The true cost of turnover. Is it time for a different approach?

Turnover is EXPENSIVE and it’s an expensive way to operate your business. Companies tend to take a reactive approach and overlook employee retention; many leaders don’t realize HOW expensive turnover is. It’s a problem that can be solved (if employers want to solve it). Retaining employees is largely connected to developing leaders. Over 60% of companies offer no leadership development or training and many employees say they have left a job due to a dysfunctional, ineffective, toxic leader.

Here’s what employers don’t realize about the true cost of turnover:

🚨 turnover costs companies $57,150 on average, but many hiring managers say it costs their company $100,000 or more per year

🚨 a lot of turnover can be prevented; 52% of voluntarily exiting employees say their manager or organization could have done something to prevent them from leaving their job (57% of people say they have left a job specifically because of their manager.)

🚨 involuntary turnover can also be prevented with leadership development (axing narcissist leaders, improving time management, setting realistic expectations) and/or improved hiring processes

🚨 the main reason people leave their jobs is: no room to grow / no development or toxic leader/workplace (💡 solution? develop your leaders!)

🚨 the current environment is showing that 96% of workers are looking for a new job in 2023 — for the reasons mentioned in the last point and also for higher pay to keep up with rising expenses & inflation; their desire for a new job is exacerbated if they have two or more: (1) don’t have room to grow / don’t receive development; (2) have a bad leader or toxic work environment; (3) want higher compensation; it’s been reported that wages rank 10th out of 23 for job satisfaction drivers — money can’t buy satisfaction. Money is obviously important, but employees are not motivated purely by compensation. Top drivers are: potential for future growth, communication channels, recognition/acknowledgement, interest in work, performance review process, and supervisor.

🚨 past behavior is not the best predictor of future behavior: in the first 18 months of being promoted to an executive role, 30%-70% of senior leaders fail; these failures are expensive — $750,000 to $2.5 million and up to $52 million for a CEO

🚨 in the U.S., it takes about 42 days to fill a role and about 6–8 months for the person to reach full productivity

🚨 recruitment costs are estimated about $4,000 per employee

🚨 onboarding costs are estimated to be about $1,286 per employee (I’d argue that the real figure is probably much, much higher considering the fact that only 12% of employees strongly agree their organization does a great job at onboarding so there’s a massive opportunity here to improve, which likely means additional resources — time is money too)

🚨 other hard-to-quantify costs of turnover:

👉🏻 impact on organizational performance — decreased productivity, projects halted due to lack of resources;

👉🏻 impact on culture & morale — employees struggle with losing trusted confidants and team players and question if they want to stay or if they should quit too;

👉🏻 impact on customer service — reduced customer satisfaction and potential loss of customers (for this reason, one of my prior places of employment offered an incentive for longer resignation notices because they recognized how much turnover impacted the clients) — depending on your industry, customers/clients might start to question the quality of the organization if workers keep leaving (especially true in financial services);

👉🏻 lost organizational knowledge & experience (what’s this worth to you?);

👉🏻 over-burdens remaining employees (results in burnout);

👉🏻 negative impact on company reputation & employer brand

I’d like to ask you:

What do you do to retain employees?

How do you budget for turnover costs?

Do you factor in lost productivity?

Do you factor in lower team morale from additional workload & loss of a colleague?

Do you consider how it affects your employer brand?

Do you think about the effect turnover has on clients/customers?

What about the time and resources it takes to PROPERLY onboard and train new employees?

Do you try to get ahead of it to retain employees proactively — with stay interviews?

If you do exit interviews and are getting complaints about a bad leader, what are you telling incoming candidates about why the position is vacant? Do you tell them the truth? Do you try to fix the problem? Or do you leave it as a revolving door?

For more, see these articles:

How to conduct stay interviews that are effective

Best practices for onboarding new employees

Reasons why people leave jobs with solutions