In our August 29th blog, we discussed the war for talent and the impact on your bottom line. The development of a unique company culture is paramount to you attracting and retaining top talent, which is now a strategic imperative that drives ROI.
The implementation of meaningful hiring, on-boarding and retention programs will set a sturdy foundation for your company’s culture. To drive these programs, a key component will be limiting employee turnover. In order to limit turnover, you must determine the cost of turn to your organization.
The following is a snapshot to provoke thought about the true cost of turnover. The calculation will change from best company to best company, from position to position. Based on a Society for Human Resource Management (SHRM) calculation, employee turnover costs may include:
- Exit interview
- Updating human resource files
- Cost of past employee training
- Loss of knowledge, skills, contacts, and lost business
- Increased unemployment insurance
- Premium labor
- Lost productivity while exiting
- PTO (sick, holiday, vacation, etc.) payout
- Sourcing professional
- Hiring manager
- Human resources on-boarder
- On-boarding paperwork
- Marketing / advertising
- Background check
- Vendor utilization
New Hire Training Costs
- New employee orientation
- Department orientation
New Hire Productivity Costs
- Assume it takes the new hire six months to become 100% productive
Take the time to get multiple subject matter experts involved to review the above. Add your own items, remove items that are not applicable, and develop a template that will suit your best company’s needs across functions. When you add these items together, you may end up with a total cost that is 150% of the employee’s salary. Yes, 150% of the employee’s salary.
After you understand the costs associated with turnover, you may find that there are inefficiencies that you can squeeze out of the hiring, on-boarding and retention processes. More importantly, you set the foundation to truly develop a retention plan that will elevate your company culture and employer brand. Doing so will make your hiring process more effective, allow you to retain your employees longer, and add significant monies to your bottom line.
Be proactive, win the coming jobs war before you ever have to go to battle.
This post was contributed by Michael S. Seaver, CPBA, SPHR, MBA. Michael is a Phoenix-based career transition coach, change management consultant, blogger and author. For more information, visit his Resource Partners profile.