Save on employee turnover costs by following these retention tips
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Employee attrition is not a major element in CXO performance evaluations; in fact, in some cases, we tend to assume that turnover will run high. But high turnover and attrition rates can affect a company's ability to hire, as well as its bottom line.
To illustrate, here are some statistics about the costs of employee turnover that have been gathered across companies and industries:
Average cost to replace an $8/hr employee = $3,637 (Coca Cola) to $11,609 (Cornell) with an average for the 10 lowest* being $5,505 (* This means that for the 10 companies in the survey that had the lowest cost per employee, when it came to attrition and replacing employees, the average cost when divided among these bottom 10 still came out to $5,505.)
Average cost to replace a $30,000/yr employee = $4,800
Average cost to replace a $50,000/yr employee = $9,850
It seems daunting, doesn't it? But there is the time lost in productivity because other employees have to cover for the one who has left, as well as the time spent in advertising, recruiting, interviewing, training, and so on.
Another cost to consider is the toll such changes take on morale. I worked for an aerospace firm that lost almost everyone in our department to a competitor down the street in a one year time period. We were constantly hiring and breaking in new people. The situation was so bad that we called ourselves the "farm team" for the other company -- and the word was out in the street. In this case, employment conditions weren't necessarily any worse between the two firms, but the one that scavenged its competitor for employees offered better pay and promotions.
C-level executives need to be as cognizant of these factors as their employees are. If they don't pay attention to attrition trends, they might suddenly find themselves in situations where critical deadlines on projects get missed because one or two mission critical people have decided to leave the company.
Not feeling appreciated is one of the primary reasons why employees decide to go elsewhere. So, too, is lacking a sense of purpose in one's work. In both areas, it is the responsibility of the manager to orient staff to its work and also to the purpose of that work -- and why that work matters to the company.
Other reasons why employees quit companies include: 1) being dictated to by their managers instead of being invited to give their opinions and to work in a team environment; 2) being under-challenged; and 3) enduring highly stressful working conditions over prolonged periods of time.
"In our own industry [fitness centers] we focus a lot on our members," said Tex McIver, Senior Partner, Fisher & Phillips LLP, and Bobby Verdun, Senior Partner, Atwood Consulting Group LLC, in a 2013 IHRSA article. "We want to make sure they are happy, have many options and the facility is what they expect. But an aspect of the business that can go overlooked is your employees. [You can] create a positive work environment. In addition, paying employees a fair income, and finding creative ways to acknowledge and encourage good performance in the work place are keys to employee retention....Hold managers accountable, too. Examine whether front-line managers are contributing to the attrition rate. Train those managers so they understand what leads to higher retention and reward those who get good results."
For managers eager to succeed in achieving high retention scores, this means making good hires in the first place, getting rid of employees who are "destructive" to general morale or are poor fits for what they are doing, and finding "best fit" employees who enjoy their work. It also means keeping an open door policy and running your department in a way where everyone feels he or she is an integral and valued part of the team.
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