We all know turnover is something we don’t want, but do we really know what the problem actually is and why we consider it such a bad thing? Most small businesses should be concerned because of the simple fact that turnover is expensive. When you hire an employee and then they either leave or you “let them go,” you’re out the following costs.
Costs of Employee Turnover
Recruiting Costs: These vary depending on the size of your business. According to a recent article on About.com, “a grocery store that is constantly recruiting and hiring cashiers doesn’t have a huge incremental cost to recruiting one more person. But if you’re looking for a Chief Information Officer – a highly specialized job – you may have to hire a headhunter, and that can cost you around 1/3 of the final annual salary. That’s a big chunk of change.”
In addition to the price of hiring someone to hire someone else, there are even more costs associated with the time it takes to review resumes, interview candidates and lastly, make a final decision. These are precious hours that your staff could be spending on other things.
Training Costs: Companies typically have training programs in place for entry-level positions. It’s their first job out of school and although most businesses would prefer a candidate with some existing experience, we all have to start somewhere. In other words, training programs cost money to facilitate. However, for a higher level position, it’s assumed that they know what they’re doing and programs aren’t normally offered. Even in these cases, the time it takes to set up computer equipment, complete orientation and answer the numerous questions your new employee will have, all falls into the training costs department.
So, what can you consider as preventative measures to avoid turnover in the future?
- Collect turnover data
- Perform employee check-ins and quarterly reviews
- Practice transparency
- Provide a comment/suggestion box
Ideally, turnover is a problem you’ll never have to deal with. Put these costs into consideration and take action towards preventing it in the first place.
This is only the beginning. We wrote an eBook all about the sources of sales turnover. Check it out – it’s free!