What Every CEO Needs to Know About Workforce ROI with Mason Duchatschek

**SPEAKER_2** (0:04)
The Bliss Business Podcast, the show about empathy, connection, and consciousness in business. Today's episode is brought to you by Zero Company, your paid search, social media, and programmatic ad experts.

**Stephen Sakach** (0:15)
Welcome back to the show, everyone. Hopefully, I'll be staying with you. Yeah, everything throws up there for a second on me, but we'll see. But anyway, let's get rolling here. Turnover, disengagement, hiring mistakes remain some of the most costly problems in business. Gallup estimates engaged, disengaged employees cost US companies nearly 1.9 trillion each year. Yet, most CEOs react to these challenges instead of measuring them with the same discipline they use for finance or operations. So today, we are exploring what every CEO needs to know about the workplace and Workforce ROI and how to uncover hidden profit drains. Tullio, introduce our guest today.

**Tullio Siragusa** (1:07)
My pleasure. That's a lot of cheddar being lost out there for sure. So our guest today is Mason Duchatschek. I hope I did it right, Mason.

**Mason Duchatschek** (1:15)
You nailed it, Tullio.

**Tullio Siragusa** (1:18)
Mason is a best-selling author, workforce strategist, and is the founder and CEO of Workforce Alchemy. Mason created a decision support tool that helps CEOs expose hidden profit leaks tied to turnover, disengagement, and misalignment. His work has been featured in Selling Power, Entrepreneur Magazine, and The New York Times. He is co-author of People Matter Most and Inclusive Leadership, best sellers that highlight how workforce decision shape business outcomes. Mason, so excited to have you. Welcome to the show. We're looking forward to digging in and learning from you today.

**Mason Duchatschek** (1:57)
It's a pleasure to be here. Thanks for inviting me.

**Stephen Sakach** (2:00)
So Mason, let's get right to that. Where do most CEOs kind of unknowingly bleed profit when it comes to their workforce, and why do they not see it?

**Mason Duchatschek** (2:10)
Well, there's a lot of them, but I'm going to focus on the two biggest ones. Turnover and employee engagement. And the challenge is that they don't see this stuff because it doesn't show up on a P&L. Their accountants can't point it out, and the employees don't really want to say anything because everyone knows it's the messenger that gets shot. So how do you address the stuff? Well, let me just give you a couple examples. There was a, I was doing some research, and I found out that about, it costs about 16%. Let's just start on turnover, and then we'll talk about engagement. It costs about 16% of a person's annual salary to replace them. So it costs, if they're an hourly employee, if it is a salaried employee, you're looking at about 21% of their annual salary to replace them. And if it's an executive level position, you're looking at about 150 to 213% of their annual salary to replace them. So let's do an example for if it's an hourly employee, and they make $40,000 a year, then that's $6,400 per hiring mistake. You lose one of those at $6,400. If you lost 50 of them, that's $320,000 a year, just in turnover costs. You start going up to salaried employees. Let's say a salaried employee makes, your average salaried employee makes $65,000 a year. Every time you lose one of those guys, it's 21% of their salary, so you're talking about $13,650.
You lose 50 of those people, you're talking $682,000. Those are huge profit leaks that businesses aren't aware of. And honestly, I don't even think that's the biggest issue. I think employee engagement is even a bigger profit leak. And the reason I say that, you guys are familiar with the Gallup surveys. I saw one, I know there's a recent one out that makes the number even worse, but the last one I saw said that about 16.5% of the working population is actively disengaged, hostile, trying to cause problems. They can't stand their employer and they want to do damage. About 52% are disengaged. And what do I mean by disengaged? Sleepwalking through the day, coasting by, doing enough not to get fired. That leaves about 31.5% left that are actively engaged and trying to build the business. And you start doing the math on that. Let's just say that same $40,000 a year employee is going half-speed, cruising by doing enough not to get fired. If you're paying $40,000 and they're doing $20,000 worth of work, that's costing you $20,000 for an hourly employee, one hourly employee. You start talking about salaried employees that makes $65,000, cruising by at half-speed, you're losing $32,500 per employee that you let cruise by at half-speed. I had a client in Louisiana not too long ago, he had a payroll of about $10,000,000. And I asked him, I said, what is the discretionary effort of your average employee? And it was an exceptional company, so his estimates were higher than this. He said, Mason, I think about 60%. I said, so you're telling me you've got $10,000,000 in payroll, but your people are only going at 60%, so you're getting $6,000,000 worth of work for that. I said, that sounds like about a $4,000,000 a year profit leak. He's like, oh yeah. And I said, and we met that afternoon with his frontline supervisors, and I asked them the same question. The ones that were, now that was the owner, asked the frontline supervisors who are dealing with employees on the front lines every day, what do you think the discretionary effort of your average employee is? They said 35%.