Business is becoming more and more competitive by the day.
Technology disruptions, increasing client exceptions and, at times, a troublesome economic climate make building and growing a business challenging.
In this climate, the most successful businesses have realised, more than ever, that attracting and retaining top talent is critical.
Excellent employees can be the critical point of difference for smaller businesses that often compete with larger competitors.
But as we all know, businesses will invest heavily in hiring and coaching new staff, only to find that high-performing employees are leaving the company to find opportunities elsewhere.
Business owners somewhat accept that employee turnover is costly in both time and money, but the scale of the impact will most likely shock you.
The Financial Cost of Employee Turnover
Year after year, businesses analyse the financial impacts of employee turnover.
Whilst the financial cost of employee turnover differs based on the seniority and wage bracket, research by SHRM is arguably one of the best indicators.
Their analysis indicates that the employee turnover ratio equates to about 6-9 months in earnings.
For instance, for an employee on $60,000 pa, the cost to the business of that employee leaving can be $30,000 plus!
Why is the cost of turnover so high?
When people hear the turnover cost is 6-9 months' earnings, they assume the figure is massively overinflated.
But the analysis includes obvious costs like hiring and training and a range of less obvious but costly implications.
These costly implications include:
1. Onboarding
The actual cost of training and onboarding a new hire is significant. In addition, it may take several months of additional on-shift costs, similarly to management time to teach and conduct feedback sessions.
In most cases, the training cost will equate to 10-20% of earnings.
2. Reduced Productivity
Depending on the role's complexity, new hires can take anywhere from 6-12 months to reach existing personnel's productivity and skill.
3. Engagement
Turnover often will have severe implications for the broader level of employee engagement.
The ripple effect will affect productivity across the business, which may take a lot of effort to settle down.
4. Errors
New employees that are learning the job are likely going to make mistakes.
Sometimes these mistakes can have an impact that the business has to absorb, including profit and customer service.
5. Cultural Impacts
Organisational culture comes from the sum of its people.
Each time an employee leaves and a replacement starts, management needs to refocus the correct values into the culture, which may suck up considerable time and energy.
Summary
Whilst employee turnover has its effects, if the right leadership is in place, they'll handle the implications, and an immediate action plan will make things right.
Pro tip: Measuring employee turnover and its effects on your business will help to understand what can change to lead to higher employee retention, saving you money.
To stay on budget and manage your team more efficiently, consider RosterElf as your online employee scheduling software. Try today for free.
