Skip to main content

The REAL cost of staff turnover

By July 17, 2022 No Comments

The REAL cost of staff turnover

The main reason 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, even more so post Covid, and they are fooling themselves to think so. A good and seasoned employee has huge knowledge of systems, products, processes and clients. They will 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 you jeopardising your future success. Your staff are your only true competitive advantage, so losing key employees damages that.

Employee turnover has some obvious costs associated with it, including recruitment, onboarding and 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, as many companies do not compute the internal costs, here is how staff turnover can drain your hard earned dollars. The obvious one are:


Recruitment fees


On boarding

Time to get up to speed

What is less obvious are the following costs:

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 are asked 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 expertise with them, this can have an impact on customer satisfaction. Customer commitments are 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.

I also think that there is a tenth cost 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 comments to other staff members or customers that may be detrimental to your business and creating a toxic environment.

The impact and cost to the business could be that much greater.

Many companies are now turning to technology as part of the solution to retain talent, to recognise great performance and contribution, and to give positive feedback in real time to help reduce staff turnover.

Implementing a company wide recognition program can help to build a culture of appreciation, where employees feel valued, respected and part of the vision, making it more likely they will stay loyal.

A well-designed and promoted recognition program that focusses on behaviours you want to promote and encourage will help to motivate and recognise staff effort, improve morale, and customer experience, leading to discretionary effort. This is especially true in a business that is not able to compete purely on salary, such as the Not for Profit sector.

A well-executed recognition 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. While many programs include rewards, they are not always the most important aspect as staff. Issues such as mental health and wellbeing, diversity, inclusion, gender equity and the need for people to feel a deeper sense of belonging and purpose – not isolated from each other – are critical issues for business leaders to address.

The old models of micro-managing people in an office or engaging people extrinsically will not cut it anymore.  People want to be treated as adults and to take responsibility for their own work ethos and standards and they want to be engaged from the heart.

Since the start of Covid, many people are assessing the quality of their experiences at work, and they have decided that they want more. Therefore, it is important now for managers to host conversations with their people to re-imagine and co-construct the new ways of working, what it means to be well and do well together in the multiple places of working – office, home, and hybrid. Building into the very heart of these new hybrid and augmented working experiences is the power of positive recognition in real time and at scale enabled by a Culture of Appreciation, supported by the New Tech.

Thought leading organisations that place a high emphasis on their employees and look to release the passion in their people will be the winners in the talent war we are experiencing post Covid.

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

If you don’t look after your employees, your competitors will.

Tony Delaney, CEO Brownie Points

Leave a Reply