January 31, 2024
The Cost of Employee Turnover
The Great Resignation touched a lot of employers not so long ago. As people reprioritized where and how they wanted to work, if their employers couldn’t meet their expectations, they simply left. This may not have seemed like a terrible thing for the employee. After all, they found places willing to offer the flexibility and higher incomes that they’d wanted. But the cost of employee turnover for the businesses was crippling.
When an employee leaves, backfilling their position is expensive. The costs run far higher than just a person’s salary. In addition to the posting, interviewing, screening, and hiring processes, onboarding and training take a long time and get incredibly expensive.
Not only that, it could take a new employee one to two years to get to the same level of productivity as the outgoing incumbent. During that time, customer service or product quality may fall as they get up to speed (and likely make more errors in the process). This transition period can hurt your company’s reputation.
Hidden Costs of Turnover
Aside from these direct costs of bringing on a new employee, when someone leaves it impacts those left behind. People start to ask themselves (and each other) why that person chose to leave. Often those same people get tasked with handling the outcoming employee’s tasks until a replacement can be hired.
If a team experiences a high turnover rate, productivity and morale plummet. People disengage and may even start looking for another job themselves. If everybody else is leaving, it can be easy for those shouldering more responsibilities to think maybe they should leave, too.
Finally, as an appreciating asset to the company, when a long-term employee leaves, they take with them years of tribal knowledge. They’ve gotten to know the company and the reasons things are done a certain way. If they’ve already tried something and it hasn’t worked, they can save someone time and energy by sharing their lessons learned.
An employee who’s been at a company knows all the processes and is incredibly efficient in completing tasks. They also know the best way to handle interactions with coworkers. For example, they know Sam has small kids and needs plenty of warning if he needs to travel to a customer site. And they know Susie in accounting is more apt to stay longer to help you finish paperwork if you bring her chocolate treats when you ask.
All in all, the costs of replacing an employee can tally 1.5 to 2 times their annual salary. Replacing a C-Suite leader will come with a higher price tag. Even replacing an hourly employee can cost upwards of $1,500. Multiply that by several people leaving and a company could easily see seven-figure losses.
People leave companies for all sorts of reasons. Finding ways to keep employees happy and engaged in their work often comes down to managers and team culture. Check out some of our other blogs on things like intentionally engaging employees. We add new material every week. Want to see something covered? Send your suggestions to firstname.lastname@example.org.
Looking for additional training on retaining your top talent and reducing turnover?
We are introducing our 2024 leadership series: Strength-Based Leadership with five phenomenal speakers and professionals that will guide you to motivating your best employees.