Employee Turnover

Society for Human Resource Management (SHRM) studies show that the cost of employee turnover is estimated at 33% of that employee’s compensation. I’m sure your first reaction is that number seems high, so let me clarify.

 

The study divides these expenses into two categories: hard (33%) and soft costs (67%). The hard costs come from recruiting costs, overtime, temporary employees, testing and background checks. The soft costs are a result of lost productivity, leadership interviews and lost training knowledge.

 

Let’s do the math. Say your average employee earned $39,000 per year and your company lost an average of 10 employees annually. This is a company expense of $128,700. Obviously, these costs can be a competitive disadvantage.

 

Case Study: One company in the commercial real estate industry hired me to understand the root cause of their high employee turnover. Their entire staff was about 50, so I set up interviews with about 15 individuals.

 

The anger was palpable; the interviews were filled with blaming others, and discussions of looking for new jobs. It is interesting to note that the company was well known in their field and very profitable.

 

The president was a charismatic, highly compensated salesperson. As I learned, managing employees and employee engagement was not only not a priority, but it was also more of a nuisance.

 

One of the lessons we’ve all learned in life is that actions speak louder than words. And although he would never admit employee engagement was not a priority, all the staff knew by his actions, it was not.

 

After we presented the report of our findings, the company chose not to allocate any resources to improve their employee engagement. If unaddressed, turnover costs will continue to erode your profits.

 

In subsequent articles, I’ll discuss techniques you can utilize to reduce turnover and maintain an engaged, and profitable workforce. To be clear, there are no silver bullets. But there are tried and true processes that increase your odds of success. We’ll begin with hiring.

 

Excerpt from The Extraordinary Business by Mike Hill

 

Write to Mike at Mike.Hill@TeamTrenton.com