The cost of employee turnover

The cost of employee turnover
The average cost of employee turnover is over $235,000 a year. That’s because they always thought about employee turnover related to just hiring a recruiter or just posting a job ad somewhere. Those are real costs, but the damage can be much more catastrophic than that. Think about a high performer, and when they leave, one of the highest costs that you can have is related to the lost productivity of the desk sitting empty. That’s right, all the work that they used to do when they leave gets distributed to other people on the team, or maybe it gets redistributed to you. Think about that from the standpoint of productivity and quality output; all people suffer when they have to take on other people’s roles or other people’s work. And so does the final output and all that starts to generate additional costs for the organization. Another cost that people miss is that they don’t think about the cost of hiring somebody from the outside of the organization into the organization at that high-performing level research shows that can cost a premium of over eighteen to twenty percent of their annual salary. The final cost to think about is when someone comes in from outside the organization; they’re not ready to go at a hundred percent productivity. Research shows it can take anywhere from eight months to two years to get to a hundred percent productivity.

The Different Types of Employee Turnover
Employee turnover, which refers to people leaving their jobs, is a common occurrence in the work environment. Chances are you yourself have left an employer and thus been included in what is known as turnover rate. The turnover rate is the percentage of an employer’s total workforce that leaves the organization during a given period of time. If an employer has 100 employees and 7 leave the organization during the year, then the employer has a turnover rate of 7 percent for the year. Now employee turnover is caused by a number of different factors. These factors can include poor performance, lack of career advancement opportunities, workplace conflict, and even a better offer from a competing firm. In general, employee turnover is problematic for organizations since people leaving create a number of different costs. Replacing an employee can be a time-consuming process that forces the organization to expend resources that could otherwise be used in other areas. In addition to recruiting, selection, and training costs, many new employees need time to become competent in their positions. During this time, mistakes are more frequent, which can cost the employer hundreds if not thousands of dollars. There are two types of employee turnover: voluntary turnover and involuntary turnover. Voluntary turnover is a turnover that is initiated by an employee. An employee may leave voluntarily because he or she received a better offer somewhere else or is leaving the workforce altogether, maybe to stay home with family or go back to school. Whatever the reason, the employee is choosing to leave, and many times the organization would prefer they stay. Involuntary turnover is a turnover that is initiated by the employer when the employee would rather stay with the organization. Involuntary turnover can result from a number of situations, including poor performance, drug use, or an overall slowdown in demand for the organization’s goods or services. Now the common belief is that voluntary turnover is bad for the organization. After all, if employees were performing poorly, they would probably be fired at some point. But is this always the case? Certainly, the impact of losing an extremely productive employee needs to be considered. After all, organizations would find it difficult to succeed without a talented workforce. If talented employees continued to leave, this would result in a knowledge and skills deficiency that would likely affect the organization’s ability to compete in their market. In this case, employee turnover is dysfunctional because the employees that are leaving the organization are valued members of the organization. So if dysfunctional turnover occurs when valued employees leave when we don’t want them to, are there instances when employees leave, and we actually support it? The answer is Yes. Although the general belief is that poor-performing employees are eventually removed from the organization, this doesn’t always hold to be true. With the rate of employment lawsuits on the rise, employers are cautious of terminating an employee without substantial documentation that the employee has underperformed or otherwise engaged in some dysfunctional behavior. Amassing sufficient documentation on poor performance can sometimes take years to accomplish, and even then, there are no guarantees. So when a poor performing employee or an employee who does not fit in well with the culture leaves on their own, it’s generally a good thing for all parties involved. This is the counter to dysfunctional turnover. Functional turnover. Functional turnover can also have a positive impact on employee morale. You may have been in the unfortunate position to shoulder a heavier workload to account for a poor performing co-worker. This is often demotivating and can result in the perception that fairness is not present in the workplace. After all, why should I work hard when I know that my co-worker isn’t, and he still gets paid as much as I do? If this perception of unfairness continues, it can result in high-performing employees lowering their performance or even leaving the organization. So while voluntary turnover can, in some situations, be good for the work environment, it’s still a good practice for employers to deal with underperformers and other problem employees instead of hoping that they’ll eventually leave on their own. This has been The Different Types of Employee Turnover.

AmirArsalan Farhadkouhi

Co-founder of TogoLead & IR Startup Daily. Management and Tech enthusiast.

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