The Real Cost of Employee Turnover

Published June 20, 2019

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Written by: Simon Cartwright
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Simon Cartwright

Simon Cartwright is a leadership facilitator, designer and coach at Acumen Development Consultants. An independent facilitator for 18 years and with 15 years of senior line management experience, Simon is in great demand for his high energy and enthusiastic delivery style that delivers collaborative and practical interventions across cross-cultural audiences. Simon is a member of the British Psychological Society and is a licensed practitioner in various psychometric tools such as FIRO-B, OPQ, 16PF and MBTI as well as being a qualified lecturer in Emotional Intelligence. He earned his MCIPD from Warwick University and is a certified executive coach. Although based in the UK, Simon regularly works globally in Asia, Africa and the US.

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Employee turnover is one of the most expensive and difficult workforce challenges facing organisations of all sizes and industries. According to the latest Gallup research the cost of replacing an individual employee can range from one-half to two times the employee’s annual salary. 
 
Gallup found that 52% of employees leaving a company voluntarily stated that their manager or organisation could have done something to prevent them from departing. What’s even more alarming is that 51% said that during the three months before their departure neither their manager nor any other leaders talked to them about job satisfaction. The often-neglected exit experience however, is more impactful than many organisations realise – employees who have a positive exit experience are 2.9 times more likely to recommend the organisation in the future.  
 
It’s not just about money 
 
Voluntary staff turnover accounts for over a trillion dollars every year in recruitment, hiring, training and productivity cost. LinkedIn’s analysis found that the worldwide average turnover rate is 10.9 percent, with technology (13.2%), retail (13%), media (11.4%) and professional services (11.4) struggling with higher than average rates.  
 
When your best people leave, you are losing your most creative innovators and problem solvers. High staff turnover decreases team productivity, reduces morale and has a negative effect on recruiting, hiring, training and retaining talent. What’s more, the organisation is losing knowledge and established relationships with clients, which can impact business profitability, together with potential damage to brand reputation or in some cases even increased risk of litigation. By understanding the reasons behind negative employee experience and high turnover, leaders and businesses can focus on what is required to change their approach to talent management. 
 
The critical role of the manager 
 
Managers play a key role in the overall employee experience. Effective managers build genuine rapport and relationships with their team and are in a good position to identify risk factors that can lead to an employee departure before it’s too late. Whilst managers are responsible for their team’s performance, 47% of employees reports that they only receive feedback from their managers a few times a year or even less – for some of them the conversation only happens during annual performance reviews.  
 
To prevent high turnover, managers need to focus on having frequent conversations with their employees and continuously coach them to improve their performance and motivation. Managers who avoid micromanaging, and instead give their teams the opportunity to solve problems and be creative on their own, can drive businesses forward. For example, former PepsiCo CEO Indra Nooyi, known for her approach to creative problem solving, has given her team the permission to create new flavours of Lays crisps reflecting local flavour. This has led to the introduction of tikka masala crisps in India, seaweed crisps in China and cuttlefish crisps in Thailand. 
 
Employee turnover will continue to be an issue unless companies pay attention to why employees are voluntarily leaving. Many employees leave when they feel that they don’t have the opportunity to take on new challenges or master new skills and knowledge. By providing professional learning and development opportunities, keeping the lines of communication open, and listening to the reasons people are leaving, organisations can create new opportunities for employees to learn and advance in their roles.  

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