You may not realize it, but employee turnover can have a large cost associated with it. Although you may be able to replace that $50,000 a year salary with someone who will work for $40,000 a year, you’re probably not factoring in the hidden costs. Here are 5 hidden costs of employee turnover:
1. Recruitment: This combines the cost of hiring a new employee, including the advertising, screening, interviewing and hiring. Someone has to do all of these tasks – If you’re a small business owner, chances are that this will fall on you. If you’re a larger company, you can punt this to HR, but it will still negatively impact your business in other ways.
2. Training & On-boarding: Not only will someone need to take time out of their day (or more likely, several days) to train the new hire, but someone will also need to manage the new hire. Is this person working with clients or just internal employees? Regardless, it will take some time before they are fully up to speed.
3. Productivity: Hopefully you have additional staff to help fill the former employee’s role until you can replace them. While your staff takes on these additional responsibilities to fill the void, it can have a negative impact on your business. Your clients won’t get the same level of attention or production that they’re used to and they may become dissatisfied.
4. Culture and Staff Morale: This ties in with Productivity. The staff that is still working with you has to take on new responsibilities to counteract the loss. Over time, these employees may begin to feel resentful and undervalued (especially if you aren’t giving them a raise or bonus for taking on more work). The longer they stay in their overworked roles, the harder it will be for you to regain their trust and engagement levels.
5. Knowledge: This is especially true if you just lost a long-term employee. Whether the employee was with you for 2 years or 20, the company loses that individual’s institutional knowledge when they leave. Institutional knowledge can only be acquired through on-the-job experience; it’s not something that you can simply train a newcomer to have.
So, what can you do to avoid employee turnover? I’ll cover that in my next blog!