Employers Recognize the True Costs of Employee Turnover

By David Cox, SPHR, SHRM-SCP | November 03, 2016

I recently read estimations that it costs $4,000-$7,000 to replace an hourly worker and up to $40,000 to replace a midlevel, salaried employee. The same article estimated that replacement costs usually run 2.5 times the salary of the individual. The costs associated with turnover include lost customers, business, and damaged morale. There is also the hard costs of time spent in advertising, screening, verifying credentials, references, interviewing, hiring, and training the new employee just to get back to where you started.

This expenditure of time and money does nothing to give an employer or an organization a competitive edge. However, despite these known costs and loss of productivity, we rarely hear of businesses doing anything to create a high-retention culture or reduce high employee turnover. The revolving door keeps moving. Employees leave, employers interview and hire more workers, allowing competitors with low turnover to focus more on productivity.

People want to be part of an organization that stands for something that provides them with personal fulfillment and meaning.

Nordstrom’s continues to pride itself on customer service. They maintain a high retention rate by placing more time and effort in the selection and training of employees and aligning the training to support the organization’s mission of providing excellent customer service.

I feel that businesses need to focus on workplace flexibility to stay competitive. The downsized, super competitive work environment of today often forces employees to put their families in a secondary position.

Appreciation and recognition are critical to achieving organizational goals. All people need to feel appreciated. In a survey conducted by Robert Half International, the results showed that employee recognition and communications were the number one and two reasons employees stay in their work environment with competitive compensation ranking fifth.

Studies and surveys continue to show that employees are attracted to training and career development opportunities. If employees feel trapped or that their job has become a dead end with no opportunity for promotion or variety, they will leave.

Recent surveys indicate that as especially true among Gen X and Millennial workers. An Association for Talent Development (ATD) study shows that leading-edge companies trained 86 percent of their employees while average companies trained only 74 percent. Companies that invest in workplace learning yielded higher net sales and gross profits per employee.

Retention is an issue employers cannot afford to ignore. General Ulysses S. Grant once said, “There are no bad soldiers, only bad leaders” to remind us that poor leaders and managers can be a problem and on-going leadership development is critical. If employee turnover remains high and leadership is unwilling to address the situation, the business will be “stuck” with a continuing problem.

David Cox

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