Every time an employee leaves your company, they take profits with them. All the time, effort and money that you put into that employee is gone and now you incur additional expenses to replace them.
There are 2 types of costs associated with employee turnover, tangible and intangible. The tangible costs include the cost of advertisements, interviewing and hiring/training expenses which are easy to calculate. The intangible costs are harder to calculate but they include lost productivity, low morale as well as the lost job history, knowledge and skill of the employee that left. Based on the position or job, these total costs associated with turnover can range anywhere from hundreds to thousands of dollars per position. There are a number of cost-of-turnover calculations and models available to help you compute these costs.
Turnover has a direct impact on a company’s overall financial performance but the costs can be controlled. The first step at controlling turnover is to understand why people are leaving and what is causing the turnover. This can be done by a detailed review of the exit interviews as well as surveying and questioning the current staff. Once you have determined what the cause(s) are, the next step is to put together a retention plan. A retention plan would include some things such as:
- Start with a measurement of the current status.
- Review the hiring/recruiting process for inefficiencies and opportunities for improvement. Hiring mistakes leads to turnover.
- Review the handbook and current policies. Determine the company culture and how people are being treated.
- Make turnover a business issue and management goal
A retention plan will cover the review of current practices, policies and procedures to determine what changes need to be made to help reduce turnover, increase employee morale and productivity and ultimately the overall financial performance of your company.