The hidden costs of losing people
By Jim Maedel, Director, The Jouta Performance Group
Most business owners, when trying to calculate the costs associated with turnover, almost never take into account all the hidden costs that are affecting their bottom line. Costs of the hiring process include potential recruiter fees, the cost of posting ads on websites and the cost of the time spent by the individuals conducting the interviews. Beyond just the money being spent these also account for a loss in productivity because the interview is taking the interviewer (or panel of interviewers) away from their job.
Most business owners would be shocked at how high the hidden or less visible costs can be.
Some of these hidden costs are:
1. Separation Costs: Severance packages and costs of out-placement services
2. Vacancy Costs: Often when an employee leaves there is a period of time before a replacement is found. During this time period, other employees will be required to do the work of the vacant position and this can lead to employees been over-worked and stressed. This affects morale and can cause an increase in absenteeism, both of which negatively affect productivity.
3. Orientation and Training Costs: Time spent for employees to orient a new employee and to then train them is all time away from completing the tasks and responsibilities of their own jobs. It can often take an employee as long as six months to get up to speed before there are operating at full capacity. In this case the company can be paying the equivalent of 1.5 times the salary for the same productivity.
4. Morale Cost: Productivity can be lost when morale is low, and high turnover has a very negative affect on morale especially if well-liked and respected people leave the organization.
In the end companies can save thousands and thousands of dollars by reducing employee turnover, and the most effective way to achieve this is to have proper HR Systems and Programs in place.