Exploring Employee Turnover and Retention in the Cannabis Industry

Are you ready for a swift, yet enlightening journey through the maze of employee turnover in the cannabis industry? We promise you an illuminating and insightful expedition that uncovers the reality of high turnover rates and their impact on businesses within this burgeoning industry. We unpack the tangible costs associated with high employee turnover, including the burden of recruitment and training, the sting of lost productivity, and the irreversible loss of invaluable industry knowledge. Drawing parallels with other fast-paced sectors, we shine a light on why the cannabis industry is grappling with skyrocketing turnover rates and how businesses can navigate these testing times. 

As the cannabis industry matures, keeping employees around for the long haul has become the linchpin of business success. In this episode, we delve into the crucial topic of employee retention, exploring the powerful role of effective management, competitive compensation, professional development opportunities, and an overall inclusive work environment.  We round off the discussion by examining the unique challenges and opportunities within the cannabis industry, offering businesses pragmatic strategies to keep their employees engaged and committed. So buckle up for a productive ride through the intricate landscape of employee turnover and retention in the cannabis sector.

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Transcript

Speaker 1: 0:55

Welcome back to another episode of Can Strategy elevating your cannabis business venture. Today, we're exploring a topic that's on the tip of everyone's tongue, but often shrouded in a haze of misconceptions Employee turnover in the cannabis industry. As this vibrant sector continues to flourish across various nations, there's an underlying challenge that many businesses are grappling with a surprisingly high rate of employees clocking in and out for the last time. But before we light up this discussion, let's first unpack what employee turnover really means and why it's such a burning issue, not just in the world of cannabis, but in the wider business landscape as well. So get comfy and take notes. What exactly is employee turnover?

Speaker 1: 1:39

Employee turnover refers to the rate at which workers leave an organization and are replaced by new employees. It can be either voluntary, such as resignation or retirement, or it can be involuntary, such as dismissal or layoffs. In 2018, the US Bureau of Labor Statistics noted that the majority of turnovers were voluntary, with employees choosing to leave their jobs. As we talk about employee turnover, imagine it like this it's the rate at which employees leave a company and are then replaced by new hires. Think of it like a revolving door at a busy office building. People come in and stay for a while, but then many leave, thus making space for new faces In the world of business, especially in industries like cannabis. This can be a pretty big deal because it costs time, money and resources to find and train someone new every time someone else decides to walk out of that metaphorical revolving door. So, in essence, high turnover is not the best sign for business performance. We'll discuss the reasons behind it in a bit, but first let's understand how exactly employee turnover rate is measured. Employee turnover rate is typically calculated as a percentage. The formula is as simple as the number of departures divided by the number of average employees times 100. For example, if a company has an average of 100 employees and 15 employees leave during the year, the turnover rate is 15%, because the equation would pan out to be 15 divided by 100 times 100. One reason the discussion of employee turnover rates fall on deaf ears with cannabis business executive teams is that they look to the profit and loss statement to get their information and the cost of employee turnover isn't usually given its own line item. But the truth is that high employee turnover comes with high costs to the business. It's estimated that the cost of replacing an employee can range from one half to two times the employee's annual salary. These costs come from recruitment, training, loss productivity and more.

Speaker 1: 3:35

Let's imagine you're running a cozy cannabis consumption lounge. Now you've noticed that your staff is changing faster than the seasons. This isn't just a minor inconvenience. There are real costs and impacts associated with this constant change. First up is recruitment costs. Think about it. Every time someone leaves, you're spending money on ads to attract new talent, spending money on the hours it takes managers to conduct interviews, and maybe even taking on the expensive background checks and agent card fees. Then there's training costs. Every new barista or staff member you hire, they're not going to magically know how to make that special cannabis infused latte your regulars love. Training takes time and resources. It's like teaching someone the perfect grind and brew method all over again. Funny enough, training happens to be something that many cannabis businesses don't seem to want to take the time or resources to do. Well, yet also don't figure out how to decrease their turnover rate, thus compounding the problem. But that's for another episode.

Speaker 1: 4:34

On to the next cost of high employee turnover the dreaded loss of productivity. New employees may be eager, but might not be as quick or efficient right off the bat. They need some time to adjust. It's like having a newbie try to roll a joint for the first time. It might take a few tries before it looks right.

