In an effort to cut costs, apartment firms have taken steps such as centralizing procurement, submetering utilities and implementing risk management programs to help reduce insurance premiums. But many firms are overlooking the tremendous savings potential available by reducing employee turnover rates.

From a retention perspective, the industry has enjoyed good times recently. In fact, final total employee turnover rates for 2003 are expected to be at their lowest level since 1998. According to NMHC's 2003 Compensation and Benefits Survey, the average total turnover for property management positions was 50.5%.

But the declining average rate masks the wide range of turnover rates among individual firms. Firms at the lower end of the scale have higher total turnover than top performers. The turnover rate at the 75th percentile level was 54.5%, while the 25th percentile level was 33.5%.

The costs of turnover, such as lost productivity, training and recruiting, are well known, but a closer look at industry figures indicates the magnitude of bottom-line savings that can be generated by reducing turnover. Compare two hypothetical firms, both with 100 employees in each of five key positions. One has turnover rates that match the highest quartile of companies responding to the most recent NMHC compensation survey; the other firm is in the lowest quartile. The chart below suggests that the high-turnover firm could save $922,410 a year in salaries for maintenance technicians and almost $1.5 million for regional property managers through an employee retention program.

Employees who leave within the first 90 days account for a substantial portion of apartment firm turnover. One reason: hiring decisions for historically high-turnover positions is often conducted at the property level with little input from the corporate human resources office. Successful firms have standardized the interview process by specifying interview questions and using candidate profiling. Hiring managers also receive training in interview skills.

Ways to Combat Turnover

NMHC research shows that “lack of either real or perceived career opportunity” is by far the most common reason for voluntarily leaving an apartment firm. Forward-thinking firms are developing customized career paths for on-site and regional managers that include training and intermediate and long-term goal setting. These firms are identifying internal roadblocks to career advancement. Corporate human resources departments are encouraging new managers to identify employees for promotion or alternative growth opportunities.

Promotion is not always the answer to retention. Not every experienced employee has the skill set or interest to manage a property, so many firms are finding other career growth opportunities for these individuals. For example, some are allowing experienced, long-serving employees (such as administrative, maintenance, and leasing staff) to train newer employees or to help “reality test” new technologies and procedures before they are implemented.

Telling the Pay and Benefits Story

“Pay and benefits” is the second-most prevalent reason for voluntarily leaving a job, with 30% of exiting employees citing that as their reason for leaving. In an effort to reduce that number, some firms are recruiting employees who are more likely to find their overall benefits package attractive. For example, subject to the conditions of applicable law, firms might emphasize the health benefits to elderly employees.

Similarly, firms might tout the potential bonus income that leasing professionals make to students who are more motivated by pay. To rein in escalating health care costs, some firms use outside experts to analyze how employees are using the health plan so they can suggest future tradeoffs in plan design that will not adversely affect retention.

Firms also are turning to new technologies to free-up on-site managers. This includes software that screens residents, automates rent pricing or integrates property management duties. These technologies can automate tasks such as collections that suffer most during employee turnover.

Even taken together, intelligent hiring, elevated career opportunities, well-promoted benefits and enhanced corporate support will never reduce employee turnover to zero. But just a 5% decrease in turnover can improve a company's competitive posture vis-à-vis its peer group.

Elizabeth Feigin Befus is a senior legislative analyst for the Washington, D.C.-based National Multi Housing Council.

THE COSTS OF EMPLOYEE TURNOVER

Position Lowest Quartile Total Turnover Rate Highest Quartile Total Turnover Rate Annual Total Turnover Differential* Position Total (NMHC Survey National Avg.) Differential Cost for High Turnover Firm1*
Maintenance Tech 23.2% 56.5% 33.3 $27,700 $922,410
Leasing Consultant 44.8% 81.7% 36.9 $26,000 $959,400
Assistant Property Manager 32.7% 56.6% 23.9 $31,100 $743,290
Property Manager (<300 units) 22.4% 45.5% 23.1 $37,100 $857,010
Regional Manager 14.3% 33.3% 19.0 $78,900 $1,499,000
*Per 100 employees
1Assumes that the cost of re-staffing a position is equal to one year's total compensation for that position, which is conservative when compared with many HR experts' assumptions.