What Is the Real Cost of Employee Turnover
Essay Preview: What Is the Real Cost of Employee Turnover
Report this essay
What Is the Real Cost Of Employee Turnover
The employee turnover rate and the retention of skilled employees is a major problem businesses face. “Conservative estimates put the cost of replacing a lost employee at 25 percent of the annual compensation amount. For the typical full time employee who earns $38,481 and receives $50,025 in total compensation, the total cost of turnover would amount to $12,506 per employee.” This being the case employee turnover is a major cost and can significantly influence the bottom line so it should be avoided if possible. (Bliss)
“Employee turnover is a critical cost driver for American business. The cost of recruiting and filling vacancies, lost productivity from vacant jobs, and the costs of training new employees increase operating costs, reduce output, and cut into profits.” (Orville 5-7)
Estimates of the costs of employee turnover vary widely and depend on whether all cost elements are recognized. The three primary elements of turnover cost include:
Staffing – sometimes called cost-per-hire include the costs of exit interviews, recruiting, job applications, screening applicants, relocation expenses and signing bonuses.
Vacancy – While a position is vacant, the productivity of the former employee is lost and the productivity of the overall organization is reduced, as remaining workers have to cope with being short-handed.
Training – No new employee starts work at 100 percent efficiency. The replacement employees time, other employees time and valuable resources must be expended to train each new employee and to facilitate the transitions.
So how do employers retain employees? Many employers try gimmicks, games, and prizes. F. Leigh Branham, author of Keeping the People Who Keep You in Business offers the following advice for retaining employees:
Dont always hire the best, but hire the “best fit”.
Have the insight to realize that no matter what the job not just anyone can do it well.
Focus on matching the persons strengths to the right challenge and the right role, not on improving weaknesses to the point that every employee is well rounded.
Build a culture of trust by giving people free reign to achieve outcomes in their own way, instead of insisting that they do things the way you would do them.
Manage different people differently. Know that not all people have the same motivations.
See yourself as serving your people, and not the other way around.
Be tolerant of diversity, but intolerant of nonperformance.
Surround yourself with the most talented and dont feel threatened.
Care about your people and take a personal interest in what is going on in their lives.
Let your people move on to a growth assignment outside the team instead of blocking the move.
Give feedback, praise, and recognition on the spot.
Know when to confront nonperformance and either redesign the job so that it fits the individual, reassign the person to a better fitting job, or terminate when necessary.
The bottom line is the way you treat employees has tremendous impact. “True solutions require management attitudes and behaviors towards the employees to change.” Some of the factors that influence an employee to leave are the lack of challenging and stimulating work, fair pay, the tools and resources needed to do their jobs, recognition for work well done and involvement in the decisions that impact their day to day lives at work. “However, not every employee who leaves your company is dissatisfied. Some will retire, relocate, quit because of family circumstances, change professions, or even start a business of their own.” (McNally 16 – 19), (Branham 30 – 75)
Is all employee turnover bad? No, in fact research