Employee Retention Strategies is uniquely designed to provide small- to medium-sized organizations (and business units of large organizations) with affordable, effective, fast and lasting solutions to improve employee retention,
satisfaction and commitment.

“Hidden” Costs of Turnover Can Greatly
Exceed Numerical Calculations

     Finding data on the cost of turnover is easy – many researchers have been able to quantify hard-dollar costs of losing valued employees.
     However, many costs occur that can’t be assigned dollar amounts. These “costs’ can far outweigh the traditional, hard-dollar calculations – and organizations are incurring huge, unseen losses productivity, customer satisfaction, reputation among job-seekers and, significantly, in the morale of the departing employee’s co-workers.
     When we take into account that about three-quarters of employees polled by the Society of Human Resource Management and the Wall Street Journal’s CareeerJournal.com said they are looking for a job (according to information released by the Institute of Management and Administration in 2007), the costs of turnover can be nearly crippling to organizational finances and marketplace position.

Consider these examples, looking at the hard dollars incurred that result from unwanted turnover as determined by research studies plus the costs that can’t be measured precisely:

• Average employee turnover is 14.4% annually, according to the Bureau of National Affairs. And, turnover rates are on the rise, the Bureau now reports; turnover also varies widely among different industries.
  
  Yet, we can’t measure the blow to morale and increased job stress when remaining employees are burdened with the distribution of the departed employee’s workload. We also can’t always determine the negative impact on customer service.
   

• Replacement costs for a departing employee are estimated at one-third of his or her salary. Even at the former minimum wage, the cost to replace an employee is $3,700. The US Department of Labor’s Bureau of Labor Statistics estimates average costs to replace a worker in private industry at $13,996. (To determine an organization’s annual turnover costs, simply multiply turnover cost by the number of annual new hires.*)
  
  We can’t measure the future turnover of employees who are lured to other organizations by their friends who have departed. With all organizations in an industry competing for talent, informal networks are powerful resources for job seekers and friends often follow colleagues to other employers.
   

• The cost to replace a registered nurse is 1.2 to1.3 times his or her salary, which is substantially higher than for most other times of workers. We can’t measure the damage to an organization’s reputation when customer service falters due to low staffing levels. When customers are unhappy, research shows they’ll tell their stories to more people than they’ll share a tale of good service.
  
  Additionally, the current nursing shortage means that those remaining will have higher caseloads, possibly face mandatory overtime and incur greater job stress – all contributors, according to the research, to nursing turnover. Nearly half of all nurses under age 52 have said they expect to change jobs within five years.
   

• A 3,000-employee organization with average salaries of $45,000 that reduces turnover by just 1% can save $1.3 million, according to the Voluntary Hospitals of America.
  
  We can’t measure how employees feel when an admired, valued co-worker chooses to leave the organization. People naturally begin to consider their own options.
   

• Estimates have determined that lost knowledge that leaves with the departing employee can be as high as 50% of the exiting employee’s salary for one year of service; and, this figure grows by 10% for each year of employment.
  
  We can’t measure how many new ideas and innovations each employee might generate in the future to help the company. Nor can we determine his or her potential to be promoted to higher-level roles and leadership positions.
   

• On average, 30% of a financial advisor’s clients will move with their advisor if he or she changes firms.
  
  We can’t measure customer loyalty to staff. Customer loyalty often is people loyalty: Customers trust and build relationships with their contacts, often more so than to the organization. Out the door go not only the confidence in this employee, but future referrals from the employee’s loyal customers.

Is All Turnover Problematic?
     Of course not. Poor performers, those who are not the best fit to their roles and discontented staff typically are not considered unwanted turnover. In fact, one study showed that as high as 50% of employees are disheartened that their organizations tolerate inadequate work and poor work ethics.
     However, controllable turnover – the loss of desirable, talented staff remains a costly concern – often with a price tag higher than most organizational leaders may perceive.

Is There Any Good News?
     Fortunately, yes! For the flip side of employee turnover – the gains of creating high-satisfaction workplaces, click here for the next article.

* Turnover calculators are available on a number of Internet sites, enabling easy calculations for the cost of turnover for specific positions and organizations as a whole.

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Employee Retention Strategies
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