August 13, 2014

The Cost of Turnover

This is the first in a two-part series on turnover. There are all types of statistics out there about what turnover costs an organization in terms of quantitative and qualitative.

Real Cost

Numbers I prefer are 59 percent of annual salary for the rank-and-file, 100 percent for a mid-manage, and 150 percent of C level. Whatever you choose be real and consistent. Valid costs include advertising, time invested in resume reviews, interviews/skill testing, reference checking, drug testing, training and background screens.

Hidden Cost

Customers feel the loss of a right fit employee leaving, and feel the relief of a poor performing employee leaving. The same goes for internal people who remain. The exodus of Boomers from the workplace has already caused significant loss of institutional knowledge that turnover exacerbates. The stories that make a company culture and become part of the brand are being chipped away.  Why accelerate the process with turnover that can be avoided?

Cost of Repeat Turnover

You eventually waste time, money, energy and effort versus growing and streamlining. The true cost is lack of trust – by staff and your customer – that you have a handle on your business. Staff costs include negative attitudes, more turnover and poor performance. Customers experience negative attitudes. They also may move their business elsewhere, disengaged and disinterested because of the lack of long-term relationships with internal contacts and poor fulfillment.

What the Numbers Don’t Tell You

In my role as CEO of chief of my “tribe,” I have opposing viewpoints on voluntary versus involuntary separation. As a business owner, turnover is personal. I admit it. Do you?

For those that are involuntary, businesses take WAY too long to make a decision. We give employees ample opportunity to perform and time to “change” so that when it’s time to “go,” there is less emotion. From this chair – with the responsibility for 32 peoples’ livelihood – I take it very seriously. We don’t cavalierly lay people off. I lose sleep over it, but you have to protect the organization/the rest of the “tribe.” There is no “number” for that, it’s priceless. 

As a leader and a person, I am truly sorry when people leave voluntarily. I am proud to say one of my tribe has been with us 12 years. We try to hire the right people and work diligently to create a positive environment. It is clearly not just a functional void, but also an emotional void in the organization when someone chooses to leave.

If you’re going to measure the “cost” of turnover; be honest and avoid sugar coating. Take responsibility and action to correct the problems that exist in the organization that may be affecting the longevity of your workforce. 

Written by Jim Annis, President/CEO of The Applied Companies, which provide HR solutions for today’s workplace. Celeste Johnson, Tom Miller, and Suzanne Chennault, Applied’s division directors, contributed to this article.

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