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Michael Spremulli on the high cost of turnover and what to look for when hiring in the cannabis space

Hiring the wrong people costs money.

The cost to replace an employee in a mid-management, sales, leadership or C-suite role ranges from one-third to two-thirds of the annual salary for the position. The more senior the position, the higher the associated replacement costs, said Michael Spremulli, founder of Asheville, N.C.-based Herbal Hire, a pre-employment screening company that helps cannabis businesses identify and select top-performing team members.
 
For hourly employees, the average replacement cost ranges from $2,000 to $3,000 per replacement. 
 
“This is a conservative estimate,” Spremulli said. “For some entry-level positions such as warehouse workers who need to be trained extensively on equipment and technology, the cost is closer to $7,000 per replacement.”

“Turnover costs are insane,” said Spremulli, who has worked as a corporate personality profiler for more than 20 years. “If employee turnover is exorbitantly high, you’re sending a ton of money out the back door. The damage can get astronomical if you have someone in the wrong role.”

Spremulli estimates it costs companies about $3,000 to replace an hourly employee — a number that can reach hundreds of thousands if not millions of dollars at the mid-management and executive levels. 

But there are measures any business — including those in the cannabis industry — can take to limit the churn rate of its employees, and it starts with implementing a hiring process. It’s important for each employee goes through the same screening process to ensure that everyone is on the same page — especially when it comes to compliance.

 

Michael Spremulli

“People often have more of a process in place when it comes to ordering lunch than when it comes to hiring a new employee,” Spremulli said. “Nor is there a formalized process when it comes to replacing the employee. You’ve got to be thinking about this strategically — if you have a 10-person company and one person leaves, 10% of your workforce is gone, that institutional knowledge is gone.”

Next, look at the core competencies of what the job requires. Every business, Spremulli said, has dominant personality requirements. 

“You would hope in medicine it’s people who are wired to put patients first,” he said. “In IT or computers you want curious and critical minds.”

In cannabis, that core trait is compliance — if your staff is not compliant and following your rules as well as state and federal rules, you’re inviting trouble into your organization. 

“You’ve got to adopt the mindset of cannabis being a very compliant industry,” said Spremulli, a self-described fan of cannabis in a state where it’s not yet legal. “If people do nothing else, they need to realize that’s the question that needs to be at the forefront.”

It’s also critical to do reference and background checks rather than giving a job to someone who applies just because they love weed.

While cannabis businesses can take a number of measures on their own to get the best people for the jobs they’re trying to fill, they also could hire someone like Spremulli to pre-screen potential employees. He creates questionnaires that take candidates about 90 minutes to complete online.

The assessment is designed to measure four core areas:

  • Cognitive abilities: Do you have enough mental horsepower to do the job?
  • Motivation: Are they driven to do the job? Are they excited to do the job?
  • Personality dimensions: How is the person wired?
  • Behavioral traits: How is this person going to show up every day? Are they going to be congenial or more assertive and aggressive?

Asking a variety of targeted questions and analyzing the data paints a good psychological picture of people, Spremulli said. The assessments often reveal characteristics that don’t come across during an interview.

While getting the right people for the job is important in any industry, it’s even more crucial in cannabis — if you’re employees aren’t adhering to the industry’s strict regulations, you could be in jeopardy of losing your license.

“The cannabis industry has so many things stacked against it to begin with, if you get the wrong people, it can be disastrous,” Spremulli said. “I saw an opportunity to serve an industry I like and help these businesses determine who is right for them.”

Want to learn more?  Spremulli will be participating in “Seven Deadly Hiring Sins in the Cannabis Space (and How to Avoid Them!)” panel at MJ Unpacked, which premiers Oct. 21-22 at The Mandalay Bay Resort and Casino in Las Vegas. 

MJ Unpacked is the first cannabis event of its kind, designed to help cannabis retailers, THC CPG brands, and accredited investors connect, collaborate, and access capital. The event will feature panel discussions among industry leaders; conference sessions that address retail and brand pain points; mixers for brands and retailers; investor pitches; bars and live music; and a concert benefiting restorative justice in cannabis.

Watch below to preview Michael’s session at MJ Unpacked. 

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