The Real Cost of Employee Turnover
Perhaps you’ve read the statistics on how much losing an employee cost, but do you know the real cost of employee turnover? It’s more than just a financial burden. Turnover creates a negative impression of your business internally and externally. That means it can impact employee morale and productivity while stifling your ability to attract top talent.
So, let’s start with what we know about turnover. Some company turnover is expected. People retire, or it may become apparent that the employee isn’t a good fit and moves on. Personal reasons may also influence an employee's decision to leave. These organic scenarios are part of the natural cycle of employee attrition, which typically runs at about 20% a year in a healthy company.
Even then, losing an employee comes with costs. In fact, it can be downright pricey. According to a recent Forbes article, the average cost of losing one employee ranges from about one-half to up to two times their salary.
Employee Turnover Hurts The Bottom Line
Most business leaders anticipate the financial impact associated with the loss of personnel but underestimate the effect in other areas of the company.
For example, employee churn signals to prospective employees that there’s trouble brewing internally. That, coupled with disgruntled employee reviews shared on job boards and social media can damage a company’s employer brand and disrupt the talent pipeline.
Another drawback of employee turnover is the loss of their knowledge. Tenured employees know your company’s products and services inside out. All the training and years of experience walk out the door with that person! It’s unlikely you’ll be able to hire someone with the same knowledge and skillset, so you’re back at square one with a new employee.
Lastly, losing an employee hurts your client relationships. You might oversee what’s happening, but your employees are the ones managing the day-to-day interactions, conversations, and workloads for clients. They develop relationships that often run deeper than the relationships your company has with theirs. When clients lose their daily point of contact, especially when it’s been a fruitful relationship, it disrupts the flow of things and puts a tiny crack in the foundation. Managing the transition is key to client retention.
Tips To Reducing Employee Turnover
1. Keep job descriptions and operations manuals up to date.
In the words of Peter Drucker, “If you can’t measure it, you can’t manage it.” Job descriptions are vital to the growth of your company and should be created for every role within your organization, even yours. Typically, job descriptions are only used when hiring and then discarded. But if you use them regularly, job descriptions become valuable tools to monitor roles and responsibilities.
During employee reviews, use the job description to measure the employee's performance compared to job expectations to see if they align. This opens a dialogue helping to identify any disconnect between the original job description and the actual day-to-day activities taking place so adjustments can be made.
Job descriptions are often underappreciated but are excellent tools for setting and managing expectations resulting in increased employee satisfaction.
2. Conduct stay interviews to foster positive communication.
Stay interviews, where you talk to existing employees to discover what keeps them at your organization, can be a good tool for retaining staff. Use these interviews to show employees you value them and want to create a positive work experience for them. In my recent Talent Leaders episode, I spoke with Danny Nelms, President of Work Institute, about the value of stay interviews in finding workforce development opportunities and other areas of importance to employees.
In addition to reinforcing your appreciation of your employees, stay interviews can also be used to communicate about things that are going well and opportunities for growth. This messaging is invaluable when it comes to employee retention as employees feel seen, heard, and valued.
3. Conduct exit Interviews and then give them some credence.
Don’t let your ego overshadow what’s really happening within your company. Exit interviews, especially when conducted by a third party, give employees a safe space to openly and honestly share why they are leaving your organization. This gives employers valuable insight into areas within that job role or the organization as a whole that may need attention. In an exit interview, you might find you have a difficult manager cited multiple times. Or perhaps you are expecting too much work in too short a time, and the employee doesn’t feel supported. Exit interviews give you the chance to correct course, so don’t fall asleep at the wheel on this one.
4. Start succession planning early.
It’s pretty easy to spot high-potentials. When considering the talent pipeline for critical positions, be purposeful and plan. Develop professional development tracks that put these employees on the course for advancement, which prepares them to possibly take over as your senior people move on or retire. There is a natural growth within an organization that comes from people’s movements. Therefore, your actions to foster that movement allow them to grow and reach their goals and position the company for future success.
Losing an employee is not just a financial loss for the company. There are intangible ramifications that often go overlooked. By implementing a few baseline employee retention strategies, you will improve employee satisfaction and strengthen your company's employer brand and reputation. In the end, with a dedicated team striving for success, you will carry the company forward.