Hiring good people is hard, but as every top executive knows, keeping them in the company is even harder. Indeed, most executives can tell a story or two about a highly talented professional who joined their company to great fanfare, made enormous contributions for a couple of years and then left unexpectedly.
Employee retention is often overlooked by many managers who prefer to leave it to their human resource department. They don’t think it’s important: after all if one person leaves you can always get another one to fill the position. This is the attitude of a lot of managers mainly because they do not understand how much losing a single employee costs their organisation.
According to a study by the Center for American Progress (CAP), there are significant business costs associated with replacing an employee. The study found the average costs of replacing employees as:
- 16% of the annual salary for employees holding job positions that earn less than $30,000 or less.
- 20% the annual salary for employees who make between $30,000 and $50,000.
- And up to 213% the annual salary for highly trained employees holding executive positions in the organisation.
The reason why most employers don’t know the true cost of losing an employee is because most of the costs are intangible and often untracked. This makes estimating the true cost quite difficult.
Let’s take a look at some of the costs associated with employee turnover.
- Hiring cost. When an employee leaves your organisation, you will have to look for and hire a new person to replace them. This costs both time and money. You’ll have to advertise the position, go through numerous applications, interview the candidates and then screen for the best person. And even after all this you cannot be sure that the person you pick will be as good as the one who left.
- Onboarding costs. For the first few days the new employee will have to be trained and oriented to their new work environment before they can undertake any tasks. For onboarding to be successful, it has to be done by someone with enough skill and experience. This means that you’ll have to take one of your productive employees out of their station to on-board the new employee which in turn creates two empty spots for a while.
- Reduced employee engagement. High employee turnover affects the level of engagement of the remaining employees. Even if there is nothing wrong with the organisation people will start speculating, which can affect employee motivation. When employees are not engaged, productivity will be affected.
- Customer service and errors. When you bring in a new employee you can expect that the customer service levels will go down. This is because the employee who left was already accustomed to the customers’ expectations; the new one has to learn them. The number of errors will also be increased before the new employee becomes accustomed to their job.
- Lost productivity. Even after the new employee has been successfully onboarded, it can still take up to 2 years for them to reach the productivity of other long-serving employees. Source –https://www.linkedin.com/pulse/20130816200159-131079-employee-retention-now-a-big-issue-why-the-tide-has-turned
So why is retaining staff more important than hiring new staff? Simply put, it’s cheaper.
Retaining staff is important because people are appreciating assets; the longer they stay with your organisation, the more productive they get. They learn the systems, the products and how to work together. At CDL Insight, we understand the need and importance of retaining your staff. Let us help you hold on to your best talents for a more prosperous business.