Every business wants to save money. But did you know one of the easiest ways to save is to treat your employees well? More and more research about the true costs of turnover have showcased the need for an incredible company culture to ensure employee happiness, productivity and tenure. What happens when a business has a high turnover rate?
The high cost of business. How can employee turnover eat up profit? Thriving, successful companies have at their foundation happy employees. As employee turnover rises, profits shrink; thus, the negative impact on a company has a ripple effect. Consider all the avenues recruiting takes to reach a potential new hire. Advertising, phone screening, interviewing, job offering, drug testing and eventually hiring a new person all cost a company time and money. After an employee has been hired, HR and training invest time and resources with the hopes of making every new hire successful. New hires then require time to learn the company’s culture and daily intricacies of their job. It may take a new hire 1-2 years to reach the same productivity of a veteran employee. When companies begin to lose employees, profits drop. This negative impact on a company has a ripple effect that goes beyond profits.
The ripple reaches all employees. As employees leave, others take notice. When employees witness turnover in their workplace, they may disengage with their work. This could lead to lost productivity, and a loss of drive to exceed as they wonder if the grass is greener. The impact of newer employees losing mentors or seeing legacy employees move on shifts moral and the company culture.
The clients and customers suffer too. Besides customer service errors, new employees are often less adept at solving problems. Dealing with ‘rookie’ mistakes after so many perfect interactions with your team can leave a bad taste in the client’s mouth. They will notice when familiar voices have left and been replaced.
Turnover costs real money. A Center for American Progress (CAP) study found some average costs to replace an employee. With jobs with lower pay, there was a higher turnover, costing 16% of an annual salary (so a minimum wage employee would cost about $3300 to replace.) Cost goes up to 20% for mid-range positions: a $40K position would cost about $8000. Senior level bumps up substantially: to replace an employee with a $100K salary, the company shells out over $200,000.
Be proactive. To stop the hemorrhaging, companies need to take action. After all, the old adage still applies: “employees don’t leave jobs, they leave managers.” Start by benchmarking your retention rate. Do research and find proved successful strategies to cut out the guesswork. Don’t kid yourself and assume employees are happy. Solicit their honest feedback, do exit interviews, know your people. Walk around and engage with your team.
Be competitive! Pay and benefits matter. Make the environment one that retains employees through retirement. Don’t get the reputation of being “a great place to get your start.” Be the place that when asked, employees say: “I’m proud I retired from there.”
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