Hang on to Employees to Boost the Bottom Line
Many companies hemorrhage money in ways they can’t seem to control. High employee turnover is one of these areas in which many businesses struggle. While attractive benefits programs and incentives are the more obvious costs of most organizations’ retention efforts, oftentimes, those expenses could be easily offset by lowering the number of employees who need to be replaced. Getting the boardroom to take meaningful action to address turnover, however, requires data.
The problem is not that executives can’t track turnover costs. With time, effort, and the right tools, tracking those expenditures can be accomplished easily and efficiently. The problem is that, once the issue is brought into the light, many businesses aren’t sure what to do about it.
“Many companies do track turnover. However, just because they know they have a costly problem doesn’t mean they’re taking the right steps to fix it,” says Lori Farley-Toth, regional vice president of employment agency Adecco Staffing USA. “In the haste of avoiding business interruption, many employers sidestep the root of a turnover issue or fail to recruit the best replacements, ultimately inhibiting the success of their workforce. In addition, some businesses see the hard cost of turnover and overlook the soft costs – such as morale or reputation – which can take a toll on the bottom line in the long run.”
Identifying the Problem
Before taking steps to impact the bottom line by reducing turnover, companies must determine the amount of the losses they are incurring. These costs are specific to each individual company and are often impacted by factors such as company culture or benefit offerings, so averaging across verticals or industries can be difficult. Executives who want to improve turnover to impact the bottom line need to drill into their own companies to figure out where the problems are.
“While turnover costs vary by career stage, geography, and industry, companies should look at costs from a holistic perspective,” says Farley-Toth. “Beyond the hard financial costs, there are soft costs that should be considered in order to understand the full impact of turnover on a company. Employers should also avoid benchmarking based on national average turnover costs or rates and instead assess what the ideal retention model looks like for their own business. And then, strategize ways to get there.”
The ways that a turnover problem can impact a company are extensive and complicated. Farley-Toth says it is much like a “pebble thrown into a pond.”
“High turnover … creates a huge ripple effect,” she explains. “Not only do the financial expenses add up, but teams can become disengaged and disgruntled, resulting in decreased productivity, which can hinder sales, customer experience, and other revenue generators. Internal turnover issues can quickly leak out to external audiences, causing a brand’s reputation to crumble. This can circle back to financial results, as it becomes harder to engage new customers, attract new talent, and keep up with business demands while short-staffed.”
Tools of the Trade
The task of calculating turnover can seem daunting, but getting started is much easier if one has the right tools. Adecco Staffing’s turnover calculator is one such tool. The calculator aims to give employers a glimpse at the estimated cost of losing an employee.
“While the financial expense tied to turnover is a great reason to reevaluate a retention plan, sometimes hard costs alone won’t prompt employers to invest time in their turnover issues,” Farley-Toth says. “That’s when the calculator can become a resource for recruiters in igniting a conversation with HR decision-makers on why turnover is becoming a problem, both financially and in terms of soft costs like morale and reputation.”
Once hiring managers know the complete cost of hiring and onboarding an employee, they can send those figures up the chain and inspire action in the boardroom. High turnover, while costly and inconvenient, is a symptom of a larger culture problem that should be addressed. Providing figures for the cost of the symptom may be the first step to convincing the C-suite to treat the larger issue.