The Hidden cost of employee turnover
Employee turnover is costly, negatively impacts business performance, and is difficult to control. Unfortunately, some businesses underestimate the true cost of employee turnover. Some of these costs are immediate while others are long-term. Here are five hidden costs of losing employees, as well as steps to avoid or mitigate these losses.
1. Turnover can
damage employer brand
All
organizations must deal with turnover. The way they manage it makes a big
difference in how employees, partners and customers perceive it.
2. Company may lose
valuable knowledge and relationships
Each
of employees builds knowledge over time
that’s unique to them and helps the company.
For
example, a sales team that loses a key player also loses the detailed knowledge
that employee had about:
- Customers’
needs
- Budgets
- Contact preferences
"The financial costs mainly involve the cost of people’s time, cost of materials and equipment, cash outlays, and productivity losses. The other costs are less discernable and harder to estimate but may entail large negative impacts on organizational effectiveness such as loss of customer, business and damaged morale (Heneman and Judge (2009)".
3. Team productivity can take a dive
Often
when one person leaves a team, the team is in effect down two people for days,
weeks or even months:
- The
departed employee
- The
person responsible for finding and training a replacement
Until
the position is filled, the manager must focus on finding the right person.
Once a new hire is on board, the manager or a top-performing team member needs
to devote time to training the new employee.
4. Employee development
can stall out
When
a team suffers from frequent turnover, there can be another opportunity cost:
development.
Managers
focused on filling positions and training new hires may not have the bandwidth
to also keep up with succession planning, cross-training and employee development.
5. Turnover can disrupt
team dynamics
Even
a single employee departure can affect the way your team works together. Having
a knowledge-sharing plan in place and managing expectations for productivity
and development during hiring searches can help.
Conclusion
Effective strategies for
increasing employee engagement and productivity can be learned by managers.
Leaders can help employees thrive by supporting strong HR policies and
developing clear communication strategies and a positive work culture.
"Employees who leave on the
organization’s request as well as those who leave cause disruptions in operations, work team
dynamics and unit performance. Both types of the turnover create costs for the
organization. If an organization has made significant investment in training
and developing its employees, that investment is lost when employee leaves
(Mello, 2011)".
Reference:
Employee Turnover: Causes, Consequences and Retention Strategies in Organizations (researchgate.net)
Available at : (online) Accessed on 19th August 2021
https://www.researchgate.net/publication/215912138_Employee_Turnover_Causes_Consequences_and_Retention_Strategies_in_Saudi_Organizations
The Hidden Costs of Employee Turnover (And How to Reduce It) (linkedin.com)
Available at : (online) Accessed on 19th August 2021
https://www.linkedin.com/pulse/hidden-costs-employee-turnover-how-reduce-rich-kneece
The Hidden Cost of Employee Turnover (alvernia.edu)
Available at : (online) Accessed on 19th August 2021
https://online.alvernia.edu/articles/cost-employee-turnover/
In addition to the costs associated with replacing employees, employers will likely see a decrease in productivity as the new hire adjusts to the new work environment. In addition to that disruptions to continuity, loss of institutional knowledge, are disadvantages to organizations . hence HRM should every possible action to retain it’s best employees.
ReplyDeleteNice article
ReplyDeleteOn the other hand, Turnover should not be taken lightly. Employee turnover, or attrition, has an impact on profitability and, in some cases, the company's ability to execute its business. Despite this, very few businesses calculate the cost of employee turnover and use it to plan their operations. When an organization understands how much it costs to replace a departing employee, may reconsider its compensation and retention policies.
Hi Kanchana, some interesting findings according to Ere Media, when you think all of the costs combined with employee turnover comprises interviewing, hiring, training, reduced productivity, lost opportunity costs, etc. it can cost a company:
ReplyDelete• To replace entry-level employees, it costs between 30-50% of their annual salary.
• To replace mid-level employees, it costs upwards of 150% of their annual salary.
• To replace high-level or highly specialized key employees, it costs up to 400% of their annual salary.
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ReplyDeleteEmployee Turnover is very expensive because organizations pay directly when the employee leaves and incurs additional costs for hiring and training new hiring. The negative effects of profits, such as declining productivity, loss of knowledge, and declining morals, can also result in emerging costs.
ReplyDeleteEmployee Turnover costs include the cost of replacing vacant space and the cost of filling vacant space as well as travel and administration costs and rising production costs.
This is a very important topic and HR and senior management have to deal directly with these costs.
Employee turnover is expensive as it highly influence organizational performance. On the other hand it involves huge financial cost for replacement that can be about 50 to 60 percent of an employee's annual salary (Alvernia University, 2016). Therefore Organisations must adopt proper retention strategy to motivate and Increase the loyalty of existing employees.
ReplyDeleteI agree with you Kancha, An increase in ET will have a direct impact on the overall performance of the company. You have presented your findings in a clear and concise manner.
ReplyDelete“Employees turnover is costly to all level of organizations regardless of its nature and usually the productivity and quality of the products or services are always negatively affected” (Ali, 2009)
As a result, it will be important for organizations to treat their staff as assets.
ET can have a direct impact on an organization's workforce's goodwill and knowledge. Is it true that huge costs are involved in the training and development process as well? Every fact involves a large sum of money. As a result, employee retention is critical to reducing all hidden costs.
ReplyDeleteThe hidden cost of employee turnover isn’t certainly hidden at all. maximum of it you could’t pay for with a credit card or paycheck. The finest fees of worker turnover are intangible but can certainly add up in a hurry. The damage may have a massive effect on your business.
ReplyDeleteEven though it is a hard thing to control employers must seriously think about employee turnover. Direct cost like recruiting new employees and training them and develop them to get the maximum out put and also indirect cost like the damage to the corporate image and overall productivity must seriously address. As you discussed within the article Kanchana, effective strategies should implemented to minimize this issue.
ReplyDelete