A 2018 study confirms that employee turnover costs can range from 50% of the annual salary for an entry-level employee, to 125% for a mid-level employee or manager, to 200% for a senior manager or executive. Turnover at any level is hugely expensive in actual dollars to replace the person, lost productivity, employee morale, and good client relations.
And the most common reasons cited for employee departure? Lack of career development opportunities (22%), work-life balance (12%), and supervisor’s behavior (11%).
45% of the most common reasons cited by ‘former’ employees are well within a company’s scope to impact in a positive, win/win fashion. So why wouldn’t you tackle this?
Here’s a key on how to change your perspective. Your employees are your most valuable asset. Without them, literally nothing gets done. You’ve invested hundreds of thousands or millions of dollars in capital equipment. You then perform routine maintenance and repair on literally every piece of this investment equipment: computer, manufacturing equipment, trucks & cars, HVAC, etc. Why? So it doesn’t break down. You need it to run at maximum efficiency as much of the time as possible.
So, why not do this for your people assets as well?
In today’s tech-driven world there is access to a huge variety of training tools to continue employee development. Some are discipline-specific. EG: employee health & safety, environmental compliance, Six Sigma, etc. Gone are the days when you had to send employees away to a seminar at an off-site location.
And what does the company get? An employee who is more confident that you value them, that their work is meaningful, and that they are building a career with your company.
Another way to retain them: pay them as well as you possibly can. Of course, all companies have to operate with a budget. But, too many times, the decision on a raise or bonus is made solely on a percentage versus what the actual dollar cost differential is. EG: “Fred”, earning $50k/yr has done a great job. The dollar value he’s contributed to the organization is easily in deep 6 figures. The budget stipulates that salary increases are capped at 3%. That’s an increase of $125/month. As his supervisor you know he has earned a 10% raise. That’s an increase of $416/month; a $291/month differential between the stipulated max raise vs. what Fred earned.
And here’s another outside-the-box approach: do both! Reward the employee with the maximum raise allowed by the budget. Then ‘add’ to that the opportunity for professional training. EG: there are management training courses offered by some firms with a live instructor which have a monthly cost of less than $200/month. Other courses are available without an instructor, self-directed, for only $750-$1,000. In this case, the employee & the company both benefit.
So, which costs the company more? The $291/month differential between the raise cap vs. what he earned, or, the loss of Fred and the subsequent cost to replace him? Using the study cited above, it will cost the company approximately $25,000 or $2,083/month to replace Fred. You do the math.
What benefits the company more? A happy, productive employee who stays with you for years? Or, dealing with revolving door turnover?
To quote Sir Richard Branson: “Train your people well enough so they can leave, but treat them well enough so they don’t want to.”
Training & treating them well can take many forms.