Employee Turnover Comes At A Cost
The cost of employee attrition and turnover is the secret little back office problem that has become a global issue in every organization; well nearly everyone. Looking at it from a pure economical point of view, employee turnover creates not only employee disruption in productivity but there is a true cost every time an employee walks out the door.
What Does It Mean?
When an employee resigns, is terminated, retires or simply takes another job in a different organization, the company loses a true asset; regardless of the reason why they leave. We do know today however that in looking at the Gallup Poll conducted in 2016 that 50% of employees that leave an organization do so because they are trying to escape a bad manager. That is a huge wake-up call to leaders today.
Turnover rates in the hospitality, retail, customer service and sales arenas is as high as 30%-40%. Normally these jobs are designed today to be transient and allow for minimal investment of time and resources by the organization, assuming the employee will only be there a short time. Again, this should be a blazing Las Vegas style neon sign to leaders in these career fields. Is there a better way of doing business in these job categories?
Turnover Statistics and Causes
Today, employee turnover costs are estimated to be between $5,000 and $30,000 for salaried employees hired in the $30,000 to $70,000 salary range. The cost of minimum wage employees is as high as $2,500 every time they walk out the door. That is real money! The annual cost to businesses today is $360 billion a year due to poor leadership, bad managers and failures to lead. This however is not the only reason. Harvard Business Review provided the following statistics based on recruitment decisions.
• 36% of new hires fail within the first 18 months.
• 40% of senior managers hired externally fail within 18 months of being hired.
• On average the cost to replace them is approximately one-third of their salary.
Other reasons employees leave;
• Low morale between employees, often due to the ongoing departure of team members.
• Low productivity of newly hired employees. As the constant turnover continues, new employees are normally not able to be as productive as seasoned employees.
• Management issues. As stated earlier, poor supervision, failure by managers, leadership ineptness does not go unseen for soon forgotten by line employees.
• Better jobs elsewhere. Sometimes for higher pay, but more often it’s workplace satisfaction. Leadership is better, team participation is in play, work productivity is acknowledged.
• No growth in current position. Today’s employee needs to know they can do more and do it sooner than earlier generations of workers. If there is no movement or potential for advancements, an employee will leave.
• Forbes reports that employees who stay in companies longer than two-years get paid 50% less. Incredible!
Again, all of this should be a viable wake up call to leaders today. We can look at statistics from a variety of ways; is it a recruitment problem, is it a leadership problem, productivity problem? is it a failure of some unknown reason? Maybe it’s all of them.
What Can Leaders Do?
Look at this from a basic needs perspective. Maslow’s Hierarchy of Needs is a great place to start. Make your employees feel safe in all their needs. Shelter, food, security, the basics needs a person must first survive and then thrive. Employees need to feel their pay and benefits are sufficient to meet needs they have in housing, providing food and a safe environment for them and their families. Meaningful work assignments, team atmosphere and productive efforts recognized.
When employees are allowed to use and apply their personal skills and interest and finally recognize accomplishments with public and personal recognition. Provide positive, empowered leadership at every level. This will grow employees to be proud and loyal, and stay!
Leaders Still Own the Problem
At the end of the day, leaders still own this problem. Mentorship, training, providing positive work environments and providing the tools and resources they need. Providing your employees, the ability to thrive is the key to keeping good employees. That is the call to action for leaders today. We are ok when poor performers move on, the ugly truth however is they are the ones that rarely leave.
We push out the ones we need and want to keep because we forget they are the employees we need to engage most often though rarely do. The sooner leaders understand the importance of a total management perspective to employee loyalty, turnover and the costs associated with both, the sooner every level of the organization will be a part of the solution.
For more information as to helping your leadership teams grown, learn and be better prepared to meet your leadership challenges today please book Matthew Brandt for a corporate training event today!