True Cost of Employee Turnover
Our most valuable assets, or our biggest cost?
How many times have you picked up a journal to read a CEO talking about why their company is as successful as it is. Nine out of ten times the CEO will state the secret to success as being the employees.
We would love to ask those same CEOs about the companies employee turnover rate. It is surprising how many companies don’t know the answer to that question. If employees are the most valuable asset, why are you not tracking turnover rate? If you are not tracking turnover rate, you are not tracking a vital cost factor, and an amazing tool to improve your current success
How much does it cost your company every time an employee leaves?
We are going to throw some numbers around, and you are going to think they are high. Rest assured that once you start adding up items that you didn’t consider before, you will realize these numbers are realistic, and you will be shocked!!!
Here are two cost examples from the internet.
(Hiring+Onboarding+Development+Unfilled Time)*(number of employees*Annual Turnover %) = Annual Cost of Turnover
Let's say you have a 100 Person Company, and you lose 10 people per year.
Cost of Hiring is $15,000
Cost of Training = $10,000
Learning and Development = $10,000
Opportunity cost of unfilled role = $25,000
Your annual cost of turnover is $600,000.
The number is shocking, so let's look at example 2.
This study states the cost is about 16% for a high turnover, low salary position. (many warehouse positions out there)
For example, you have a worker making $25,000 per year, the turnover cost will be $4000 per employee. This cost doesn’t include the above noted costs of hiring , training, or productivity loses. Once those costs are added, we are back up to the total cost of example 1.
As you can see, these are not small numbers. So the question must be asked, why do so many people ignore these costs?
One would hope that the answer is that companies are just not aware of the cost. I know that if I walked into any company out there and told them I can save them $120,000 a year, and all we had to do was reduce employee turnover by 20%, people would be lined up at my door.
What can be done:
Take away barriers that cause employees issues. These barriers are most likely causing you efficiency issues as well
Create a system for employee feedback
Use proven retention strategies, not guess work like handing out a gift card every time someone does something you like
Conduct Exit interviews
Benchmark your employee retention rate
"Progress Demands Change"