Here’s the good news: according to Leafly’s 2020 Jobs Report, the legal cannabis industry is growing leaps and bounds above any other industry in the US in terms of job creation.
The bad news: incredibly high turnover rates are causing cannabusinesses to hemorrhage cash and other resources.
By addressing the turnover problem head-on, employers in the cannabis space can reduce their labor and training costs substantially while improving customer experience and retention. And that translates directly into increased revenue.
Here’s the breakdown:
The Job Market
According to the Leafly report, the cannabis industry added 33,700 legal jobs in the United States in 2019 — a 15 percent increase over the course of the year. That brings the total number of people employed in the industry to 243,700 across 33 states and DC (excluding illegal jobs and jobs that focus solely on the CBD market). That’s a 100 percent increase since the company began counting four years ago
As other states continue to join the legal cannabis fold and expand access to legal marijuana, that number is only expected to grow. In fact, the Leafly study projects 250 percent growth in the legal cannabis job market between 2018 and 2028 — a figure that is more than four times as high as potential job growth in any other industry (in second place is “Solar photovoltaic installers” with a 63 percent projected increase in demand).
On this front, congratulations are certainly due to the industry’s employers. The cannabis industry has delivered on its promise to create value for the communities it serves by adding millions-of-dollars in local revenue and driving job growth. Still, there is some work to be done on the employee retention side of things.
Despite (and perhaps even because of) those optimistic figures, the turnover rate at cannabis businesses is atrocious, meaning that individual cannabis companies are spending thousands of dollars every year to keep their businesses staffed by undereducated and low-producing employees.
The industry is learning the hard way that churning through people is a tremendous drain on revenue. It also takes the fun out of owning or managing a business.
Once you break the code and start to find the right people, and your company learns how to engage and challenge those people, you will wonder how you or anyone else ever survived in the old model. But, before you can change, you need to get clear on what the problem is.
The Turnover Situation
It’s a well-known fact that turnover in the cannabis industry is a problem, especially when it comes to entry-level employees like budtenders. And, as of late, employees at the top of the company ladder aren’t immune, either.
But what, exactly, are we looking at here?
According to a study of cannabis retail shops in Washington and Colorado by analytics company Headset, of all of the budtenders hired in Colorado in 2019, 44 percent were hired and left within the same year, and only 15 percent of employees that were with a company at the beginning of the year stayed until the next year.
In fact, according to that report, almost 60 percent of entry-level cannabis employees leave within their first two months on the job. And, since it takes about 90 days before a new employee can begin adding any real value to the company that employs them, this puts stress on businesses to be constantly hiring and training new team members who are unlikely to stay long enough to actually contribute to the company’s bottomline.
Why Employees Leave
It may be that the level of growth in the industry is actually helping keep turnover rates high. With so many cannabis businesses popping up as states grant more and more retail and medicinal licenses to sell cannabis, employees have the advantage when it comes to deciding who they want to work for.
The data from Headset also suggests that the stress of rapid growth can lead to burnout and, therefore, higher turnover rates. The report shows that the lowest turnover rates are associated with stores that are experiencing a “medium” growth rate (between 20-40 percent growth), whereas stores with a “very-high” growth rate (40 percent) experience higher turnover.
There are, of course, numerous reasons why employees might leave a job that managers and business owners can do nothing about: employees move, school schedules conflict with work, people change careers, etc.
Still, according to the numbers, the vast majority of employees actually quit their bosses, not their workplaces. In fact, though 89 percent of managers (across all industries) say they believe employees leave for “more money,” 79 percent of employees in the US cite a “lack of appreciation” as their reason for leaving a position.
The Cost of High Turnover
So, what is turnover ultimately costing your business? The answer is probably “more than you realize.”
Since it takes the average employee a full three months to bring their value for your business into the black, unless you keep a new hire for at least 90 days, you can assume that the employee is giving you a negative return on your investment in them.
Then, there are the general costs of hiring and training, as well as the opportunity costs associated with lost revenue when you replace higher-performing and/or more experienced employees with someone green.
Estimates by the Center for American Progress put the median cost of replacing an employee at around 21 percent of that employee’s annual salary, though bringing on higher-level employees can cost you as much as 213 percent of their salary. And, according to estimates made by the Society for Human Resource Management (SHRM), bringing a new employee on board can cost between 6 and 9 months of the employee’s salary.
