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Improve your P&L through increased staff engagement and lower turnover.

It’s a little known fact that employee turnover costs U.S. businesses $30 to $35 billion per year.  Even in this tough economy, 20 to 25% of workers are planning to change jobs in the next six months. Recent surveys conducted by the Society for Human Resources Management (SHRM) have found that worker dissatisfaction, distrust and resentment are at all time highs.

So, what’s your share of the cost of turnover?  Will your key talent be exiting all too soon?  Is morale killing productivity? 

When you look at the immense costs of these dynamics and compare them to the very modest costs to correct them, the returns on your investments can be significant.

Let’s first identify some of the expenses that make up the cost of turnover.  These expenses fall into three categories:     

Recruitment, Onboarding/Training and Systems.

recruit train systems
Recruitment On-Boarding & Training Systems
  • Advertising
  • Printing
  • Travel/Relocation
  • Bonuses
  • Reference background and credential checks
  • Internal/External recruiters
  • Significant time for sifting, screening, interviewing, re-interviewing, wooing and orchestrating logistics
  • Pay for training (zero or little productivity)
  • Mentoring
  • Setting up security and all relation I.T, function
  • New equipment and materials (badges, keys, uniforms, computers, cell phones)
  • Significant time involved with multiple parties signing papers, explaining benefits, inputting data, etc.
  • Loss of productivity
  • Overtime & Temp Services
  • Morale
  • Brain Drain
  • Client Drain
  • Potential Lawsuits
  • Unemployment
  • Off-boarding former employee*
*Reversing access *Severance and   paid time off *Benefits/Cobra *Legal Releases *Exit Interviews
Putting Turnover in Context

When you add this up, turnover can cost you anywhere from 40% to 100% of the annual salary for a key employee that is being replaced and perhaps as much as 200% for a top executive. 

A simple illustration can explain the ROI of focusing on retention:

  • Assume your sales force of 20 people earning an annual average salary of $80,000 is experiencing an annual turnover rate of 25%.
  • This means you'll replace 5 sales staff per year. Assuming a 50% cost of salary to replace them, the cost of this loss is $200,000 annually.
  • Now, if you reduce your turnover to 15% you will only replace 3 per year at a cost of $120,000. You just improved your bottom line by $80,000. Or you can now go out and hire another salesperson. Either way, you're well ahead of the game.
So, what's a company to do?
You can get big returns on small investments because most of the resources you need to reduce turnover are already at hand.  And, what resources you don’t have can be attained with comparatively small outlays.
Your Managers: Frontline Keys to Engagement

Engagement can be defined as: "A heightened emotional connection that an employee feels for their organization that influences them to exert greater discretionary effort in their work.”  Engaged employees are the most productive employees.

So, who’s most responsible for creating that critical connection that leads to greater effort?  Right – your managers.

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