Employee turnover negatively impacts every company, regardless of the size of the business. Employee turnover is costly, but how can you estimate the cost for your business? This is a difficult question. Even the experts disagree on specific metrics or how to quantify the implications of turnover. It is important to consider both the financial and emotional impact of turnover. Then, you can begin to develop a strategy to reduce your turnover and improve your bottom line.
Large firms typically plan for a percent of their population to leave every year due to personal changes and choices. These larger firms typically incorporate an attrition model for replacement hiring and training costs into their budgets. Employee turnover is expensive for all organizations, however, small to midsize firms often feel the impact of losing employees even more dramatically. Therefore, losing even one employee on a small team can result in a big business disruption.
Every time a business needs to replace an employee, they feel the direct impact financially. They incur expenses to recruit a replacement and appropriately train them. Direct costs are only the beginning of the financial turnover impact. Vacant positions can result in less overall production and decreased client satisfaction. These factors result in unplanned expenses for a business that ultimately impact revenue.
Another cost is more intangible, it’s the emotional impact of the turnover. Vacancy’s in the workforce mean that the company is not staffed properly, and others need to step up. These gaps in coverage are not filled until the replacement is trained and working at full capacity. When team members are asked to carry a bigger workload, they often do so willingly; however, if vacancies occur too frequently theses team members may resent the additional work. Turnover can result in a downward spiral that if not corrected maybe devastating.
Managers dedicate significant time to hiring talent, training them fully and ensuring their engagement and satisfaction. When there is stability in the workforce the continuity of operations is realized beyond the immediate bottom line. Seasoned employees have a deep understanding of the operations and how to efficiently complete their responsibilities. Through their work experiences they gain knowledge of the organization that is priceless.
Steps To Reduce Employee Turnover
While the financial and emotional impact of employee turnover is hard to quantify, it is a tangible expense that will influence business outcomes. Successful organizations focus on retaining talent in an attempt to avoid the disruption and impact of turnover. Consider adopting the strategies below:
- Leverage a robust selection process to hire strong talent
- Build a culture that encourages employees to openly share feedback
- Actively support employee growth and development
- Keep a pulse on employee engagement through adoption of a Stay Interview Process
Keeping employees, challenged, satisfied and retained is not easy, but it is necessary for all companies. The key is to invest in retention of employees versus incurring the cost of replacements.