Employee Turnover and Your Business Profitability
It is interesting that for all the charts and graphs displayed at meetings that you have attended t hat never once have you ever seen a graph of the true and major cost of “employee turnover”.
Turnover is the polite management word for employee loss – whether it is from death, retirement, firings or in many cases employees disgruntlement.
To make matters worse organizations actually even reward high turnover rates. A whole industry has emerged to deal with these issues … The first question should have been asked as to “Why are we hiring in the first place?” “Why did this employee leave?
Retrospection by upper management is often difficult. It is in most cases easier to criticize someone else rather than yourself and as well the quickest route to a career limiting move is to draw attention to mistakes of superiors. You may have heard the phrases at company meetings “We are a proactive organization or business. We do not want yes men (or people) here”.
Yet when proper corrective action or a memo is taken it is often the messenger “who is shot” rather than problem makers. There is a major difference between efficiency and effectiveness. Efficiency can be seen as “How fast did we dig the hole?” Whereas effectiveness is asking the proper question “should we have wasted our time digging the hole in the first place?’
To hire and train an employee d takes a great amount of time, energy and cost.
First the replacement employee has be sourced. Either an ad has to be written and placed in a suitable medium – whether it be online or in a newspaper or magazine.
Cost and time one. Or a commercial employment operation, often referred to as “headhunters “may be employed. There is a cost saving to using such an operation.
Initial screenings are done, expensive management time and travel costs may be saved in screening to rule out lost causes. And as well the employment firm can offer interview rooms which can be costly if the interviews are done away from head office. Headhunters are not cheap. They generally charge a commission charge of 1/3 of the salary, bonuses and perceived value of benefits of the new employee hired down to the benefit of the company car.
Standard interviewing and job hiring procedures usually involve three interviews. A first screening interview. A second more serious, more in depth second interview. Finally another member of “the team” is called in for the final interviews. Usually a more senior member of the “management team”. The concept is that the more senior member will be more experienced and skilled in assessment and hiring judgment skills. As well there is the additional advantage that:” if things do not work out” no one person can be blamed.
Now that finally the new employee is hired the fun and costs are only just starting. The new employee has now to be trained. It is often estimated that the time period to train the employee to adequate performance is approximately a year to a year and a half. There are costs to employee training. Actual time spent in training, the cost of training, management and training staff being taken off the job. There may be travel and hotel costs. The new employee is being trained to benefit the profitability of your organization. However there is nothing so energy inefficient as an empty train rolling down the rails.
All of these costs involved to the organization or business could have easily been prevented in the first place if the experienced employees had been encouraged to stay with the organization either by proper treatment or other means. Remember a major role of fire department is to prevent fires not to fight them.