The Cost of Losing Employees

I have met with a potential client in the last couple of weeks, who was not concerned over the level of turnover he was experiencing in his business. His turnover levels were around 50% a year and he had managed his business on this sort of rate for many years – his comment to me was that it was just what happened in his industry.

Well a little bit of research did tell me that turnover was high in this particular industry, but 50% was almost double the industry average!

Unfortunately for this gentlemen I needed to point out to him the cost of this turnover to him in time, effort, experience and, of course, profit.  When they were calculated, to say he was shocked is an understatement!

The actual cost of replacing an employee can be calculated at somewhere between 50% and 200% of an employees salary.  This amount is a result of the time and effort required for recruiting (advertising, shortlisting, interviewing, time for all of the above), the loss of productivity, the cost of training new employees and many other, incidental, factors.

But high turnover can also be an indicator of other problems with your business – and with the cost of replacing employees, these can not be ignored!

Some hints for improving your turnover rate are as follows:

  1. Hire the right people – not just in terms of qualifications or experience but also in terms of motivations and values.  Attempt to ascertain the drivers of your potential employee prior to employment and make sure you can meet them before offering them a job.
  2. Remember those motivators as you deal with them during their employment – these are the things that are going to keep them interested. For example – people who are goal/career motivated need to be treated differently to people seeking security.
  3. Our workforces today are more mobile – acknowledge this and find ways of making it work for you.  If a person feels it is time to move on, then find ways to make it easy on you and them. 
  4. Find ways to improve communication and continuously improve the workplace.  Keep your employees engaged by involving them in developing their own goals and targets.  Communicate your goals and targets for the business – don’t keep them in the dark!

Reducing turnover is a long term goal but worth it in terms of your time, effort and profit.  If you require assistance, People Smartz can provide you with a number of services to improve your results.  Contact us today!

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