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Hidden costs of staff turnover

By November 13, 2023 No Comments

Hidden costs of staff turnover

One of the main reasons why most managers fail is their inability to retain top talent. Lack of positive feedback and recognition for contribution plays a large part in that.

Many senior executives have the attitude that anyone is replaceable, like a pair of gloves, and that they can hire someone even better if a staff member moves on. This is a false set of values, and they are fooling themselves to think so. A good and seasoned employee has huge knowledge of systems, products and processes. They have developed trusting relationships with their clients and colleagues that may have taken years to build.

When you lose a good employee you lose part of your culture and part of your company, which may result in reduced future corporate performance. Your staff are your only true competitive advantage, so seeing key employees walk out the door damages that.

Employee turnover has some obvious costs associated with it, including recruitment fees, advertising, interview costs, onboarding and training and time to get up to speed.

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 staff turnover can drain your hard earned dollars. These include:

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.

Ripple effect. 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 I spoke with recently had his five-year growth plan turn into a six-year plan because of delays due to employee turnover.

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 clients. Dealing with trainees can also be challenging. If you have a lot of unwanted staff 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 demoralised and may decide to move on too. It is also likely to have a negative impact on productivity.

I also think that there is a fifth element. One that is hidden. What I call “gone time”. 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.

More importantly, a person planning to leave could become less productive, and even vindictive, making negative comments to other staff members or customers that may be detrimental to your business. The impact and cost to the business could be that much greater.

Many companies are now turning to technology to recognise great performance and contribution, and to give positive feedback to help reduce staff turnover. Implementing an employee recognition program can help in several ways.

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

A well-executed recognition (and reward) program can act as a monitor on the pulse of the business, and should be able to identify changes in behaviour, so could help as an early warning system.

A positive behaviour recognition program could give you a competitive in the recruitment war, as it shows a potential candidate that you are serious about recognising their contribution to your business.

You can’t stop employee turnover, but you can minimise the impact to the business. If you don’t have a strategy to aid staff retention start clearing a space in your diary for exit and recruitment interviews.

Tony Delaney, CEO Brownie Points


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