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Solving the On-Site Employee Turnover Problem

In March of 2015, the Apartment Association of Metro Denver published the results of a 2014 poll regarding on-site employee turnover. The results of this poll are staggering. Of the 26 companies surveyed, the average employee turnover for on-site teams was 35.9%.

This report, while highlighting a major problem in our industry, also serves as a signpost to direct multi-family owners and operators toward incredible untapped value. By decreasing employee turnover at the site level, apartment owners can directly and positively impact NOI in an unparalleled way. And they can do so without spending a penny.

Employee turnover at the site level has both direct and indirect consequences for property NOI. Bradford D. Smart, Ph.D., argues in his book, Topgrading, that mis-hires and employee turnover can cost a company up to ten times the employee’s salary in hard and soft costs. If this statistic is accurate, that means that every $50,000 employee you lose at your property could be costing the property $500,000!

While the above statistic may be hard to believe at first glance, once you more closely examine how employee turnover affects a property, you can start to accept its likely accuracy.

Why it Matters

First, turnover means a new staff member will need to be trained. All the hours a new employee spends training, and the hours the remaining staff spend training the new employee, are hours that are not spent operating the property. As a result, phone calls from prospects don’t get returned, maintenance items aren’t followed up on and vendor oversight and direction can suffer.

Further, the new employee lacks specific property knowledge, which can harm property credibility as they interact with current and prospective residents. All of these deficiencies in operations ultimately result in decreased demand for your property.

Second, the decreased demand noted above can be exacerbated if the situation is bad enough to cause online ratings to suffer. Lack of call backs, poor maintenance response times and a deficient curb appeal can damage your property’s online reputation—often the first place prospective tenants look to learn more about an asset. And if online ratings are suffering, you can be sure the property’s word of mouth reputation is suffering as well.

Third, and perhaps most important, staff turnover can negatively impact renewals. If there is a constant churn of staff at a property, tenants are deprived of the opportunity to build a relationship with property staff, feel less secure and less stable in their home and can become uneasy with their relationship to the property.

The result is tenants become less likely to renew their lease, especially at prevailing market rates. This creates higher turn costs at best, and increased vacancy and lower rental rates at worst.

What to Do

So, how can you limit employee turnover? Here are a few strategies to help you get started.

First, for new acquisitions, employ a strategy of maintaining the teams that are already in place when you take it over. New ownership disrupts the property enough; replacing the entire staff at closing only adds to that disruption. Instead, create a plan to retain current staff, while evaluating them over 60-90 days to decide if they are the right long term fit. If it turns out certain employees aren’t the right fit for the property, then make sure you take steps to minimize the impact of turnover by prepping your team to up-level their customer service during the transition.

Second, invest in training programs and promote from within. Studies show that employees want to grow in their jobs, so train your staff, mentor them and help them succeed. By promoting from within, you not only accomplish the goal of helping your staff grow professionally, but you also create continuity at the property so that when you do have a staff member leave the property, the turnover is as minimally disruptive as possible.

Third, pay your employees competitively. Yes, you must focus on limiting expenses to keep NOI high, but employee salaries are not the place to skimp. Even a 5% increase in pay at another property could be enough to lure away a strong employee, so know where your pay stands relative to the competition and stay competitive in your pay to make sure that money doesn’t lure staff away.

Fourth, and most important, employ a People-Centered Management approach. In a nutshell, this approach places great value on empowering and building up staff while supporting them and training them as needed. Adopting this approach creates staff who care, staff who are loyal and dedicated, and staff who stick with the property (and you!) for years and years.