Employee Turnover Impacts the Entire Organization
What could you do if you were armed with the true cost of employee turnover in your organization? Now you can find out.
We’re all familiar with the expression, “you don’t miss someone until they are gone.” While this sentiment is typically associated with personal relationships, the same can be said of organizations for their top employees. It’s not just a matter of missing the camaraderie of a valued team member; it’s a bottom line issue as well. Employee turnover takes a toll on morale, productivity levels, and customer satisfaction. For this reason, employee retention is an increasing priority for organizations, specifically with high performing team members.
The goal of any business, large or small, is to make a healthy profit that can be paid to shareholders or reinvested for growth. An important element of profit generation is the ability to control and minimize cost. Very expensive, yet often unrealized, the cost associated with employee turnover is an aspect of cost management that many business owners or companies fail to proactively control.
Employee turnover costs depend on labor markets in which you are competing. When the market is loose, for instance, it is relatively easy to find and train new employees quickly and at moderate costs. In contrast, in a more competitive market where labor and skills might be somewhat scarce, recruitment is generally more costly, and open positions may be vacant longer, resulting in higher loss of productivity and profitability. This is especially true when you are losing top talent to competitors or when customers have developed relationships with individual employees. Data from our TalentKeeper’s Turnover Cost Calculator tool shows the average Direct Cost of losing a valued contributor at nearly $17,000 plus an average Indirect Cost of just over $26,000! You can calculate your organization’s direct and indirect turnover costs with our free tool click here.
What are the Direct Costs of Employee Turnover?
To provide some scope of the costs typically experienced by organizations, TalentKeepers conducted our 11th Annual Workplace America study of employee engagement and retention trends (with over 800 organizations participating from a range of industries), analyzing causes, costs, and consequences impacted by employee turnover. Direct costs include some of the more obvious expenses such as filling the vacancy (e.g., recruiting, interviewing, selection, testing), training costs for replacements, equipment and tools, uniforms, and similar expenses.
What are the Indirect Costs of Employee Turnover?
Of the two categories of cost that are associated with employee turnover, direct costs are typically the costs that leaders focus on because they are visible. Yet of equal importance and very often neglected, are the hidden or indirect costs. These costs are represented by lost productivity, the financial value of time that is used to find and hire the replacement employee and the negative impact on colleagues and customers when a valuable employee leaves an organization.
Learn More About the True Costs of Employee Turnover
For much more about the Costs of Employee Turnover, here’s a link to our free 12-page whitepaper “The Dirty Truth about Employee Turnover”. And to learn how Stay interviews can be an impactful component in your engagement and retention strategies attend our Stay Interviews Webinar November 18 from 1-2 PM Eastern. Learn more about the webinar here.