As a human resource professional, you dedicate so much of your time finding the perfect person for a position. Once you hire them, how much time are you dedicating to keeping them in their role or growing them within the company?
Losing employees is costly to any business. The general study response is to look at the loss as a portion of the employees’ salary. The cost of replacing an employee in a mid-range position (earning between $30 – $50K) is 20 percent of their annual salary (so $6,000 to $10,000), according to a study by the Center for American Progress. However, if you’re replacing a highly educated company executive, that can cost more than double their annual salary, so an executive making $100,000 will cost you $213,000 to replace.
Besides the hard costs, there is the cost of institutional knowledge loss, morale among remaining employees and additional workload for them.
Beyond those initial upfront costs, you must also consider the cost of offboarding that employee, including severance pay, benefits continuation if needed and even the administrative and payroll burden of closing out an employee. Unless they are leaving because their position is eliminated, there is also a considerable cost associated with replacing them including hiring, onboarding and reduced productivity that comes with waiting for that new hire to get up to speed.
When you lay out the financial burden associated with losing talented staff, you already have a business case for reducing employee turnover, but you also have to think about how a revolving door can impact your business growth.
Seasoned employees understand your vision. They have been there as that vision evolved and likely played a role – no matter how small – in the decisions that were made that shaped your company into its current form. Further, they have institutional knowledge, meaning that they can draw on past experiences to inform the choices that they make out in the field, without needing to constantly check in with you or other higher-ups to perform their jobs. In short, they are invested in your business and can be a driving force in helping it to become the company you want it to be.
While fresh talent is also important to prevent your company from becoming stagnant, if you have a constant stream of new hires coming through your door to replace seasoned workers, your company will be at a deficit. As we touched on above when you have a new hire, they need a lot of guidance in the beginning, which means that you are pulling one of your existing top performers off the job to, for lack of a better word, babysit this individual until they get up to speed. Depending on your industry, the role, and the aptitude of the employee in question, this could happen for a handful of weeks, but it could also stretch to a year or two. By asking that manager to divert their attention to help the new employee, that manager’s productivity will decrease, and its not likely to be made up by any new business, clients or sales that the rookie brings in. Essentially, you have to ask yourself – if I’m using my star talent to train the next generation, are they available to me to weigh in on business decisions that could grow and strengthen my business?
And finally, from a long-term perspective, what does high turnover mean for your business down the line? New hires who are either green to your business or the industry overall are not ready to participate in succession planning. They aren’t going to be able to take over the big roles as your company grows and changes, meaning that you will be left hanging when it comes to thinking about the future course of your business.
With this in mind, having a plan in place to hire the types of employees that are most likely to stick around is paramount.
This is where the services of a Professional Employer Organization (PEO) can help you to hone your job descriptions so that you attract the right talent for the job and for your company, and can also guide you along the way as they transition through the various interview processes and eventually gain a position.
But an off-site HR pro doesn’t stop there – to keep buns in seats, they also help you to develop a competitive compensation strategy that is appealing to workers and incentivizes them to stay in the job AND perform well.
Finally, a PEO takes some of the heavy lifting off of HR for you to provide the training you need for your new recruits to get them up to speed as quickly as possible; our training programs are comprehensive and can be tailored to address your company’s unique needs. Further, if we’re the ones providing a portion of the training, it frees up you and your management team to focus on what’s important: making your business the best it can be.