When your business starts losing good employees, it can severely hurt morale and it can cost a lot of money. How much does it cost to lose an employee? More importantly, what are the best ways to prevent employees from leaving your company?
How Much Does Employee Turnover Actually Cost?
According to one study, it can cost a company up to $15,000 just to replace an employee who earns $45,000 a year. That’s one third of the employee’s salary! With that high of a price tag, it often can be cheaper to just pay an employee extra to keep them happy and keep them around longer. If you can identify why employees leave your company through exit interviews, you can divert additional resources to keep those employees from leaving and avoid the $15,000 per loss.
One great way to retain employees longer is to hire the right kind of people in the first place, and staffing agencies might be a great way to identify those great candidates that will commit to your company for the long haul.
Employee turnover also has a number of hidden costs, including problems such as safety issues and morale damage. If the $15,000 quote is mostly a measurable number, then there are additional costs that are more difficult to measure. If employees begin leaving it can create the perception that the company is not that good and other people are unfulfilled.
Peer pressure is notoriously strong. Imagine if all people from several different tables abruptly got up in a restaurant and left; it would leave the other patrons to feel potentially uneasy. If employees begin leaving for more exciting jobs, or at least jobs that are perceived as more exciting, there may not be much to keep the other staff members in place.
Don’t Hold on Too Tightly
Why do you need to know the cost of employee turnover? It will help you not to overspend on retention programs. While it does cost you when an employee leaves, it isn’t the end of the world. Employees are difficult to replace but not impossible. And if an employee has a bad attitude and really wants to leave, this can actually improve morale instead of hurt it.
If you’ve created a great workplace environment and bureaucratic system of hiring and training that you can stand by, then you don’t stand to lose too much if an employee becomes unhappy or moves on. Realize that turnover is normal. People change their jobs, move to new cities, and adapt their lifestyles all the time.
People leave jobs for a variety of reasons, but primarily because they’re either more excited about another opportunity or are unhappy in their current position. You may be facing an active or passive threat of losing an employee. A passive threat is a bad job or bad company culture. Your employee doesn’t have another idea or offer on the table, but is just generally unhappy and may turn to a new opportunity at any time. An active threat is when a job offer is made or when the employee has goals and aspirations that your company doesn’t fulfill.
Keep employees happy by using a variety of different techniques, and encourage the right kind of workplace attitudes to maintain morale. Keep in mind, however, that these techniques can sometimes function like band-aids; if the employee isn’t a good fit for the job, no amount of extra benefits and casual Fridays can make up for the discrepancy. They’re either happy or they’re not. Hiring the right people is therefore critical to job happiness.
Starting off Right
The first month in a new job often determines the way an employee perceives their role and the company for as long as they work there. If you’re an employer looking to give employees the best start that they can have, you need to make them feel welcomed and valued throughout the entire experience– from the start of the hiring process to their transition into the new position. Whether it’s for an entry-level hourly employee or an executive role, make sure your company has policies to make new hires feel welcomed and wanted. Making friends at work can really help a person feel like they belong and are valued intensely by the community.
If an employee is unhappy or expresses doubts about their fit for the position, it is important that you and the team listen and try to improve the situation. You need to develop a culture of honesty and authenticity to increase retention. Sometimes problems can be snuffed out before they flare up into major issues that people leave jobs over.
That being said, the only way you and your team will hear about such problems is if the employees feel comfortable sharing their issues and know that they won’t be judged or disciplined for airing grievances through appropriate channels. Creating this kind of environment will help retain employees, because smaller problems won’t grow inordinately.
Offer Meaningful Work-life Balance
People need a great work-life balance to be happy. If someone’s work-life balance is poor, they may be pushed to the point of quitting their job due to burnout. On the other hand, you need to provide enough for the employee to do and be challenged by so that they don’t get bored and quit to find more meaningful work. You’ll have to balance both work and rest well in order to create a culture of employee retention.
Offering good benefits will help employees live a quality life. Actively listening and talking to employees about the kind of things that they are interested in can help you make logistical decisions that are meaningful to their lives. Imagine yourself doing the job of your employees, and think about the kind of things that make that job better and easier; work to implement those. Sometimes empathy from coworkers and superiors is enough to persuade employees to remain in their position longer.
Hire the Right People
The best way to reduce employee turnover is to find people that fit your company culture. Staffing agencies can help you identify great candidates and reduce those turnover costs. Even the most positive workplace environment can not make up for hiring the wrong person.
Be honest with job seekers about the kind of company and culture you have. Don’t air your company’s dirty laundry in a job interview, obviously, but know that if you bring someone on board and their expectations don’t match the situation they find, they will quickly become dissatisfied. If you give a job applicant unrealistic expectations of company culture, they will be disillusioned by the company’s reality.
Pay attention to people’s desires that they list in their cover letters. While you may have one candidate that is clearly more experienced than the other, it may be more cost effective to hire the less-experienced candidate if they are more likely to form a longer relationship with your company. If you’re a job applicant, use your cover letter to show your employer that you’re looking for a stable career.
The hiring process is tricky and expensive to get wrong. Turnover is inevitable in some circumstances, but costs a lot of money. If you don’t have a massive HR department to vet and screen candidates, it’s easy to hire the wrong person. Those mistakes can be expensive. Using a staffing agency to help you hire gives you a more diverse, complex set of candidates than internal job boards can generally create.