For companies to prosper in today’s economy and job market, locating and holding onto the best talent is crucial.
Turnover can be costly. Minimizing turnover is particularly vital for small companies and nonprofits that must contend with big companies that have big budgets.
The value of an employee
In order to think about the true costs of turnover, it’s essential to start by determining how much the average employee costs to employ. Most staff begin their time with a new company as a “cost” to their employer, while they are onboarded and acclimating, they are essentially less productive, have a larger learning curve and require training without adding to the bottomline. However, with proper training and a supportive workplace, the employee will begin to show a return on the investment, becoming an integral part of the company.
The costs when an employee leaves
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- Costs to consider: Lost Productivity, onboarding costs, recruitment costs, overtime and more…
Even if a person had only been on the job for a week, any duties they were doing will have to be picked up by someone else should they decide to leave. Plus, if turnover happens quickly, the business never had a chance to realize the return on original hiring costs. In fact, research according to Achievers states: “it takes companies an average of six months to break even on a new hire,”
When an employee leaves, it results in lowered productivity, with the departure of experienced professionals having a more severe impact than newer employees. The running stat is that “it costs 33% of an employee’s salary to replace them” so turnover from higher salaried employees comes with increased costs. (Forbes)
If your staff had been running at peak production capacity, a departure means overtime, which can quickly lead to employees being overworked. Morale can begin to fall as staff members are stretched thin. This can perpetuate a cycle of turnover as burned out employees start looking for new jobs.
High turnover also means more time spent training new employees. Trainers must then spend more time away from their regular jobs to coach a new employee, which means two people are being payed for the productivity of one person.
Another cost that is a bit intangible is the loss of knowledge that leaves with an employee. Perhaps the departed employee devised a more efficient way of doing things that others never really picked up on. Or a situation might arise that calls for specific knowledge a former employee took with them.
Finally, there are the costs associated with sourcing new talent. Hiring personnel must review resumes, talk to several people, hold formal interviews and determine the best candidate. When a company works with a recruiting firm, the costs of hiring new employees are easier to quantify and offer the added benefits of cost-efficiencies and better time-to-fill rates.
Retaining talent
Holding on to talent and minimizing turnover is vital for today’s companies. Best practices for employee retention include tracking the employee retention rate, a recognition program created with employee input, a high-feedback environment and conducting exit interviews. These practices can help you learn how to keep employees while creating an environment that people want to work in.
At SSi People , we support organizations of all sizes through custom staffing solutions. Contact us today to find out how we can help your organization.