Studies by Hewitt Associates indicate that it costs Hudson Valley organizations 150 percent of an employee”™s base salary to replace them. Why is turnover so expensive? Among the expenses seldom considered are the costs of the employee who must fill in for the person who leaves before a replacement is found and the lost productivity while the departing employee was still in the position, but not fully concentrating on their job.
Turnover cost are incredibly high as you consider the forfeited costs of training provided and the cost of lost knowledge, skills, contacts, plus the potential cost of lost customers the employee may be taking with them to a new position or who will leave because of a negative impact on service. Consider hiring costs including advertising the position in newspapers and websites or an employment agency fee.
Don”™t overlook the value of your or your employees”™ time for arranging and conducting interviews and calling references. Time and money may be required to do personality-testing, skills assessment, background checks and drug screening. Once you hire the right person, training costs start all over again.
There will be new employee orientation.
Specific training such as computer usage, product knowledge, industry knowledge, and day-to-day duties.
Current employees must set aside their own work and break in the new person. Estimated costs? About 13 percent of the position”™s salary.
Remember that it will take months before the new employee performs as well as their predecessor. Experts say about 25 percent productivity during the first four weeks, 50 percent in weeks five through eight, and 75 percent from weeks nine through 12.
Could a well-thought out program to retain employees pay for itself? Leonard Bell, president of The Bells of Ethan Allen says, “We experience very little employee turnover and have had our designer, office and delivery staff with us for many years. An on-staff trainer keeps our designer”™s skills current with a weekly meeting.”
Bell continued, “In retail, complacency sets in unless goals are set and performance incentive pay is built in. Every month, performance is evaluated. We raised designer”™s commissions, contribute to the cost of employee benefits and reimburse designers for mileage doing house calls. A new building extension created an environment that is conducive for our designers to meet with their clients.”
Based on research by Success Profiles Inc., organizations can readily identify the practices that lead to the highest employee retention. Those with the highest employee pride had the lowest turnover. Turnover is significantly lower at firms that excel at having a stated set of values or guiding principles.
Joel Kurtzman, author of “Common Purpose: How Great Leaders Get Organizations to Achieve the Extraordinary,” said: “The task for leaders, especially among the X and Y generations, is to argue for the importance of values and against the fantasy that work and life are somehow different. Values, simply put, are how we do things around here.”
Top organizations carefully articulate and communicated their purpose, the one thing they do better than anyone else and their core values and beliefs. Organizations that excel at aligning the hiring process with their culture and place a high priority on training and developing people, have the lowest employee turnover. They save a lot of money for the effort.
Questions for discussion:
Based on last year”™s numbers, if we”™ve reduced employee turnover by 50 percent, how much would it save the company?
How can we do a better job in communicating our purpose, the one thing we do better in serving our customers than anyone else, as well as the critical role our people play in making that happen?
Joe Murtagh is The DreamSpeaker, an international keynote speaker, meeting facilitator and business trainer. For questions or comments, oe@TheDreamSpeaker.com, www.TheDreamSpeaker.com or call 800-239-0058.
