What is the real cost of losing an employee?
- The expense of advertising, interviewing, screening and hiring a new employee.
- The training and management time required to on-board a replacement.
- Lost productivity resulting from a new employee taking one to two years to reach full
- Lost engagement and productivity of other employees who tend to disengage when they see high turnover.
- Customer service and errors because new employees often take longer and are less adept at solving problems.
- Investment in training totaling 10-20 percent of an employee’s salary over two to three
- The cultural impact that occurs when someone leaves the organization, and others ask “why?”
In spite of these compelling factors, the real cost of employee turnover often remains unknown. This is because most companies don’t have systems in place to track costs associated with recruiting, interviewing, hiring, orientation and training, lost productivity, customer dissatisfaction, reduced or lost business, administrative time, lost expertise, etc. Tracking of this sort requires collaboration among departments (HR, Finance, Operations); ways to measure these costs; and good reporting mechanisms.
“‘Me, too,’ is not a strategy” to attract and keep good workers, Reed said. No organization can copy a corporate culture template from a “best places to work” winner and expect it to produce identical results.”
“It’s well-known that employee turnover rates come as a high cost to companies, however very few discuss the true extended costs and the multiple ways that it impacts the business. It’s important that successful business not only find the best employees, but keep them engaged as well.”
“In short, turnover can be beneficial if it leads to the right individuals leaving and if it produces an organization that is more agile and better able to adapt to the rapidly changing business environment that most organizations face today. The key issue is not how much turnover occurs, but about who leaves and who stays!”
“You’ll hear people talk about the high cost of turnover, but when you try to press for the actual costs they don’t really know. It seems like a mysterious thing that people talk about. And it’s true–the costs are largely hidden.”
Best practices for employee retention
- Benchmark your employee retention rate
- Use proven retention strategies, not guesswork
- Don’t assume employees are happy (create a high-feedback environment)
- Implement a health benefits program such as a traditional health plan or defined contribution health benefits
- Provide different benefits for different employees (focusing on the high-value, expensive to replace employees)
- Conduct exit interviews