Hiring an employee is expensive. Three different recent studies have found that the cost of hiring a new employee can be anywhere from $4,000 to over $7,000. Money isn’t the only resource that you use when making a new hire: it can take anywhere from 40 to 50 days to fill an open position. If that amount of time and money seems daunting, think of what it costs to replace a lost employee who you’ve spent so much time and money on: it can cost up to 50 to 60% of their annual salary, with the true costs of turnover sometimes soaring to 90 to 200% of your employee’s salary.
Those numbers will make any business owner stop and think about the importance of employee retention, but be aware that the costs of losing an employee don’t stop at the direct costs associated with replacing them. There can be indirect costs, as well, which can impact your business immediately or have more long-term negative consequences. If you’re not putting any energy into employee retention, or if you’re not adequately responding to the loss of an employee, your business could end up suffering from the following hidden costs.
There’s no getting around it – if you have employees, you’re going to have to deal with turnover at some point. But how you deal with it can make all the difference. In the short term, frequent, mismanaged turnover can stress out your remaining employees, and turn off customers, causing you to lose business. Stressed-out employees who feel that your business is in trouble will in turn be difficult to retain, and the cycle will continue.
In the long term, all of this could begin to turn your employer “brand” toxic. You might find that it becomes more difficult to recruit employees, and your pool of quality candidates could shrink, making it more time-consuming – and more costly – to find the employees you need to keep your business growing.
How can you keep this from happening? To answer this, you need to think about the next few consequences of losing employees, and look at how to deal with these consequences, so you don’t end up with disgruntled employees after the loss of a colleague.
Loss of Valuable Knowledge and Relationships
While you’re the one who put the work into writing your employees’ job descriptions, and training them to properly execute those duties, they are the ones who put in the work day-to-day. This means that they gain knowledge that is unique to them, and/or they build relationships with customers or clients that would be difficult to quickly replicate should they decide to leave.
For example, if you manage a sales team, losing an employee could mean losing quick access to detailed knowledge about customers’ needs, budgets, and preferences for anything from how they are contacted to how much small talk they like to engage in. While you are scrambling to get another employee up to speed on every customer that your lost salesperson worked with, your customers could get frustrated and move on. Anytime customers feel like service is going downhill, you run the risk of losing their business and, again, stalling your business’ growth.
There are numerous other examples of how lost knowledge can affect businesses. If you manufacture a product, losing a senior worker could mean losing knowledge of what your equipment looks like or how it performs when it needs maintenance, meaning you could end up with more breakdowns and repairs needed. Even for service-oriented businesses, which tend to have higher turnover rates, that turnover can be problematic, especially when it comes to front-facing staff. Customers like to be served by familiar faces who chat with them, know their particular preferences, and make them feel like “regulars.”
To avoid this hidden cost, or reduce its impact:
- Have a succession plan in place
- Take job training seriously, and make it an ongoing process. For example, have newer employers periodically shadow more senior staff even after they’ve gone through their formal training process. Emphasize that senior staff should be communicating not just the nuts and bolts of the job, but also the more nuanced knowledge that they have picked up along the way.
- Make sure that employees are sharing knowledge and information with each other, so that they are naturally being “cross-trained” in each other’s roles.
Ensuring that any knowledge gaps are filled could help keep you out of the frustrating cycle of losing even more employees.
A Dip in Productivity
When you lose an employee, your team is not just down one person, they’re down two people – the departed employee and the person who has to hire and train the new employee. If that’s you, you’ll be splitting your focus for weeks or even months as you look for a new employee and then spend time training them. If you choose another staff member to do that, they’ll be unable to be a fully functioning part of their team. That means other employees picking up the slack of both your departed employee and the training manager.
Employees with overly long to-do lists could end up less focused and, ultimately, less productive. Having staff that is stressed and overburdened with tasks could also land you back in the same situations as earlier: losing more and more employees due to a mismanaged response to one employees’ departure. You can try to minimize the dip in productivity, as well as keep your staff as happy as possible by:
- Resisting the urge to just fill the position with a warm body as quickly as possible. Making a hasty hire could put you right back where you started, only you’ll be down a few thousand dollars.
- Really putting thought into how you can best support your staff until you find the right person to fill the job. This might mean hiring a temp as an extra hand for the grunt work.
- Being open and honest with your staff, and discussing with them how to redistribute tasks. Whether you choose to hire a temp or not, your regular employees will inevitably have to take on some of the work of their missing team member. Talk to them, manage their expectations by explaining that it will take time to find the best possible person to fill the open position, and get their input. Having an open dialogue could help manage feelings of being overwhelmed by work.
Hold Onto Your Employees!
If you lose an employee, and you don’t manage this loss properly, you could be heading down a dangerous path. Stressed, overburdened employees are harder to retain, as are ones who can’t advance in their positions because there is no time to implement any development plans. To avoid the cycle of high turnover, spend time thinking about how you can keep your employees before you lose them!
Start by examining why your employees might want to leave in the first place. Consider whether:
- Your pay is competitive
- The culture of your workplace is positive
- Your employees have enough support, opportunity, and chances to feel engaged
Then, you can try to go more in-depth by getting feedback from you staff:
- Conduct exit interviews, if possible, with employees who leave voluntarily.
- Offer a “climate survey” to current employees, so you can get a feel for what your current employees are thinking.
Once you conduct these surveys, be prepared to implement changes based on them – if you don’t, your employees could feel like you’re ignoring their concerns, and they might become even more dissatisfied.
It’s inevitable: if you’ve got employees, you’re going to lose a few along the way. But considering the costs – both obvious and hidden – to your business, you should do your absolute best to keep turnover as low as possible. Stay out of the cycle of lost employees by making sure that you’re constantly training, developing, and supporting your staff – after all, you can’t grow without them!