Speaker 1: 4:50

High turnover can also lead to decreased morale among your remaining staff. If people keep leaving, those who stay behind might start wondering if they should be looking for a new opportunity as well. This can create a sense of unease or instability. It's like seeing your favorite coffee shop change management every month and therefore never seeing that friendly face each morning who knows your name and your order. It feels off. Then there's the cost of lost knowledge. Every person who leaves takes away some of the business with them. Maybe they had a special rapport with customers, or they knew the ins and outs of the inventory, or it was their relationships with vendors that got you the best deals. It's like losing a secret recipe. Lastly, there's the risk of overworking remaining staff members. If someone leaves and there's a gap before you find a replacement, guess who is picking up the slack? Your existing team, and this can lead to burnout and resentment. Are you paying them more to do more work than they were hired to do? Probably not. It's akin to asking your car to drive without ever pulling over to a gas station, it's bound to stop functioning eventually. Hopefully it is clear by now that high turnover is a lot more than just saying goodbye and hello to employees. It touches your business's wallet, productivity and overall vibe.

Speaker 1: 6:06

In the cannabis business, like in any other business, keeping that staff door from revolving too quickly can be key to revving up success. To even try to start reducing costs by reducing turnover, we first must understand why the turnover rates are what they are. In the cannabis industry. Reports have been suggesting that for some roles, especially those frontline jobs like bud tenders, we're looking at a turnover rate soaring up to 60% or even higher. Yep, you heard that right. That is pretty high, even when you compare it to other fast-paced industries such as retail. Generally, retail businesses experience an average turnover rate of 60% to 70%. Thus, dispensaries align closely with this broader retail benchmark. However, the elevated turnover in retail is often influenced by seasonal employment, young high school-aged employees and temporary roles. Those factors aren't prevalent in cannabis dispensaries.

Speaker 1: 7:00

To truly grasp the reasons for the high turnover rate in cannabis, despite the absence of some common turnover triggers, we must delve deep into the intricacies of the cannabis industry and its workforce dynamics. There are some unique challenges that are making that staff revolving door spin a little faster. First up is regulatory challenges. This industry feels like it's riding a roller coaster sometimes. Laws and regulations are constantly changing and, depending on where you are, today's legal might be tomorrow's gray area. This unpredictability can make folks nervous about their job security. Imagine going to work every day not knowing if a new regulation might make your position obsolete or completely change the rules of your role. It may not be the fact that the regulations change so much, as it is how leadership handles communicating the impact of those regulatory changes to the employees. Most leaders aren't skilled at managing change, so every time a regulatory change occurs it feels like a sudden shockwave rather than a well-thought-out operational adjustment. Listen to episode 17 to learn more about how to manage change in cannabis business.

Speaker 1: 8:07

The next thing oiling the hinges on the staff revolving door is the rapid industry growth. You know when a kid gets home after trick or treating on Halloween and binge eats all their candy, only to wind up sick to their stomach and moody from their sugar crash. That's kind of like how the cannabis industry is growing. Companies are sometimes so eager to fill roles that they might rush hiring decisions without ensuring a good fit. If the cannabis industry was a chess game and your company was a player, this unrefined approach to hiring would be like making moves in the game without looking at where the pieces were headed. It's not a great strategy for winning the game.

Speaker 1: 8:42

Next up in the causes of cannabis business turnover rates is safety concerns. Working with cannabis isn't just about rolling joints and having a good time. Employees might be dealing with potent chemicals, potentially dangerous tools and equipment or, given the cash-centric nature of the business, they might face higher threats of crime. There are genuine risks involved and if these risks aren't taken seriously by an employer, it can cause employees to flee due to feeling unsafe. Lastly, there is the issue of lower wages. Especially for those just starting out in the cannabis world, the pay might not always be green enough, if you catch my drift. When other industries are offering more competitive salaries, it can be tempting for workers to jump ship. Dispensaries have the benefit of being able to allow employees to accept tips, which can be seen as an added benefit to employees without being an additional expense to the business.

