By Nathan R Mitchell MBA

When it comes to costs, many organizations “cross their T’s” and “dot their I’s” – that is, unless you are talking about the costs of employee turnover. For one reason or another, many businesses simply don’t measure it. Some organizations, however, know their percentage of employee turnover quite well, but don’t calculate the long-term consequences on overhead expenses like training and development.

What are the real costs of employee turnover? What does it really cost businesses to replace key personnel when they jump ship to change careers, or even worse, jump ship to join your competition? Well, it depends on whom you ask. The calculations vary greatly from study to study and organization to organization, yet all are equally frightening!

I recently had a meeting with an administrator of an organization who told me their average employee turnover rate is higher than 30%. Even if the employees jumping ship earn an hourly wage just slightly higher than the Federal Minimum Wage of $7.25, the costs are still astounding – yes, even for staff members who many organizations deem to be “easily replaceable.” The Society for Human Resource Management estimates that one $8.00 per hour employee costs an organization $3,500 in additional expenses when things like recruitment, lost productivity, and training and development are all taken into consideration.

So, why don’t more businesses pay attention to this critical number? For many companies, it’s simply viewed as a normal cost of doing business – besides, isn’t some turnover desirable? Yes and no. It’s true that poor performers may cost businesses more in the long run, but what about the good performers? What’s causing them to leave the organization? Perhaps it’s due to poor job alignment; perhaps the human resources department or key personnel haven’t given them the proper training and tools they need to perform their job effectively; or perhaps it wasn’t determined in the recruitment process whether or not the company’s purpose was in alignment with the applicant’s strengths, passions, and objectives. Does the organization have a purpose? And if so, do the employees know what that purpose is, and are they “buying-in?”

Unfortunately, many businesses today don’t take the time to implement a solution. Instead, many companies spend the bulk of their energy and resources finding ways to decrease payroll and increase sales. I know, it’s practically an oxymoron. The ironic thing is studies have shown a 10% reduction in employee turnover is worth more than a 10% increase in productivity, or a 10% increase in sales.
The question you should be asking is this: which will you choose to focus on in the coming months ahead?

If you choose retention, your customers and employees will thank you for it! Oh, and by the way, so will your bottom line.

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