What if you had to write a personal check every time a worker departed from your employment? How long would it be before you were bankrupt? My guess is not that long.
In a recent Manpower survey, 86% of respondents indicated they were actively seeking new job opportunities. I imagine some of these people are working for you. Still think employee turnover is just part of the cost of doing business?
While companies know that replacing an employee costs considerable time, energy, and lost productivity, few can put a dollar figure on the actual cost. Lack of hard data means investments in retention and recruitment programs get placed on the back burner, or efforts are made to solve the wrong problem, thereby resulting in a continuous outflow of money. When it comes to employee turnover, here’s what you must know.
Your mileage may vary. If you’ve looked at the cost of owning a car lately, you’d know that it varies depending on the type of vehicle you are driving as well as where you reside. Only a fool would buy a car without running the numbers to ensure he or she could afford what is, for most, a large investment.
Yet employers make huge investments when hiring, with little thought to what it costs when things go awry. Estimates for the cost of employee turnover for a single position range from 30% of the yearly salary for hourly employees (Cornell University) to 150%, as estimated by the Saratoga Institute. The shocking truth is that employee turnover costs vary significantly. How is this information helpful to you?
Why use estimates with that much variance when you can calculate the exact cost of employee turnover for your organization? Selecting one of these estimates is certainly easier, but is that any way to run a business? You can use my free employee turnover calculator to determine how much of an impact unwanted employee turnover is having on your bottom line. Do so before making your next hire.
Most companies don’t have a retention problem. They have a hiring problem. At some point in your life, you’ve probably gone into your doctor’s office and told her you were suffering from a particular disease based on your symptoms and the intense research you conducted on WebMD. Most likely you were surprised to learn that you completely misdiagnosed the situation.
The same thing happens in business. Clients contact me because they’re feeling the pain caused by high employee turnover. We work together to determine the root cause so the right prescription can be administered to relieve the pain. More often than not, the problem is related to hiring.
In one instance, my client was recruiting at Ivy-league schools for entry-level sales personnel. They did quite well getting candidates to agree to come work for them. Right at about the nine-month period, after they had invested heavily in the training of these people (at least 40K per employee), most resigned.Acceptance into graduate school was the most common reason they were fleeing.
The following year, we completely changed the recruitment strategy, which included recruiting at schools where a sales job with a great company was considered a step up, as opposed to a place to rest your weary feet on the way to something else. This change resulted in a 50% reduction in sales turnover, and yielded an additional $2M to the bottom line on an annual basis.
Lost knowledge is lost forever. When an employee leaves, he takes his knowledge with him. Do you even have a clue as to what some of your employee do? How many of your employees have their jobs documented well enough that someone could figure it out?
You’re already doing your own job and maybe even someone else’s. The last thing you have time to do is to learn a new job. Are you cross training your people? Are you taking special care of those people you’d really miss if they went away tomorrow?
The impact of employee turnover can be shocking, but it won’t be for those in the know who do something to prevent it.
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