Myth #2: Measuring turnover isn’t important
Reality: Costs associated with turnover are significant and you should know how much it is costing your business when employee leave.
The resignation of an employee earning $60,000 a year can cost a company anywhere from $12 – 30K in cumulative turnover costs. Executive level positions can reach 100-200% of base salary. Seem high? Direct hiring costs and indirect costs combine to make turnover an expensive proposition. Turnover is one of the few costs that HR and the leadership can predict, plan for, and control.
In fact, basic turnover is among the easiest of the HR Metrics to measure and track. A simple turnover equation provides a basic understanding of the larger turnover picture:
Turnover Rate = # Exits/ # of average staff during a defined period of time
Turnover Costs = Direct + Indirect Costs * # Exits
Examples of Direct Costs: postings, recruiter costs, administration, severance, background checks, relocation, immigration, signing bonuses, etc.
Examples of Indirect Costs: off-boarding, hiring, integrating the new employee, training, lost productivity, morale, client relationships, management time, etc.
Stephanie Teasdale, HR Manager at Ferguson Enterprises in Newport News VA, successfully revamped the off-boarding program and incorporated exit and turnover analysis into the process. “It wasn’t enough for me to simply record who left and when – the data needed to be meaningful and, therefore, actionable to my management team,” Teasdale explained.
Next installment of this 5-part series will be “Turnover Myth Part 3 – Exit Interviews.”
The series is co-authored with Kelly Allmon, owner of York River Human Resources LLC.