less value and even costs your business in revenue. Watch out for these employees who cost you money.
We talk a lot in hospitality, spa, and wellness about the importance of team members and our employees being our greatest assets. In the spa, our people are everything. They bring our customers joy and create transformational experiences. They breathe life into treatments, therapies, and rooms. Without them, our spas would be nothing but empty rooms and enticing menus. Our people bring value.
Unfortunately, sometimes we’re going to come across an employee who brings less value and even costs your business in revenue, some of it measurable, some of it less quantifiable. There are a few types of employees who cost you, including the disengaged employee, the underperformer, and the troublemaker.
Let’s take a look at these three spa employees who cost you money, why, and what you can do about it.
The disengaged employee
A disengaged employee is someone who doesn’t enjoy their work, does the bare minimum, and is unlikely to recommend your company’s products and services, or your company as a place to work. They’re not your evangelists and may even be your detractors — while you are paying them.
Research by Gallup shows that productivity among highly engaged teams is 14% higher than that of teams with the lowest engagement, and that disengaged employees cost their company the equivalent of 18% of their annual salary. Gallup and the Queen’s School of Business also found that disengaged workers logged 37% higher absenteeism, 49% more accidents and 60% more errors than engaged employees.
Disengaged employees won’t go above and beyond to create a memorable or transformational guest experience, they don’t inspire guest confidence and they can affect the mood and performance of other employees.
Research by People Metrics has also found that highly profitable companies have 50% more engaged employees versus unprofitable companies; and teams with high levels of engagement sell over 20% more than teams with low engagement.
Disengaged employees are more likely to leave or job hop, and the cost of employee turnover is high. One study found it to be, on average, around 40% of an employee’s salary, broken down as follows:
Cost of lost business due to disruption
Unused vacation payout
New employee recruitment and training costs
Cost of new employee errors
A subset of the disengaged employee is the job hopper. This person may already be looking for their next job as soon as they start with you. Avoid this by looking at tenure in past positions and, if these are short and many, ask questions.
Manage your employee engagement by being engaged yourself. Check in with your team and identify and address issues early, before they become a bigger problem.
You want every team member to have a great work ethic and to go above and beyond, but reality is that this doesn’t always happen. Underperforming may be a by-product of disengagement or it may be the result of insufficient training, anxiety, or something else.
One report found that underperforming staff can cost a business up to 400% of the employee’s annual salary. That would mean that an underperforming employee making $50,000 a year can cost a company $200,000. That’s a dramatic estimate, but the cost of an underperforming employee is still big. Team members who don’t meet sales or performance goals need to be coached or redirected.
Spa performance also means making guests happy, keeping things clean, sanitized, and orderly, and being informed and prepared to treat guests before they arrive. It means knowing customer preferences, meeting and exceeding needs, problem solving, and finding creative ways to delight customers.
If team members are not making guests happy that will negatively impact your bottom line. Dissatisfied customers won’t necessarily complain. They just won’t come back. And they can leave negative reviews which will deter new customers. Ninety-three percent of consumers say that online reviews influenced their purchase decisions and less than half of consumers would consider using a business with fewer than four stars.
The underperformer should be offered training, coaching, and encouragement before more drastic options are considered.
Do you have an employee who likes to start trouble by gossiping, antagonizing others, or being difficult in some other way, resulting in an uncomfortable or unhappy work environment and conflict? What does this person cost you?
Workplace conflict can lead to a toxic environment, employee attrition, absences, and more. An analysis published in May, 2021, estimates that workplace conflict costs UK employers £28.5 billion every year, or just over £1,000 (US$1382.77) for every employee. So, for a business that employs 30 people, that’s £30,000 or (US$41453.10).
The report estimates that 9.7 million UK employees experienced conflict in 2018/2019 and lists the following as the biggest annual costs to employers:
£11.9 billion from resignations
£10.5 billion from disciplinary dismissals
£2.2 billion from sickness absences
Not mentioned is the potential revenue loss from the impact of conflict and a negatively charged environment on guest experience. The atmosphere in your spa matters. If a guest senses conflict, frustration, or anger in the air, this will impact their satisfaction, which in turn impacts operations and revenue.
The troublemaker should be handled with compassion, understanding, open communication, and a firm hand. Sometimes people have no idea of the impact they have on others. Always offer the opportunity to change before taking further steps.
What to do about employees who cost you money
Finally, some stats on the cost of a bad hire:
- According to The U.S. Department of Labor, the cost of a bad hire can reach up to 30% of the employee’s first-year earnings.
- Based on a second-level manager earning $62k/yr a year who is terminated after 2.5 years, The Undercover Recruiter estimates that a bad hire can cost $840,000 in expenses.
- CareerBuilder reports that companies lose an average of $14,900 per bad hire.
In an ideal world we would all avoid making a bad hire, but in the real world it happens. Experts like to go on about the cost of a bad hire, but this is never measured against the cost of not hiring anyone at all, which isn’t usually an option.
If you’re dealing with one of these employees, lean on the resources available to you. Use your software management system’s reporting to learn where gaps are and also to find out where your employee excels. Perhaps a therapist who lags on retail sales more than makes up for it by being a customer favourite who is often requested.
Be patient and offer coaching and training. Try to turn the situation around with support. Look at your management style and ask yourself if you are partly responsible for the situation — be honest in your answer. Ask yourself what you can change.
Weigh the cost of trying to fix the situation against the cost of hiring and training someone new. You might have to let a person go, but this should be a last resort.
Lastly, view these resources on managing spa employees: