Turnover is expensive!
- Christine Miller
- Dec 10, 2024
- 3 min read
So why aren't we trying harder to engage employees? According to Indeed, it costs between one-half and two times an employee's salary to replace them. So why are promotions of top talent so regulated? Especially in large corporations, the answer nearly everyone in HR or senior leadership will give you is "budget restrictions" or because "we are only approved to give 2 promotions in the entire organization this quarter."
When you ask any middle manager how this restriction will impact them over the next 3-24 months, they will fire off a cacophony of long term consequences that are arguably more costly than just giving Jack and Jill a fair promotion based on their valuable competencies and earned skillset (a 1-3% increase doesn't count) from the beginning.
Measurable CostS
Recruiting isn't just posting a job online- yes, it consists of the administrative tasks of posting the role on the appropriate job boards, but it often involves tens of hours spent in meeting with HR, recruiting teams and/or external agencies, screening candidates, and multiple interviews with more than one team member. When you account for each of those employees' hourly rates, the number in question begins to rise.
Once a candidate has been identified and hired, they need to be trained, brought up to speed on normal business practices, office standards, and projects that were interrupted because of someone's departure. The loss of productivity would have to be estimated since it impacts so several people across many teams. Keep in mind that we are assuming that this candidate is a good one but of course there's always a chance that they'll turn out to be a lackluster performer despite being a good interviewer.
indirect costs
When anyone leaves a company, regardless of the reasoning, there is a loss of institutional knowledge incurred by the organization. With that also comes decreased morale, employee burnout and the side effects of a departure including dissatisfaction of the remaining team members. In the spirit of customer satisfaction, I would be remiss not to mention the client impacts that arise when an employee leaves to go elsewhere.
Opportunity costs
Talented employees bring innovative ideas and progress. They set the standard for their team mates and encourage momentum that mediocre employees just can't muster. In today's world the loss of innovative talent could be the start of a downward spiral of progress and brand creativity.
Replacements don't happen over night. The lost time between a departure and an eventual backfill certainly delays company initiatives but the residual effects of employee burnout is un-quantifiable. To take it even further, what happens when those people are so burnt-out they ask for a pay increase to justify the added extra hours of work spent?
To make this even more interesting, my colleague, Stephen Smith, calls it "The Wells Fargo Shuffle" and reveals that "employees who leave the company for a competitor and returned often earned more in three years than those who stayed loyal for five." If that isn't a compelling enough reason to treat our top talent well from the beginning, I don't know what else is!
ENGAGEMENT IMPACT
Employee engagement can mean so many things when we talk about retaining top talent:
Workplace Experience programs that enhance productivity
Providing options for wellness to be incorporated into the office
Prioritizing work-life balance
Providing amenities that people need, not just what they want
Fairly & proactively compensating talented workers for the value they are providing to the company; and doing it often
The bottom line is that engagement strategies are overwhelmingly beneficial to organizations and even while our leaders push for greater efficiencies in the workplace, being proactive about your employee engagement is not only an intelligent way of running a company but it will be critical as we continue in this corporate environment.
And sure, sometimes good talent needs to grow by going elsewhere; it can be a mutually beneficial decision in some cases to part ways. However, if you can preventatively mitigate the challenges of losing your talent to your competition, then you should absolutely do that.
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