By: Amy Matthews
Retention Matters. Finding quality employees can be a tricky process. The rule of thumb in HR is “hire slowly, fire quickly.” Employers should take their time finding the right employees, and then, most important of all, they should focus on keeping them.
We all instinctively know that employee turnover is expensive—but how much are we really talking about? Some studies show the cost of losing an employee can range from tens of thousands of dollars to 1.5 to 2 times the employee’s annual salary.
Jack Altman, CEO of Lattice, has shared a helpful math formula to help calculate the cost of turnover:
(Hiring + Onboarding + Development + Unfilled Time)
x
(Number Employees x Annual Turnover Percentage)
=
Annual Cost of Turnover
To illustrate how this math formula works, let’s consider an example. If you are a 150-person company with 11% annual turnover and you spend $25,000 per person on hiring, $10,000 on each of turnover and development, and lose $50,000 of productivity opportunity cost on average when refilling a role, then your annual cost of turnover would be about $1.57 million.
Now that we see employee turnover with some real numbers, we grow more concerned. In a market where we are experiencing a labor shortage across all industries, it would behoove us to focus on retention. A well-trained employee is a valuable asset to a business. This asset grows and becomes worth more over time, which is why it is so costly to lose a long-term employee.
Where does retention begin? Retention begins with a smart hire. Hire for fit, train for skill (another HR rule of thumb). Outside of highly specialized fields, most people can be taught a skill. Keep that in mind, and hire the person that “feels right.”
Is your company loud and social? Hire the person that can work in that environment. Is your company quiet and focused? Hire the person who can sit still and doesn’t need a lot of social stimulation.
Most employees today are more concerned with finding a company to call home – with benefits that aren’t just for help. They want to be appreciated, consulted, and valued. It isn’t all about the money in 2018. It’s about the satisfaction of providing a job well done and being acknowledged for the same. Since we spend most of our time at work, it stands to reason that employees want to enjoy their time there.
Investing in your employees is a winning bet. The longer your employees stay, the better they understand your business. This leads to stability and a strong culture. It makes the business a preferred place to work. Few things are more attractive to prospective employees than seeing longevity among the existing workforce. Although the era of the 20+ year employment tenure (with the gold watch sendoff) appears to be vanishing, there is still room to make the workplace the “home away from home.” It will benefit the bottom line in the end.
