Everyone knows that turnover is harmful to a business. However, it’s easy to lose sight of just how much turnover costs our organization. Let’s put a dollar sign on it. Although the cost of turnover is going to vary depending on lots of different factors, various studies can give us some ballpark figures. For example…
- Work Institute estimates that replacing an employee costs roughly 33% of their salary (although they admit this is a conservative figure)
- SHRM estimates that to replace a salaried employee, businesses lose 50-75% of the employee’s annual salary
- The Center for American Progress estimates that turnover in high-level positions can cost as much as 200% of the annual salary
In short, it’s clear that turnover is incredibly expensive– and that’s just looking at the measurable impacts.
The Intangible Effects of Turnover
It’s hard to analyze the full impact of turnover because it can affect so many aspects of the business that we can’t always measure. Consider the following effects of turnover that we can’t necessarily put a number on:
- The cascading effects of other employees quitting because their favorite manager/co-worker left, or they feel the pain of working while short-staffed
- Sinking employee morale due to the turbulence and other effects of turnover
- Hamstrung performance because of open seats, incomplete teams, or the lag associated with bringing new employees up to speed
- Less experienced and knowledgeable employees at the organization serving your customers
- A growing feeling among employees that it’s not a good place to build a career
As you can see, turnover permeates every facet of the business. When the organization is constantly churning and burning through employees, it’s cuts directly into our bottom line and hurts everything we do. So what the heck are we supposed to do about it?
You Have More Power Than You Think
All too often, business leaders act like turnover is just a cost of doing business. We fall into the trap of treating it like a necessary business expense such as rent or property taxes.
What a mistake!
The reality of the situation is that you do have the power to reduce turnover. The Harvard Business Review estimates that as much as 80% of turnover can be traced back to bad hires. Like most things in life, the hiring process will never be perfect – but there are certainly steps we can take to improve the situation here.
People Analytics Change the Game
For decades we’ve relied on resumes, interviews, and gut feel to make our hiring decisions. We look at a number of candidates and resort to glorified guesswork to choose the best person for the job. This is exactly why we have a failure rate of about 50% when it comes to new hires.
In virtually every other facet of business, we have turned to data to guide and improve our processes. We meticulously track our results so that we can find a data-driven approach to success. Why on earth would we not use data to improve our hires?
With people analytics we can actually predict whether someone will succeed in a given role. Better yet, we can understand how to create a supportive environment for each new hire. People analytics like the Predictive Index help us understand what someone needs in order to thrive in our workplace.
These tools have been scientifically proven to improve performance, retention, and drive profits…so why aren’t more businesses using them?
It’s Time to Turn the Tables on Turnover
You have the power to reduce turnover. You can slash the expenses associated with churning and burning talent. You can also drive superior performance and crush your goals by retaining talent more effectively.
The question is…are you bold enough to adopt a new approach to the problem?