The importance of recruitment - This is something every business knows, but the extent to which this statement is true isn't always reported. With recruitment, we think about finding employees who will contribute, add value and become a part of the family.
This is a great business idea and it should be something all business owners consider. But what about when it all goes wrong? Could high employee turnover actually destroy the business? We're going to investigate today!
Losing an Employee - The Financial Cost
With one search online, you're likely to find a number of studies on this very topic. For example, the Society for Human Resource Management ( SHRM) predicts the total cost of replacing a worker sits between six and nine months of the employee's salary.
Of course, this means that those higher up the chain will be more costly to lose and replace than somebody at the bottom. If we say a manager is earning $40,000 per year, this means the cost of losing them falls anywhere between $20,000 and $30,000.
Center for American Progress suggests that it can cost just under $3,400 to replace somebody in a job paying $10 per hour. The same study stated that a CEO earning $100,000 would take $213,000 to replace. While it's not often that a CEO will walk away from their role, it does show the impact a high staff turnover has on a business.
If you have a team of 30 people making $10 per hour, high staff turnover will frequently lead to costs of around $3,400. Can you afford this?
The Real Cost
How are these turnover numbers calculated? You might think they've been manipulated or exaggerated, but there's a reason they are so high. It's not as simple as watching a staff member leave and then having somebody come in to replace them the next day. When you lose an employee, you need to consider the following.
- Advertising a new vacancy, sifting through resumes, interviewing for the role, screening the top candidates and then making a decision on a new employee.
- Training this new employee and getting them set up with your systems and technology.
- The loss of productivity between one leaving and another entering the business - Will your other workers pick up the load or will the work go untouched? If the former, will your existing employees lose motivation? If the latter, will your clients or customers lose faith in the brand as productivity falters?
- The motivation of remaining staff members as their colleagues and friends continually walk out the door.
- The culture of the company - Do you really want to be seen as the business who can't hold onto employees? The more staff leave, the more prospective candidates start to question the business.
With this in mind, it's easy to see why losing an employee is so detrimental. It's more than just hiring a replacement; it can affect productivity, motivation, engagement, customer service and more.
Tips for Retaining Staff
To finish, here's some advice for keeping your employees.
- Offer training and a clear route of progression.
- Provide some responsibility (this allows them to feel trusted and as though they're really contributing to the cause).
- Make sure all employees have opportunities to provide feedback.
- Arrange staff gatherings and events (you will soon build a business that people want to know and work for).
- Consider outsourcing payroll and HR to save yourself a task and prevent simple issues from frustrating staff.
- Offer benefits to employees.
- Always treat employees with respect and as humans (workers, more than ever, want to enjoy their work).
