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ASK THE EXPERT: September 2015

Real Cost of Employee Turnover
“My company is very focused on finding new people to hire, for a wide range of positions. There’s not as much focus, however on keeping people—and keeping them happy—once we have them on board. Are there any figures on the value of employee retention, and the actual cost of employee turnover?”

Signed, Tired of Turnover

Dear Tired,
Talk about a hot button! I believe you have touched on the singular hallmark going forward of winning, and losing, organizations. Those that treat their employees best survive. Those that don’t, won’t. How’s that for being real?

According to an article published last summer in Forbes, the real cost to replace entry-level, mid-level, and upper-level employees is 50%, 150%, and 400% (respectively) of their annual salary. Could they possibly be right? Using the above guidelines, replacing four entry-level inside salespersons/ yard staff ($35K each), two mid-level office/operations staff ($45k each), and one upper-level sales or GM position ($120k), Forbes estimates the real cost to your company for this turnover of seven people exceeds a half-million dollars. If you want to use a more conservative replacement rate of 30% for each annual salary, this total still exceeds $100,000.

LBM Resources

White Paper: 3 Ways to Ensure Success with the Right Manufacturing Partner

LBM owners must look for a partner who does more than just sell products.

To minimize the staffing chaos within your company that every article on millennials predicts, why not spend a little more up front on employees and their retention? But where does one begin?

Begin with the employees. Ask them a series of thought-provoking questions. What’s working at work? What’s not? What are they seeing at work they like—or don’t like? Convince them the environment (staffing, structure, performance expectations, evaluation criteria, etc.) is significantly up to them.

Lastly, as they make recommendations that require financial and personal funding, support their decisions. Such support may include an extra staffer, offsite monthly happy hours, modifications to job descriptions, or broader participation in employee evaluations.

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And when you total up the real cost, the cost to a winning organization in being proactive with their employees towards a better work environment and happier customers, the real cost will almost certainly be less than the cost for replacement amid standard turnover.

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