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Hidden Costs of EmployeeTurnover

By September 13, 2011 May 6th, 2020 No Comments

Employee turnover has some obvious costs associated with it, including recruitment, training and salary. However, every time an employee leaves, there are a variety of hidden costs you might not have considered. While you might not be writing a cheque for these costs, here is how turnover can drain business dollars according to a recent article by Toronto-based human resources consultant Tom Armour. He talks about:

Ripple effect. “Staff turnover has an impact on the peer group, as well as the management chain, making everyone less effective. Co-workers need to pick up the slack, distracting them from achieving their own performance goals while managers need to devote time to finding a new employee”. One CEO Tom spoke with had his five-year growth plan turn into a six-year plan because of delays due to employee turnover.

Slippage. “When an employee is missing, the work that isn’t getting done has a price attached to it. Lost sales, production delays and lags in new product introductions all cost your company money”.

Customer loss. “When a knowledgeable employee leaves, taking experience and customer service ability with him or her, that can have an impact on customer satisfaction. Customer commitments are often not met, and the company loses important customers. Dealing with trainees can also be challenging. If you have a lot of unwanted turnover, customers can get annoyed or begin to lose interest in your business.”

Lost credibility. “Turnover is a cost to management in two ways. Management can lose credibility when it creates an environment with excessive turnover, and existing employees can become demoralized and decide to move on”.

While we agree with Tom’s comments, we would suggest that there is a fifth element.  That is the time when an employee has mentally left but has not yet resigned or physically left his or her job, and it goes beyond the Ripple or Slippage effect.

With hindsight this can be easily seen. Time off (sick leave, dental appointments etc.), arriving late and leaving early may all be signs of disengagement and someone looking for a new job.

Importantly, a person planning to leave might become less productive and behave in a way that is detrimental to the business, making negative comments to staff members or customers, or by undermining management policy. The impact and cost to the business could be that much greater as a result.

Implementing a reward and recognition program can help address these issues in a number of ways.

* Firstly, a well-planned reward and recognition program will help to motivate and engage staff, improve morale and customer service.  This is especially true in a business that is not able to compete purely on monetary based salary packages.

* Secondly, a well-executed reward and recognition program monitoring specific KPIs could act as a barometer on the pulse of the business, and should be able to identify changes in behaviour, which would help as an early warning system.

At Brownie Points we believe that a reward and recognition program (which should pay for itself out of pre-determined improvements to the business), can be a major asset to a business of any size. Improved staff motivation, increased customer service and reduced staff turnover are all attainable.

You can’t stop employee turnover, but you can minimise the impact on the business.



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