How Much Is Employee Turnover Costing Your Organization?

Employee turnover is much more costly than you might think. In fact, research shows that up to 80% of turnover costs are hidden. Because of these virtually invisible costs, most managers usually do not track turnover and are not alarmed by high turnover rates.

Turnover refers to the number of employees who have voluntarily or involuntarily left a given job or group of jobs during a specified period of time. The "turnover rate" is the ratio of this number to the total number of employees in the job or job group.

When you add everything up (e.g., separation, vacancy, replacement, and training costs), the price tag whenever an hourly employee leaves an organization typically ranges from 33% to 50% of annual compensation and benefits. And it’s a whopping 100% to 200% for salaried employees.

Since there is so much on the line, it pays to do everything you can to keep successful and productive employees from leaving.


BizTip #1 – Regularly monitor employee turnover in your organization

Do you monitor employee turnover for key jobs in your organization? If you don't, you're not taking advantage of valuable information that could save you time and money. You can quickly estimate the turnover rate for any job in your company by completing a free Employee Turnover Calculator, a business tool that provides both annualized turnover rates and estimated costs associated with turnover.

BizTip #2 – Improve your hiring practices.

Studies indicate that your first line of defense against higher-than-desired turnover is a successful employment process. Poor hiring practices significantly contribute to employee turnover. Do whatever you can to take the gambling out of making hiring decisions and reduce turnover in your organization.

BizTip #3 – Provide realistic job previews.

A realistic presentation of relevant aspects of your jobs will help attract promising applicants who are more likely to stay with your organization. Don’t try to sugarcoat anything when you’re telling applicants about your jobs. Honesty is the best policy for minimizing problems with employees later on. Complete a free Job Condition Inventory to help you write more effective employment ads that communicate realistic job expectations.

BizTip #4 – Orient new employees properly and give them the support they need.

Be sure you give new employees helpful tips for dealing with job realities. This can be accomplished effectively in a structured employee orientation program that provides individuals all the information they need to succeed. It’s also a good idea to place new employees in work groups with positive attitudes. And make sure that new employees receive the support they need from their supervisor, especially during the first three months on the job.

BizTip #5 – Make sure your training programs are effective.

Nothing will make a new employee leave faster than a sense of failure. If your training programs don’t help employees meet job expectations, most people will look for greener pastures that foster employee development and success. Take some time and learn how "accelerated learning" techniques can help you improve your training programs and speed up the learning process for your employees.

BizTip #6 – Evaluate employees consistently and fairly.

Employees who feel mistreated by management are more likely to pack their bags. To promote fair treatment of all employees, use a structured performance management program for evaluating employees in relevant areas in a consistent manner. In particular, be sure to communicate regularly to your successful employees (i.e., the people you don’t want to leave) that you value their talents and contributions to the organization.

Keep Track of Organizational Health

Monitoring employee turnover is an easy way to check your organizational health. Low turnover normally (but not always!) means a fairly healthy organization. On the other hand, high turnover usually is symptomatic of underlying problems, such as inadequate selection and training programs or unhealthy management practices.

Employee retention problems can have detrimental effects if nothing is done to address the hidden causes. That's why it's important to monitor employee turnover over a period of time. If you know that employee turnover is high or is rising sharply, you are more likely to investigate the problem and take appropriate, timely action.

Author's Bio: 

Barry Farrell is an organizational psychologist who has provided management consulting for over 35 years. Visit GreatBizTools to try some free BizTools and to register for a free 15-day trial of WebAssess, an online testing system.