THE HIGH COST OF TURNOVER

One of the most telling measurements of employee satisfaction with their employer is turnover. Asking employees what they find interesting and exciting about their jobs and employment situation as well as what they find challenging is a wonderful opportunity for employers to learn what is important to their employees as well as why they might consider employment elsewhere. Asking before there are obvious problems may reduce the need for more drastic intervention later on.
Every employee who leaves a company should be given a formal exit interview. This procedure not only allows for a smoother transition out the door, but also enables the employer to collect items from the employee that might belong to the employer such as keys, credit cards, uniforms, laptops, hand tools etc. Specific questions should be asked of the terminating employee related to employee communication, supervision, rewards, training, job satisfaction, and certainly what is the reason they are leaving. If the employee is leaving voluntarily and the employer is simply guessing why, nine out of ten times they will be wrong!
Just like the saying it is cheaper to keep your current customers coming back than it is to win new customers, keeping good employees is less costly than the costs associated with employee turnover. Turnover is costly to any size business and involve direct, indirect and hidden costs. Direct costs might include outplacement services, severance pay, advertising costs, recruiter fees, background checks and drug testing. Indirect costs can include the time spent writing ads, interviewing candidates, conducting new employee orientation and training as well as lost productivity of team members, managers and support staff. Hidden costs include mistakes made by the new employee as they get up to speed, lost sales or service opportunities if the new employee doesn’t know what to listen for or the right questions to ask customers, reduced morale, lost customers, reduction of customer referrals, potential increased unemployment benefit costs.
The Society for Human Resource Management (SHRM) calculates that all costs associated with losing an employee add up to about 150% of the employee’s annual compensation. You can do the math to see how costly it is to lose even an averagely compensated employee.
Many employers feel that the main reason good employees move on is money when studies conducted over the last twenty years report just the opposite. Providing adequate compensation appropriate for the job, the industry and the location is important but being an employer of choice and having employees feel good about their company, boss and job is more important. None of the 2005 Fortune Magazine Top 10 ranked small companies were scored that way by their employees because of pay. #1 Genentech was cited for having great products, #2 Wegments was cited for sending all new employees to meet personally with the CEO, #3 Valero was cited for their excellent employee volunteer efforts and the list goes on. Employee ownership and volunteerism were cited as the overwhelming reasons employees stay with Colorado’s top rated small companies CH2M Hill and PCL Construction.
So what do employees want? SHRM suggests that more important than money is pride in where they work, appreciation, opportunities to learn and grow and respect. Companies that wish to become top talent magnets need to start at the top by having the owner or CEO committed to excellence. The company mission and values need to be established and clearly and consistently communicated; the company should earn good press, be a good community member and involve employee at the highest level of decision-making.
Want to learn more about reducing turnover and becoming an employer of choice? Join the consultants of HRMC on May 31 from 11:30-1:00 at the Magellan Center for lunch and a “how-to” presentation ($30.00). Register by calling HRMC 303.774.9445 or E-mailing rbowman@hrmc.net.

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