Seriously … They Are Leaving!
Even in these economic times, employees are quitting their jobs and it may be costing more than you know!
At a recent cocktail party, I was pleased to hear a change in the buzz. Finally, the conversations were taking a break from all the political campaigning. Instead, the chatter was focused on the economy. Several debated whether we were headed for major inflation or deflation. Others underscored the need to create more jobs. Many nodded in agreement to the various comments: “People are lucky just to have a job.” “Employees should just hunker down and ride out the storm.” “We sure don’t need to worry about turnover right now – no one is going to leave in this bad economy.”
Really? As usual, I had to chime in … people are changing jobs at high levels and I predict it will get worse. The Bureau of Labor Statistics indicates that across all sectors, annual voluntary turnover is tracking at a bit over 20%. That is pretty significant and pretty costly–the U.S. Department of Labor (DOL) estimates that it costs a company $370K to replace one employee with a base salary of $90K per year. This “replacement cost” number is much larger for: (1) top-performers, or (2) more senior positions.
Based upon the research, consider a company with 100 employees and an average $90K base salary:
Replacement cost/person= $370,000
20% of 100 employees= x 20
Total replacement cost for one year= $7,400,000
That seems astronomical to me. So even if the DOL is off by 50%, that number is still significant. For a 100 employee firm, that could well wipe out the net profit for that year. How much do you think it is costing your organization?
A key basic for companies is to hire the right people for the right positions and then treat them right so that they perform and stay. Leaders need to realize that employees leave managers first and companies second. Although they claim money or opportunity as a cause when asked in an exit interview, the real cause is their manager. The real reason is captured through post interviews six months later – not feeling appreciated by my manager.
By providing human capital analytics and training for leaders and managers, companies can minimize the turnover and save those expensive replacement costs. To me, there is nothing more rewarding then creating positive and high-performing organizations.