Losing an employee is a huge pain - and it turns out, it's a huge expense too. The cost of replacing an individual employee can range from one-half to two times the employee's annual salary. But, that's just a conservative estimate. Let's just say employee resignations aren't great for your company's bottom line.
But here's the good news: many of these costly employee resignations are preventable. While some amount of turnover is inevitable, there are plenty of proven strategies to boost employee retention at your company. In this post, we'll break down the real costs associated with turnover, as well as actionable tactics you can implement to keep great employees around longer. Let’s dive in.
Before diving into the costs, it's important to understand the retention rate meaning. This is the percentage of employees who remain at your company during a given period. When this metric drops, it signals issues to address.
For instance, when this rate rises and you see too many employee resignations, it triggers a cascade of expenses to replace them. From recruiting to training to lost productivity, turnover takes a major toll on a company's bottom line. Let's break down some of the typical costs associated with refilling an empty position:
Recruiting new employees requires a significant investment of time and money. Costs from job board postings, agency fees, and employee referrals add up quickly. Don't forget about the HR staff's time spent screening, interviewing, and selecting candidates.
Once you've filled the role, there are still more turnover costs to come. New hires require extensive training to learn your processes, systems, and culture. If the employee is in a specialized role, training can be very time-intensive.
New employees almost never reach full productivity right off the bat. Expect lowered output during the ramp-up period as they get acclimated. Their colleagues also become less productive as they take time to train and assist the new team members.
When an employee leaves, their work doesn't disappear - it falls onto the plates of the remaining staff. The higher workload diminishes productivity and job satisfaction. Extra hours of overtime or temporary workers are often required during the transition.
Besides the obvious expenses, turnover inflicts some major "hidden" costs that impact your business's performance and culture.
When someone resigns, it's not just their desk that goes empty. All of their institutional knowledge and intellectual capital walks right out the door with them. Even with training, replicating that intel in a new staffer is tough or impossible. The more tenured the employee, the bigger this knowledge drain hurts.
Turnover is a huge disappointment for the remaining employees too. They're losing longtime colleagues while trying to stay afloat with their own growing workloads. That negativity and stress tank engagement. Constant churn also makes team cohesion and bonding difficult. The cutthroat environment makes retention even harder.
New hires lack the rapport and experience your veteran employees built with customers. Even post-training, expect some dips in quality of service during transitions. Some customers get frustrated with turnover and peace out. Their loss directly dings your revenue.
Vacant roles put big projects on hold and leave leads unfollowed. While you scramble to fill the job, chances are you're missing major opportunities for deals, accounts, or campaigns that would impact revenue. Gotta calculate these missed gains into the overall cost of turnover.
The good news is that many cases of turnover can be prevented by investing in retention strategies. Here are some effective tactics to boost employee loyalty and satisfaction:
Employees will stick around at places where they feel happy, welcome, and valued. Ditch the "take this job and shove it" mentality by building a workplace founded on trust, transparency, and camaraderie. Make sure your teams have opportunities to bond through meals, events, retreats, and celebrations. Show your people their satisfaction is priority #1.
Money talks, so make sure your packages are competitive and appealing. Benchmark rival companies and poll your employees anonymously on the perks and policies they desire most. Revamp parental leave, wellness stipends, tuition reimbursement, and other areas that need a boost. The flexibility and freedom offered by your workplace itself can be a major bonus.
Your rising stars need to know how to move up, whether through raises, promotions, training programs, or bigger responsibilities. Support professional growth by investing in conferences, classes, mentors, and stretch assignments. Make career mapping and progression a joint effort.
Rolling out the red carpet for new hires gets them engaged and invested from day one. Set them up with mentors, give office tours and company history downloads, and establish first-90-day goals collaboratively. Furthermore, check-in frequently, provide ample training resources, and encourage relationship-building across teams.
All work and no play burns out employees fast. Therefore, consider allowing flexible schedules, remote work options, and generous time off. Discourage overtime and respect personal responsibilities outside the office. Furthermore, aim to set the example by taking your own vacations and buffering after-hours work time. A little flexibility goes a long way in retention.
Employee resignations and turnover costs are massive - but many can be avoided. While some attrition is inevitable, putting energy into boosting employee satisfaction pays off big time for your business's bottom line. Do the math on what turnover really costs your organization. Identify your weak spots, then rally your managers to fix them.
Strengthen your culture, empower your people, and make work something they get stoked about. With the right focus on meeting employees' needs, your A-team will want to stick around to crush goals, drive innovation, and help your company progress into the future.