If you have ever lost a key employee, you probably appreciate the impact it can have on the business, and new research shows just how much it can affect the bottom line.
Replacing top talent can cost a business two to three times the outgoing worker’s annual salary, according to a new study by The Dream Collective and reported in a recent Financial Review article.
And if you are not looking after your top performers, someone else surely will!
“With high performers delivering up to 400 per cent more in productivity than the average employee, and taking fewer sick days, losing even a few of your star workers can have an astronomical impact on your bottom line,” said The Dream Collective’s founder, Sarah Liu.
The high estimated financial impact of replacing a star employee covers the cost of hiring, on-boarding, lost productivity and poor engagement.
Gallup has repeatedly stated that to replace an employee costs around 150% of salary. Using the example of an employee earning $200,000, The Dream Collective’s analysis suggests that replacing them could cost up to $800,000, which includes about $50,000 for hiring and $150,000 for the six to nine months it takes to train the replacement.
Lost productivity will cost about $200,000, assuming it will take about a year for the replacement to be trained to the same level of productivity as the previous employee, making a total loss of about $400,000.
“New hires simply aren’t as productive as the person they’re replacing and may take a year or two to get to that level,” Ms Liu said. It also takes time to build trust with clients.
There is also the ripple effect a departure has on remaining employees.
“When a star performer leaves, the rest of the team start to wonder and doubt if they should stay,” she said. “If our best performer is leaving, what does that mean for me? Is this ship sinking? This can have a disastrous effect.
We dare you to calculate the cost of staff turnover in your organisation.
Click on the link below to find out. You may be in for a shock!
To discuss how we can help you reduce staff turnover call us today on +61 (0)3 9909 7411 or email us at firstname.lastname@example.org