Even using the low-end figure of 21 percent of salary to replace an employee, this means that you’ll be spending the equivalent of one employee’s annual pay for every five that you hire, whether or not those employees ultimately decide to stick around.
For a budtender making an average salary of $32,240, that means you can expect to spend somewhere between $6770 and $16,120 just to get someone on board. For a General Manager who makes $110,000 per year, that translates to between $23,100 and $55,000 on the low end of the cost spectrum. And those are figures that will repeat for each and every one of the 60-plus-percent of employees that leave your business each year in search of greener pastures.
How to Reduce Turnover at Your Business
According to data, employees want recognition for their contributions to your company even more than they want financial incentives and rewards. This means that a more hands-on management style can actually be all it takes to keep people on your team longer. And, believe it or not, employees appear to crave negative feedback even more than positive feedback!
But, why is that, and what does this tell us? Essentially, it means that employees want to know where they stand in your eyes, they want to know what is expected of them, and, whether the information they are getting from managers about their performance is positive or negative, having that understanding contributes to their overall well-being and (of course) their engagement on the job.
That said, here are a few data-driven ways to reduce turnover at your business:
Use a Structured Onboarding Process
How are you training and welcoming new employees to your company? If your answer is anything like, “on the fly,” “sink or swim,” or “trial by fire,” you’re likely doing yourself and your business a disservice. Instead of throwing your new employees to the wolves, set them up for success on day-one by using a structured onboarding process.
According to SHRM, the chance that an employee will stick with your business for three years increases by 58 percent when you incorporate a structured onboarding process. Organizations that utilize structured onboarding processes also see 50 percent greater new-hire productivity.
Want to see what a quality structured onboarding process looks like? Check out the checklist in this free Hiring Guide by CEDR HR Solutions.
Provide Better Training
Not all retail customers are bud experts. In fact, a growing number of adults of all ages are completely new to cannabis. More informed budtenders can make better recommendations to new patients and customers, which will help them build lasting relationships with those customers early in their foray into cannabis. Not only is that a recipe for success for your employees, it’s also the secret sauce that keeps customers coming back to your business.
Only 55 percent of cannabis employees report having any formal product training, and less than a third of those with formal training have any training related to medical cannabis use. A whopping 94 percent of budtenders are making cannabis recommendations for the treatment of medical conditions, however. Therefore, better training for your team might be all it takes to give your business an edge over its competition.
A number of cannabis training programs are popping up in legal states, including at least one that’s actually being offered at an accredited Seattle college. Once trained, you can expect your budtenders’ sales to see a boost, and — surprise! — being successful makes people happy.
Invest in Engagement
Your customer-facing employees aren’t just the people that ring customers up at the register. On a day-to-day, one-to-one basis, those employees are the face of your brand to every customer they interact with. And there are far too many stories about how bad budtender interactions have turned customers away from a brand for good to deny the truth in that statement.
Not only have happy employees shown to be more productive than unhappy employees, but they also make more sales and cause companies to be more profitable. Plus, a recent study demonstrates that employee happiness actually causes profitability and not the other way around.
And, in case you were getting worried, engaging your employees doesn’t have to come down to a measure of dollars spent.
Learn how to give both positive and negative feedback.
It turns out that the majority of employees want more feedback from their managers even more than they want more money! Employees even tend to have a favorable view of negative feedback as long as it’s given in an appropriate way.
Whether it’s congratulatory or redirective, employees want feedback that is designed to inform them, build them up, and help them do better at their jobs. The sooner you learn how to give that type of feedback, the sooner your losses due to turnover will decrease.
There is also an unquantifiable component that you should consider, and that is the currency measured in terms of job satisfaction. Imagine your workplace with happier and more productive employees and a better bottom line. Build your feedback skills and those of your managers and watch what happens.
The bottomline for you: happy employees create happy customers, and happy customers come back, which makes for very happy business owners.
Want more of the kind of expertise that created this guidance on engaging your employees? Download The Manager’s Playbook: Your Company Culture as a Management Tool to find our free Core Values Worksheet and other helpful tools for cannabis employers!