It's easy to overlook the cost of losing and replacing a productive employee, but as you count up the costs, the message is clear: Every effort should me made to improve employee retention.
I have been speaking to groups of CEOs throughout the country. My effort is to help them see the wisdom in making it their mission to increase levels of employee engagement. And the key to achieving that result is to employ the tools of Recognition and Internal Communication.
I find myself needing to quickly cut to the proverbial chase, meaning the ROI (Return on Investment) of any employee engagement initiative, in order to keep their interest. One area that has a clear and positive ROI is employee retention.
When a productive employee runs for the exit, the employer incurs costs on several fronts. Here are some current facts — easily verified — relating to the financial impact of employee retention and employee engagement:
• 70% of companies say that retaining talent is their #1 HR challenge this year.
• 44% of employees in North America say they may or will leave their current organization within the next 12 months.
• Losing an employee can cost an organization up to 213% of the employee's equivalent annual salary.
• Engaged employees are 87% less likely to leave their organizations than disengaged employees are.
• Employees with lower engagement levels are four times more likely to leave their jobs than those who are highly engaged. (Source: Driving performance and retention through employee engagement. Corporate Leadership Council).
On that last point, if you don’t believe it, I would suggest you do a value map of what is required to refill one role. Consider the whole process of someone deciding they don’t want to work for you anymore, to their departure, to hiring someone to fill their position is more exhausting to company time and resources than you may have ever considered. Let us look at these steps.
Without focusing on any specific detail, this is typically the way it goes down:
1. Employee is becoming dissatisfied for whatever reason, so they are likely to not be engaged; the cost to the company begins to accumulate from this point on.
2. They are using company time to search for a new position, which costs you both money and other resources.
◦ 75% of employed Americans are currently looking for jobs
◦ 46% of people spend time at work looking for other jobs
3. They resign.
4. Rumors fly as to why they resigned which distracts other employees from focusing on their work. This lasts for at least a few days.
5. You host the going away party, which takes time and money, and gets others thinking about whether they should leave.
6. The position description has to be reviewed to make sure it is still pertinent.
7. The position is posted – print and online advertising, social media, agencies, etc.
8. Weeks to collect resumes and applications go by, adding to accumulating opportunity costs.
9. Candidates are scheduled for initial interviews.
10. Leaders, managers, supervisors have to coordinate time to interview.
11. Interviews take place.
12. Top candidate is selected.
13. Background check and references checked.
14. Offer is made.
15. Tests conducted if needed prior to starting.
16. They start their new job.
17. Need to be trained; shown where everything is; brought up to speed on the values and culture of the company.
18. Start working and do a passable job for several months until they get the hang of their new position. And that's assuming you made a good hiring decision. If the hiring decision goes wrong, for whatever reason, you're back to step 3 or 4, above.
19. Peak performance isn’t achieved until year 2 or 3 if they make it that long, because ... 75% of employed Americans are currently looking for jobs.
So how much do you think all of that cost your company's checkbook? There is a clear and present ROI when you retain any good employee. And the single most effective path to employee retention is to put in place an engagement strategy. Make sure it contains directives for your managers to follow in order to engage employees. Include effective internal communication and a healthy employee recognition program.
In short order you can slow the amount of money that is leaking out of your organization because of staff turnover. There's no time like today to begin. Get the right people on the bus ---train them ---engage them---applaud them----reward them---and continue to celebrate their long-term success.
Tom McQueen is PDP's automotive industry expert and has consulted with over 400 dealerships on performance improvement and employee engagement.