The high cost of low employee retention
July 18, 2019
Your ability to gain new customers, keep current customers happy and grow revenue largely rests in the hands of your employees. With talent shortages and skills gaps growing in many industries—in 2018, there were over 80,000 Software Engineer and 16,000 Account Management job openings that needed to be filled—hiring and retaining top employees has become even more essential for success. By focusing on employee retention, your company can reduce costs, increase revenue and boost employee morale.
Each time an employee leaves your team, your company incurs costs, both direct and indirect. According to Employee Benefit News (EBN), it costs employers 33% of an employee's annual salary to hire and train a replacement. While it can be easy to quantify obvious costs, such as relocation fees, it's also easy to overlook hidden or recurring costs that occur during employee turnover. Here are five often-overlooked ways that employee turnover hurts your bottom line and how to combat them.
It takes time to recruit for a replacement: Every hour spent finding a replacement and training a new employee is time not spent developing employee relationships or improving your employee experience and processes. Instead of only considering the time spent, think about the opportunities lost.
The learning curve for new employees can decrease productivity: Even the best new hires take time to learn the processes and develop the relationships needed to most effectively do their jobs. If your company has low employee retention, lower productivity can add up to a significant amount of time.
Recruiting and outsourcing fees: While these fees are simple to quantify, they can quickly add up with high employee turnover. A 2016 Human Capital report found that on average it costs $4,129 to bring in a new hire. Additionally, job seekers who constantly see a company hiring for the same positions may reconsider wanting to work for the employer.
Turnover negatively impacts your customers: Customers notice when your employees leave. They may even follow a favorite salesperson to another company. Each time an employee leaves, it weakens customer relationships with your company. What’s more, customer needs and responses may go unanswered during the vacancy or transition.
Training comes with a cost: Both formal and informal training costs money. Because your company knows that providing top quality training to employees is key to your success, you focus on getting new employees trained quickly. However, when employees leave, not only do you lose the time and money spent training them, but your company must spend additional money on training the next new employee.
Investing in and retaining employees is crucial to growing your business. When you fail to provide the support and opportunities for employees to grow, they will likely leave your company for another. By focusing on an employee retention program, your company can save money, time and even your reputation in the marketplace. So how do you actually increase employee retention? Here are a few strategies.
Create a career path for each employee – Employees want to know what future opportunities are available within the company and how to move up in the organization. By creating a personalized path for each employee with specific goals and milestones to become ready for the next level, employees know what is expected of them and what they need to do to move up.
Proactively provide training and learning opportunities – To be ready to handle increased responsibility, employees often need training both in technical skills and soft skills. Using a learning management system, you can provide a wide range of courses as well as structured informal learning opportunities.
Design a formal mentoring program – By building relationships with more seasoned team members, employees gain both skills and connections to your company. Be sure to carefully match mentors with newer employees based on strengths, personality and career paths. Provide training to all mentors to help them proactively coach and guide their mentees.
Want to learn more about how Cornerstone’s products can improve retention at your organization? Check out Cornerstone’s Recruiting Suite.