Costs of turnover OR benefits of retention?
While you might occasionally welcome the opportunity to hire new talent and ‘fresh blood’ into your firm, one of your top priorities should always be employee retention. Think about this – according to CIPD research conducted in 2014, employee turnover cost British businesses more than 13 billions pounds in that year alone. Can you afford to contribute to this pot of lost and wasted money? Most of us cannot.
Ok, so it is clear than 13 billion is a huge and abstract number, so let’s break this down to a simpler number. How can this affect you and your business? More importantly, how will it affect your bottom line? Oxford University Economics released a report in 2014 that shows that the average cost of replacing one employee is more than £30,000. More than £25,000 of that? Lost productivity while you are trying to hire, interview and train a new employee. The average time that it takes your new employee, no matter how keen they are, to reach their peak productivity levels is more than 28 weeks.
Can you afford to lose more than £30,000? What if you lose more than one employee in the financial year. What if you lose more than 3, or even more? Would your business survive?
For this reason, you need to cultivate a sense of workplace satisfaction, employee engagement and a positive work environment. Assessing your employees’ intention to stay with your firm is one of the most important things that you can do. When you know more about your company’s employee turnover rates, you can begin to understand them and ideally manage and affect them.
The high costs of employee turnover for any firm
Your organisation might have a really lean and cost effective approach to recruitment, interviewing and training. You might look at the £30,000 figure cited above and laugh, thinking that it only costs you a mere fraction of that bloated number. So, employee turnover isn’t an issue for you… or is it?
It is absolutely an issue for any business. There are many other negative consequences to having a high turnover rate.
- It alerts you to employee dissatisfaction – If your employees are cycling through your firm, this should alert you to the fact that they are unhappy with your organizational culture and with their job. You need to get to the bottom of why they are so dissatisfied with the workplace you are providing. When you know this, you can take measures to change them and increase your overall productivity.
- It hinders your organisational learning through brain drain – Efficient processes and progress in your organisational learning can only be achieved when you have a strong and stable team.
- It will disrupt your working patterns and can prevent progress on projects – Similar to above, when your team is constantly changing and introducing new faces, your progress on important projects will be hindered. Sure, the day to day tasks might be completed, but your long term goals will fall by the wayside.
- Your reputation with clients and potential employees will be damaged – Want to hire the best talent in the future? Want to appear on ‘top employers’ lists and attract clients through these channels? Highly unlikely if your turnover rates are too high.
Understanding your employees’ intentions to stay or go
One factor affects your employees intention to stay more than any other – satisfaction with their jobs and workplace. This is a complex factor. It includes hundreds of different components, things that we have written about extensively in our other blog posts. A positive work environment, support in their position, valuable feedback and a strong rewards system all contribute to an employee’s overall happiness.
That said, different employees all have different drivers behind what compels them to stay with your organisation – and what drives them to leave.
A millennial might have a very different motivation than an individual approaching retirement. The millennial likely values change, complex tasks and constant challenges. They also tend to like an open and friendly workplace that includes team building days and social events.
Members of the so-called Generation Y tend to cite career opportunities and job fulfilment as some of the most crucial components of job satisfaction.
When it comes to the old timer approaching their retirement years? They want strong stability and a sense of reliability. Both are valuable, and both will contribute to the success of your firm – you need to assess how you can engage both.
While you certainly want to discourage constant turnover and improve retention, an employee who simply ‘coasts’ in your organisation for many decades is also not a desirable member of your team. These people have been labelled ‘passengers’ by many experts – they glom onto your organisational success and ride out the successes and failures without really appearing to contribute to either. While they might seem benign on the surface, they can actually be a true liability. They sap you of your resources and take the place – and salary – of someone who could truly be making a difference and helping your firm. Don’t get stuck with a company full of passengers.
Getting the retention balance right
By encouraging your best employees to stay with your firm (and jettisoning those who might simply be coasting), you can achieve the ideal balance of talent on your team. Ideally, your firm will grow year on year, and you will be hiring new employees every year from this point on. When you do, pay attention to ensuring that you maintain a positive workplace that makes your team want to come to work.
Do you have any experience with successfully – or unsuccessfully – maintaining a positive workplace environment? Leave your comments below and join the conversation. Share this post across your social media networks – we look forward to hearing from you.