Losing an Employee is Hard on a Team (and a Business)
What is the cost of a losing one employee? In concrete terms, according to SHRM (the Society of Human Resource Management), losing a young professional employee can cost an organization between $15-25,0000. However, that is a conservative estimate. If the organization wants to find and train a replacement, that number will increase to 6-9 months of their salary. And, as the professional becomes more skilled and entrenched, that dollar amount grows.
What are the factors or ingredients of the direct loss?
- payout for vacation time
- + payout for unused sick days
- + continued benefits
- + time spent on exit interviews
- + processing time and money
- + severance pay
- + increased unemployment taxes.
Loss Inclusive of Replacement
What are the additional factors, should you want to replace the individual? Or, the related costs which add to the initial loss?
Total direct loss + replacement cost =
- direct loss cost
- + advertising and/or recruiting costs
- + interviewing costs
- + hiring costs
- + orientation, on-boarding and training
- + lost productivity overall
- + potential customer dissatisfaction
- + reduced or lost business
- + administrative costs
- + lost expertise
- + lost institutional memory (if the person has company historical knowledge)
- + effect on morale
- + decrease in productivity from new hire
- + internal gossip
- + disruption in productivity
- + temporary coverage during replacement
- + allowing for mistakes made by replacement (interim or new).
Also note, the longer the replacement takes – the higher the recruitment costs.
In addition, if the employee that leaves represents a community that is within a minority of the organization’s total population, the significance of that loss is exponential in its effect.
These costs may seem vague or perhaps not of an immediate concern unless you are currently thinking about firing an employee, a team member is leaving, or the person you are hiring is a high-risk hire. And of course, if you are considering firing an employee, the many costs of having them may be far greater in the long run than letting them go.
However, think about these numbers:
- 3 million Americans quit their job every month (according to the US Bureau of Labor).
- Nearly 33% leave before 6 months of starting because of poor on-boarding, a lack of clarity around their job responsibilities, or an awful boss (Bamboo HR).
- Over 25% of employees are at high risk for turnover; these are the top performers, those with critical skills and high potentials (research from Willis Towers Watson)
- 93% of younger professionals left their employer to change roles rather than stay (according to a recent Gallup poll. For some potential reasons why they left view: https://susangoldbergleadership.com/want-retention-try-respect/ and https://susangoldbergleadership.com/listening-to-everybodys-voice/ )
You can see why according to research by Kronos and Future Workplace 87% of Human Resource Leaders consider retention a primary concern. However, why aren’t other executives paying attention? If you could keep the interest of valued employees, wouldn’t that be a worthwhile plan to consider?
I’d love to get your comments either directly or through www.SusanGoldbergLeadership.com I work with clients everyday who are cultivating more engaged leaders and creating a culture of respect which results in better retention. If you’d like to increase retention in your organization, let’s talk. You can reach me at Susan@SusanGoldbergLeadership.com