Speaker 1: 9:31

While the cannabis industry surely has its highs, there are challenges making it a bit of a wild ride for employees. As the sector matures, one can only hope these bumps smooth out, ensuring a more stable journey for all involved. Until that happens, how can cannabis companies reap the rewards of increased employee retention? If you're a leader in the cannabis industry, lean in closer. According to a Gallup poll, 75% of the reasons employees quit could be prevented by employers. This indicates that management practices play a crucial role in retention. We're going to chat about how you can keep your All-Star team sticking around for the long haul. Let's be real Money talks and competitive compensation can motivate employee loyalty.

Speaker 1: 10:14

Now, I know budgets can be tight, especially in the aggressively taxed cannabis industry, but here's the thing If you want the best company, you need the best talent. And if you want the best talent, you've got to make sure your paychecks reflect that. Otherwise, it's like trying to buy top shelf cannabis with pocket change you get what you pay for. Offering salaries that match or even surpass industry averages is a surefire way to make employees think twice before looking elsewhere. Before you scoff at this being an idealistic expectation, hear me out. Consider that your business might have an over-hiring problem because your management is not hiring the right people for the right roles. Then those hired don't receive adequate training. And now you are, knowingly or unknowingly, stuck in a never-ending cycle of trying to get quantity to make up for the lack of quality.

Speaker 1: 11:03

Here's a proposed alternative Imagine keeping payroll costs the same and reducing employee turnover rates, which then results in reducing the incurred costs of turnover, all because you implement improved processes for hiring which result in a higher quality of talent on payroll, demolishing the practice of a need for hiring for quantity. Speaking of quality, this brings us to the next effective method for reducing turnover Professional development. Investing in your team's growth isn't just good for them. It's good for your business too. Imagine you're a barista and you're given the chance to become a master coffee roaster. That's the vibe we're going for. Give your team incremental opportunities to learn, grow and climb that cannabis ladder. It'll boost morale and make them feel valued and optimistic about their future with the company. This next employee turnover reducer should be common sense, since it speaks directly to a basic human need, but somehow companies still miss the mark here.

Speaker 1: 11:58

A safe and inclusive work environment is key to motivating people to stick around. Just as nobody wants to be stuck in a toxic relationship, nobody wants to work in a place where they don't feel secure or accepted. That's basic. This has to do with both physical and mental security and acceptance. Companies can cover the physical safety element by complying with OSHA, having a top tier security system and plan and not allowing violence in the workplace. The mental security and safety element requires having managers with good leadership skills, fostering an inclusive environment that allows people to ask questions and provide feedback, and building a positive company culture.

Speaker 1: 12:36

Benefits and perks also commonly do the trick of motivating an employee to stay. Health benefits, bonuses, extra days off and maybe even a discount on products these are the things that sweeten the deal. Think of the extra toppings on your favorite pizza. They might not be the main draw, but they sure make the whole thing a lot more delicious. And last but certainly not least, never underestimate the power of open communication. Employees should feel they can go to their superiors with concerns, ideas or just to chat about the newest product on the shelves. They should also be able to trust that if there was a concern with their performance or an upcoming decision that would affect their day-to-day work, then leadership would make sure to communicate with them fully and clearly about these things. Open communication lays the foundation for a positive, transparent and trusting work environment. A we can see. From ensuring competitive compensation to fostering a culture of professional development, from creating a safe and inclusive workspace to offering tantalizing perks and benefits.

Speaker 1: 13:34

The avenues to enhance employee retention are varied and promising. If there's one overarching takeaway, it's this Skilled leadership is linchpin that holds everything together, because it is only with skilled leaders that the implementation of these solutions is possible. As leaders in this industry, or in any sector for that matter, it's essential to understand and act upon the fact that the very essence of a thriving business lies in its people. By investing in them, nurturing their growth and ensuring their well-being, we are not just building teams, we're building legacies. Alright, as we wrap up this dissection of employee turnover in the cannabis world, let's reflect on this.

Speaker 1: 14:16

Cannabis industry's instability and rapid growth have undeniably presented hurdles, especially when it comes to employee retention. But hey, every challenge is an opportunity in disguise, right? If you found this episode insightful, give that subscribe button a click and share the episode with a friend. Knowledge is always better when shared. And if you're in the cannabis business, whether you're a small startup or a booming enterprise, and you're looking to navigate these waters effectively, don't hesitate to reach out to Cannes Strategy, your go-to cannabis business consulting firm for all your cannabis business development needs. Until next time, keep growing, keep learning, and here's to making the cannabis industry the best it can be.