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Cost of staff turnover

By August 6, 2020 No Comments

Too many business managers think a Christmas party (socially distanced!) and a reasonable salary is enough to keep motivation high and staff satisfied.

Think again. Unfortunately, research proves that if you aren’t recognising (with or without rewards) and celebrating your employees’ contributions every day of the year, your business and brand image are likely to suffer, delivering a significant impact to your bottom line.

Surely that’s a statement that’s going to get the attention of even the most notorious scrooge manager? Unfortunately not.

The proof that employee recognition matters isn’t in the Christmas pudding. It’s in examining how people drive profits. When employees are unmotivated or disengaged, they are less productive than their colleagues who are. PWC report that engaged employees deliver up to 57% extra effort than their disengaged colleagues.

When your employees aren’t challenged and motivated, they leave (or worse stay), and this has hidden costs that impact the bottom line.

Just consider what happens when an employee “wastes” just 30 minutes a day. In a 40 hour work week that’s 2.5 hours per week, which represents 24 hours (or 3 working days) in a 48 week year.

This lost productivity of 30 minutes, multiplied by your other disengaged employees, can translate into a very large amount of lost opportunity.

In contrast, when employees are productive or engaged for an extra 15 minutes a day that time can be billed to clients, and without any additional labour expense, the revenue generated will filter directly to the business’s bottom line.

Profits are also impacted when an unmotivated, unproductive employee quits. The company must bear the cost to recruit, hire, train and get a replacement up to speed. Remaining staff also have to pick up the slack which could create stress. These often overlooked overhead expenses are deducted from the business’s gross profit, translating to money coming right out of the owner’s or shareholders pocket. The cost of losing a motivated or engaged employee is even higher and could include damaging costs such as lost client confidence who go elsewhere.

Staff turnover is a big expense of doing business. According to the U.S. Small Business Administration, the cost to replace an employee goes up with the employee’s rank in the company.
For instance, to replace a non-skilled employee can cost up to 50 percent of the employee’s annual salary, whereas Gallup reports that the cost for a manager can be as mush as 150 percent of their annual salary.

So, what can a business owner do to retain employees? Offering your employee’s a bigger pay packet or schmoozing them with a once-a-year function (when we can) isn’t going to fix a retention problem. You must understand employees’ true workplace motivations.

Choosing to invest in your people is choosing to invest in your business. Your staff are your only competitive advantage, and motivated, engaged employees will deliver higher levels of customer or guest experience.

Probably now more than ever, with Covid protocols in place and restricted or home working causing additional stress, managers need to address their strategy for appreciating, valuing and recognising employee contribution.

Engaged employees supported by leaders who communicate positively and openly can be the key to move your business performance from ordinary to exceptional, so plan your strategy carefully.

Brownie Points works with thought leading organisations to ensure that the entire workforce in focused, appreciated, valued, and included.

To discuss how we can help you to maximise the potential in your employees in your business, call us today on +61 (0)3 9909 7411 or email us at

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