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Employee Turnover’s Hidden Costs

Many companies write off employee turnover as natural or an assumed cost of doing business. Later, when their finance department looks at numbers in aggregate, those companies suddenly find shocking amounts of money have been spent replacing employees. Big red numbers make it much easier to see value in conducting employee surveys to help keep turnover low. We’ve compiled some of the employee exit costs that get overlooked, but will silently eat away at your bottom line.

Recruitment Costs

You almost always need to fill the vacated position. The perfect candidate won’t be waiting at your front door the next day, so that means paying for advertising and potentially recruiters. The cost of placing ads on LinkedIn, CareerBuilder and the plethora of other job sites can add up to a considerable sum. The top jobs sites charge $500 or more to post openings. Recruitment agencies typically charge between 20-35% of an employee’s first year of wages when they make a placement. If you have staff recruiters, you’re already carrying significant costs. Your Human Resources department will have paperwork to handle, in addition to recruiting new candidates. Then add in the time spent reviewing resumes and interviewing candidates, the majority of whom will not be hired. Limiting turnover mitigates each of these costs.

The Time-Productivity Leak

When an employee leaves, it’s never a clean break where nobody misses a beat. Either the work doesn’t get done, or it’s added to another employee’s workload, and inevitably productivity suffers. Your employees will feel the pinch of a departure, and your customers might, also, if customer commitments are not met or work is delayed.

On-Boarding Costs

Few new hires can hit the ground running. Even the perfect replacement will need time to acclimate to your systems, policies, and procedures. Often companies have additional training expenditures for specific classes – OSHA, HIPPA, etc. During this time, other employees will have to lend a hand to bring them up to speed and continue to cover the workload. Teamwork pays a lot of dividends, but in this case, it will result in more lost productivity. The more complicated the job, the longer it will take for the new hire to be running at 100%.

The Sinking Ship

If a handful of valued employees leave around the same time, it may cause unrest with the rest of the employees in the department. Remaining employees may feel disconnected from management, and lost credibility can play a strong role in creating the “Sinking Ship” mentality. Management may know that all of those employees left for unique reasons. But, remaining employees may assume the company has a problem and they’re stuck tossing buckets of water over the side. Companies are limited in what they can share about employee departures, but a good work environment, with support from management, will play a strong role in bolstering employee morale.

The bottom line is: Money spent replacing employees is unproductive. Apply the old adage, “it costs twice as much to find a new customer than to keep a current one,” to your employees. It’s up to you to deliver a work environment that will keep employees happy, engaged, and productive. Employee survey research can identify the prevailing sentiments in your company. NBRI has years of experience helping companies identify the issues and then providing a framework for solving them. To find out how NBRI can help your company, fill out our contact form or give us a call. A small investment now will save you a lot down the road.

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