"I remember almost leaving my company in 2006. I was lying in bed, dejected and upset. My workplace mentor called me and talked me off the ledge. He told me I was highly valued at a time I was feeling undervalued. Over the course of our deep conversation, I realized that I had likely misinterpreted a situation and I needed to get out of bed, stand back up and not be company roadkill..."
First, let’s take a look at the hard costs of high turnover. What is a company going to spend in order to compensate for low retention rates? According to a study by the Society for Human Resource Management, employers will need to spend the equivalent of six to nine months of an employee’s salary in order to find and train their replacement. Doing the math, that means that for an employee salaried at $60,000, it will cost the company anywhere from $30,000 to $45,000 to hire and train a replacement. Other research shows that the average cost could be even higher. According to the Center for America Progress, the cost of losing an employee can cost anywhere from 16% of their salary for hourly, unsalaried employees, to 213% of the salary for a highly trained position!
1. The Cost of Training and On-Boarding
Training an employee is not free, and is often relatively expensive. Training seminars and classes can cost businesses thousands of dollars, and they can also result in the understaffing of other departments, as training sessions will often need to be led and monitored by other employees of the company.
2. Interview Expenses
Conducting interviews is a long and tedious process. Many expensive mistakes can be made here in picking the wrong candidate. In order to lower turnover rates, it’s important for businesses to ensure that they are hiring the best candidates for the job, individuals who will be more likely to stay and grow with the company for an extended period. The interview process can include travel expenses if candidates from out-of-town are being considered, which add up quickly. Outside of monetary expenses, the interview process takes immense amounts of time, with company leaders needing to take hours out of their day to conduct the meetings. Much like training, time spent on interviews costs the business by way of lost productivity.
3. Lowered Engagement
I can’t tell you how many calls I receive from people distraught when they see good people and friends leaving their companies. High turnover rates will most definitely be noticed by staff who remain employed by a business, and this can often result in lost engagement on part of these employees. They will often feel that the ship is taking on too much water if too many people leave, overworked, and thus less satisfied and less motivated at work.
5. Productivity of New Hires
When a company is faced with the need to hire new employees, they also face a severe decrease in productivity. As discussed before, remaining employees may lose focus due to high turnover, however the productivity of the new hires is also an issue. According to business expert Josh Bersin, of Bersin by Deloitte, a new employee can take up to two full years to reach the same level of productivity as an existing staff member. Lately, I have been thinking of the workplace like a blended family. Having new stepbrothers and sisters, uncles and cousins come into the ‘work’ family can be a lot of fun, but also can be riddled with new and unexpected challenges, turf wars, feelings of displacement and hurt feelings if not integrated and on-boarded right.
6. Impact on Morale & The Gossip Machine
When other employees leave, the remaining staff will wonder why and the gossip machine commences. If an employee leaves for a higher salary, other employees may interview for other higher-paying positions elsewhere. According to Forbes, employees expecting a raise can expect to see an average of 3 percent, however being recruited for or finding a new position often results in a 10-20 percent raise, meaning that the company has to further compensate for lost staff members. Additionally, if employees left unhappily based on workplace culture issues, they will often communicate with their friends sharing a brighter life/opportunities available on the other side.
7. Less Effective Service
When hiring for an employee that will be interacting with your customers; as a new hire they will generally not know the answers to typical questions they will face on the job. For example, it might take longer to resolve common issues, and it could potentially result in the loss of customers.
So what is a company to do? After all transitions are a given in any company.
Perhaps we can learn something from youth in the New York City schools.
Professor Jonah Rockoff researcher out of Columbia University illustrates that mentoring not only reduces employee turnover, but also improves the skills of new employees, increasing the amount of productivity that you will see in the newly on-boarded staff members.
After studying the habits of students in New York City schools and how they perform with and without mentors, Rockoff found that students who received mentoring had the best performances out of all of the students observed, and that they had a lesser chance of dropping out than students who were not mentored. These observations can be applied to business as well, with the concepts of mentoring remaining the same. Rockoff states that when an employee receives specialized attention and training from a mentor, they will perform better on the job, and will be much more likely to stay in the workplace. These concepts have been proven in corporate giants like Google, who have one of the lowest employee turnover rates in the world, and also implement one of the most effective mentoring programs.
There are many costs associated with high turnover, but there are a multitude of ways to reduce it. Mentoring is one of the most effective, cost efficient ways of increasing employee tenure benefitting the mentor, the mentee and driving significant retention.
"So when my mentor called me that day from his business trip in Ohio, we had a deep and honest discussion. I deleted the resignation letter I had been drafting, dusted myself off, worked through the issue and continued loving my two-decade career for many more years."
Exerpts taken from Twomentor, LLC.