The Rising Cost of Employee Turnover
When it comes to hiring in this economy, there’s good news and bad news. The good news is unemployment is currently hovering around an all-time low. But how low is it? Low enough that talent doesn’t necessarily fear jumping ship if they find themselves unsatisfied in their current position.
Thus, as unemployment is falling, employee turnover is on the rise. And that turnover comes at a high cost. In 2018, The Work Institute’s National Retention Report predicted that turnover costs will increase to $680 billion by 2020. This month, Gallup Workplace reported that U.S. businesses are losing over one trillion dollars a year to voluntary employee turnover. Yikes.
How did we get here? And what can we do about it? There are a lot of contributing factors to turnover, all of which demand some attention if we’re to save the costs from rising.
It All Adds Up
High turnover gets real expensive, real quick. It’s one of those problems that you may shove under the carpet with temporary solutions, only to end up with a really nasty, costly dust bunny on your hands. But the expense is easy to see if you consider the various steps of the exit and entry processes.
The costs for Human Resources alone are cringe-worthy. Consider the process:
John McDoe decides to leave the company. Upon any termination, there’s data that needs to be processed and probably an exit interview, too. Then, manpower and time--which inevitably translates to money-- go into the replacement process.
Advertisements may be taken out, or at the very least someone will have to devote time in their workday to scoping out new recruits. Depending on the position, you may even need to form a search committee or advisory board, which would then need regular meetings and resources to accommodate potential replacements for interviews.
Leadership strategist Bill Conerly notes that in the meantime, the open position will need to be compensated for. This responsibility usually falls on other employees, thus “diverting them from their work or requiring overtime, or activity is simply not done.” In time-sensitive industries like sales, this entire process can be an even bigger hit to the bottom line than it already is. Not to mention the stress on those expected to serve in such an interim capacity.
Then comes the cost of onboarding. Onboarding is incredibly important, as onboarding programs have been shown to increase retention by 25%, and even improve employee performance. So, the likelihood of retaining the new replacement increases with good onboarding. But that means you must invest in onboarding.
Good onboarding, in most cases, involves an orientation process. This process requires a lot of materials, whether printed or digital. Some companies may even pay training specialists to structure their program or convert it into an online format. This orientation is often followed by on-the-job training, which is certainly necessary but will also take the time of managers and co-workers that assist in that training process.
With so many factors at work in just one exit and entry, it’s no wonder that an increase in turnover is so costly. The average cost to fill a single position can fall anywhere between $3,000 and $18,000, and into the millions for replacements at an executive level.
The Art of Retention
The numbers are terrifying, but don’t let that stop you in your tracks. High turnover is fixable. Gallup reports that 52% of voluntarily exiting employees say their superiors could have done something to prevent them from leaving.
And many of those voluntary exiting people pointed to the fact that after months on the job, no one had simply checked in with them. Nobody had asked them about job satisfaction or their hopes for the future.
This makes sense, considering that workplace sentiment is one of the warning signs of recession in any industry. If people are dissatisfied, they leave. And that typically costs more than whatever needed to happen for them to stay. Simple as that.
Consequently, a lot of retention issues can be resolved by better management and coaching techniques. Taking a proactive stance, personalizing feedback, and more consistent monitoring are all habits that can be regularly integrated to ensure employees know that they are valued for more than numbers. The fact that those habits help your numbers is just icing on the cake.
Turning Over Your Turnover
It’s time to take back turnover before the cost runs any higher. Stop shoving the costs of exits, hires, and training under the bed and start facing your fears. There’s still time for a turn-over in your employee turnover.