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Page 18 — Property Management Quarterly — May 2015
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I n early March, the Apartment
Association of Metro Denver
published the results of a 2014
poll regarding on-site employee
turnover. The results were stag-
gering. Of the 26 companies surveyed,
which collectively represent 67,987
multifamily units in Colorado, the
average employee turnover for on-site
teams was an exorbitant 35.9 percent.
This report, while highlighting
a major problem in our industry,
also serves as a signpost to direct
multifamily owners and operators
toward incredible untapped value.
By decreasing employee turnover at
the site level, apartment owners can
directly and positively impact net
operating income in an unparalleled
way. And they can do so without
spending a penny.
Employee turnover at the site has
direct and indirect consequences for
property NOI. Mis-hires and employee
turnover can cost a company up to 10
times the employee’s salary in hard
and soft costs, according to Bradford
D. Smart, Ph.D., in his book, Topgrad-
ing. If this statistic is accurate, that
means that every $50,000 employee
you lose at your property could cost
the property $500,000.
While the statistic may be hard to
believe at first glance, once you close-
ly examine how employee turnover
affects a property, you can start to
accept its likely accuracy.
First, you must consider that turn-
over requires training a new staff
member. All the hours a new employ-
ee spends training, and the hours
the remaining staff spends 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
are not followed
up on, and vendor
oversight and direc-
tion can suffer.
Further, the new
employee lacks
specific property
knowledge, which
can harm property
credibility as he
interacts with cur-
rent and prospec-
tive residents. All of
these deficiencies
in operations ulti-
mately result in decreased demand
for the property.
Second, the decreased demand can
be exacerbated if the situation is bad
enough to cause online ratings to suf-
fer. Lack of call backs, poor mainte-
nance response times and a deficient
curb appeal can damage a property’s
online reputation, which is 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 turnover costs at best, and
increased vacancy and lower rental
rates at worst.
Here are a few strategies to help
limit employee turnover. 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 to 90 days to decide if
they are the right long-term fit. If cer-
tain employees are not the right fit for
the property, 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, men-
tor 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 mem-
ber leave the property (for promotion
or otherwise), the turnover is as mini-
mally disruptive as possible.
Third, pay your employees competi-
tively.Yes, you must focus on limit-
ing expenses to keep NOI high, but
employee salaries are not the place
to skimp. Even a 5 percent increase
in pay at another property could be
enough to lure away a strong employ-
ee, so know where your pay stands
relative to the competition and stay
competitive to make sure that money
doesn’t lure staff away.
Fourth, and most important,
employ a people-centered manage-
ment approach.While entire courses
of study are dedicated to people-
centered management, in a nutshell
this approach places great value on
empowering and building up staff
while supporting them and training
them as and where 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.
While the need to limit turnover is
and always has been important, with
turnover levels at 35.9 percent, the
need has reached a critical level. It is
therefore now more important than
ever to address the employee turn-
over problem once and for all.s
Christopher
W. Geer
CEO, Haven
Property Managers
& Advisors,
Superior
Management
Employee
turnover at the
site has direct
and indirect
consequences
for property
NOI.