Turnover and Retention: The True Costs to Business

“To win in the marketplace you must first win in the workplace” – Doug Conant

One of the most derogatory perceptions that your business can have is one of high employee turnover unless it is an industry standard. Case in point, sanitation specialists. Individuals who clean port-o-potties will always have a high turnover rate. Just the nature of some jobs.

However, for the vast majority of companies and their workplace environments, having high turnover in any industry, occupation or location immediately leads to negative thoughts. Some examples and the perceptions that come with it are:

  • High turnover for students at a private school = bad teachers or curriculum is brutal. 
  • High turnover of doctors at a hospital = staff is not supported, low salaries and outdated equipment. 
  • High turnover of athletes at a college = coach doesn’t care about players or school stinks. 

Whether any of the above is true or not, the perception is tangible and makes it difficult to recruit talented individuals, leaving you with having to overcome these hurdles.

The same negative perception of your business can manifest if high turnover rates affect it. And while perception matters, let’s not forget about the significant hard costs of consistently recruiting, onboarding and training individuals. As well as the soft costs of tribal knowledge leaving the company and how high turnover has a negative impact on company morale.

While these costs do not seem to be a substantial cost to the business as singular items, when you add them all up they put quite a dent into the bottom line. Here are some of the costs of high turnover that affect typical organizations:

Hard Costs 

  • Ads for open position
  • Talent acquisition agency fee or internal recruiting team salary
  • Interviewing team time
    • This includes Interviewing the prospective employee and discussions about the prospect
  • Equipment
  • Training
  • Internal Training Team time
  • New Employee Time before creating value
  • Current employee time replacing the work of the departed employee
  • Oversight on additional licenses of tools for departed employees
  • Exit interview time
  • Equipment retrieval
  • PTO bank payout

While you can put a numerical value on all of these, some of the soft costs might end up being bigger blows to your organization.

Soft Costs

  • Tribal knowledge
  • Opportunity loss
  • Lost sales
  • Cultural impact
  • Decrease in morale

One of the reasons why this area is such a mystery is that organizations do not have the current processes or tools in place to collect the data on what the true cost of losing an employee is. Finding a way to measure this through tools or a standardized process is crucial to quantify it and receive support from different levels of management.

Alright, we’ve established this is a significant cost so how do we fix it?

Before we can take a look at the “how,”  first we need to understand the “why?”

This is why exit interviews are crucial to your organization. The ideal situation is to have them conducted as in-person meetings since survey answers can be rather bland and surface-level. However, if a survey is all that they will agree to, then it is better than nothing.

In these exit interviews, you want to look for commonalities among people leaving specific departments and the company as a whole.

  • Are they leaving for promotions and better pay? 
  • Are they leaving for more flexible working environments? 
  • Are they leaving because of management or a toxic work environment?

If they are switching fields or industries, the data should be weighted less or viewed through a different lens than if an employee is leaving for a direct competitor and is staying in the same role or received a promotion.

Having a productive employee leave for a direct competitor to perform the same tasks, in the same role, for a minor raise can be a real gut punch. But sometimes feeling that pain is what it takes for employee retention and turnover to be taken seriously.

An enormous amount of good, clean data can be gleaned from turnover and retention issues.

After consolidating and analyzing the data, you can make informed decisions on where to make the necessary changes.

High turnover rates need a deep and thorough inspection. At Prescriptive Profits, we can ensure you are not going to expect the results you find, unless of course we are talking about sanitation specialists who always have high turnover rates.

If you aint sucking shit out of a port-o-potty and you have high employee turnover, it’s time to face the music and figure out why.

Let’s get to work.

Prescriptive Profits #31