Turnover, Engagement, and…What A Waste of Money!
Okay, if you would like to significantly lower the turnover rate at your company, please raise your hand.
That’s what I thought!
Everyone wants to lower their turnover. While the exact figures may vary depending on recruiting and internal costs, it is estimated that it costs between 30-50 percent of annual salary for an entry level employee, and more than 150 percent of annual salary for a mid-level employee.
Do the math! At the hourly rate of $9.00 per hour, admittedly a low wage, with an annual wage of approximately $18,000, it’s going to cost at least $5,400 to cycle through one employee. Let’s move it up a bit to the average entry level office worker making $35,000. The minimum replacement costs is $10,500. MINIMUM!
Regardless the size of your organization, this is an expense that must be avoided!
We would recommend a two-step approach to lowering your turnover and turnover cost. And, while it might seem as though we have the order of the steps reversed, we believe that our Step 1 is perhaps the most critical step for all aspects of organizational health.
Step 1 –
Examine your Corporate Culture. I know Corporate Culture has gotten a lot of press over the past few years, but there is a very good reason for that. Corporate Culture is the #1 predictor of Engagement, Effectiveness, and Efficiency for all organizations, at all levels of the organization. Your Corporate Culture is defined by the Core Values that are lived out within your organization. Not necessarily the Core Values stated on your website, but the actual Core Values that are practiced within your organization. Your lived out Core Values determine how employees are treated, valued, and how decisions are made.
The greatest determinant of the Engagement, Effectiveness, and Efficiency mentioned above is how valued and respected your employees feel. You can be the best paying employer in your market or your industry, but if your employees do not ultimately feel valued and respected they will not stay engaged, and they will not work to be effective or efficient. They are showing up for work for one reason: because they have to. And as soon as a better opportunity comes along, or even what appears to be a better opportunity, they are gone.
We currently have clients that are actually paying slightly less than their competitors, yet they enjoy a significantly lower turnover rate. How is that possible? These businesses are committed to expressing appreciation to their employees and ensuring that each employee is treated honorably and respectfully.
Honor and respect PAY OFF!!!
Step 2 –
Seek balance between your compensation plan and your turnover rate.
How do you think your workforce would respond to a 3% raise?
In the example given above, if you have as few as 100 employees, and your turnover rate is 20%, turnover is costing you $108,000 per year. A 3% raise to every employee would cost you $54,000. That’s right! Half of what your current turnover is costing you. And that doesn’t include the hassle!
You do the math on your mid-level employees. There is a good chance that many are leaving for far less than it is going to cost you to replace them.