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During a recent meeting with a top HR team, we heard participants say there was no need to conduct a costly turnover study because top executives understood the priority of high employee turnover. Yes, executives know quality and productivity levels cannot be achieved if daily focus is placed on continuously training new employees, however, do they fully understand the hidden costs of turnover?
Do we really know how much employee turnover truly costs us across all aspects of our businesses? It’s important for us to find the answer to this question because the level of commitment dedicated to lowering turnover rates determines how expensive it gets. There are six common positions top decision makers take when it comes to understanding the actual dollar amounts associated with turnover.
Position #1: Accept the problem
This perspective takes the stance of simply accepting turnover is a problem. Executives offer plenty of excuses and show a reluctance to act.
Position #2: Competitor benchmarks need not apply
Organizations often use competitor numbers for productivity, quality and other valuable benchmarks but tend to dismiss figures associated with employee turnover. Is using selective benchmarks a smart strategy?
Position #3: Independent sources cite dollar amounts
Many respectable independent providers publish reports demonstrating specific formulas that place dollar amounts on turnover. It’s common for executives dismiss them because they don’t consider data published by non-businesses to be authoritative. Do your CEO and CFO consider these to be credible?
Position #4: Measure individual turnover costs
Executives use a cost of turnover calculator to determine how much money is lost to employees leaving. Included are exit costs, new hire expenses and the lost productivity during the gap between employees. Productivity is the most costly part of the equation, but are executives paying attention to this figure?
Position #5: Wake-up calls to organizational costs
An executive team will take notice of the $45,000 cost associated with losing an employee, but it may not be enough to act. However, add the cash value associated with each lost employee and discovering the number tops $10 million is a much bigger eye-opener. Using a cost of turnover calculator can demonstrate precise dollar amounts, spurring decision makers to take faster action.
Position #6: The Gold Standard Approach
The Gold Standard is when leaders look at the organization as a whole and seek to pinpoint losses associated with employee turnover. Along with resignation, recruiting and onboarding costs, this position takes into account the dollars associated with lost revenue-driving activities. For example, losing a good salesperson is not just an HR issue, it’s a sales problem too.
What position does your organization take? I developed a terrific cost of turnover calculator to help organizations like you better define the costs associated with employee departures.
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