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Estimate Your Turnover Costs and understand the impact of Turnover in numbers to your organization by playing with the calculations below. Please note, this Estimator only helps with the quantifying the Turnover Costs without judging good or bad turnover, or business case for taking any people – performance related decisions. Also see, how The Brew has helped in employee retention with its HR Analytics solutions.
Surprisingly, from our observations, most of the times, organizations are clueless about what’s hitting them with respect to turnover. Just to rub it further, the turnover costs represent a substantial quantum of the overall revenues. (As substantial as 12% – 23% of overall revenues, depending on whether the firm is high performer or average performer. See how much is it for your firm with the below calculator). Not just that, the turnover costs attributed to bad hires & involuntary attrition is a stellar number – worth manifolds the turnover costs of voluntary attrition.
And cos it requires collaboration among cross-functional departments (HR, Finance, Operations), with non standard ways to measure these costs, and reporting mechanisms, is the key reason, why turnover costs go untalked about. Most companies don’t have systems & practices in place to track exit costs, recruiting, interviewing, hiring, orientation and training, lost productivity, potential customer dissatisfaction, reduced or lost business, administrative costs, lost expertise, etc.
What do Turnover Costs constitute of ? (Click to expand)
In an insightful article on employee retention, Josh Bersin of Bersin by Deloitte outlined factors a business should consider in calculating the “real” cost of losing an employee. These factors include:
Few big ticket items summing up turnover costs are
- The cost of hiring a new employee including the advertising, interviewing, screening, and hiring.
- Cost of on-boarding a new person, including training and management time.
- Lost productivity—it may take a new employee one to two years to reach the productivity of an existing person.
- Lost engagement—other employees who see high turnover tend to disengage and lose productivity. Also see, Costs of Disengagement.
- Customer service and errors—for example new employees take longer and are often less adept at solving problems.
- Training cost—for example, over two to three years, a business likely invests 10 to 20 percent of an employee’s salary or more in training
- Cultural impact—whenever someone leaves, others take time to ask why.
While the list if not exhaustive, few things which are not included above, are additional overtime costs for peers compensating for the gap, additional managerial bandwidth to compensate & replace the gap etc etc.
Turnover Costs vary basis the talent replacement strategy, When a high performer quits, the loss of knowledge and work output hits the team hard. It’s becomes very difficult for managers, who are responsible for talent replacement, to get the team running & to ensure the work gets delivered.