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How much does employee turnover really cost?

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Re: How much does employee turnover really cost?

#31

Post by vinceguidry »

In my studies of history, I'm finding this current thrust of individuals as stores of wealth over firms and nations to be quite interesting. Back in the colonial period, everything revolved around national wealth. The crown alone sanctioned and funded expeditions, chartered corporations, and fought wars.

Over the last few centuries, power gradually shifted to the firm, then to markets, and now finally to individuals. Used to be, you had to pick the right parents, pick the right industry, and hope the political winds don't shift against you to earn a decent, livable life.

Now, all you need is intelligence and mental fluidity to weather hardships. No longer is a job loss catastrophic. Just about anyone born in a Western nation can, if he decides to, gain an education and make his way up the social ladder.

This is completely unprecedented from a historical perspective. The ability of the not-well-off to earn and enjoy the benefits of education was far and away only the province of the extremely gifted, the John Rockefellers of the world. It's easier than ever for someone born dirt-poor to become a CEO or politician.

Soon the world will turn completely on merit. It'll be fascinating to watch the way our societies go next. Certainly affluence will continue to push out into the developing world. But how will modern Western societies evolve? Will we conquer aging and produce scions of unimaginable ability? Death is the ultimate limiter of the power of individuals.

Re: How much does employee turnover really cost?

#32

Post by henrik_w »

dtnewman wrote: post #16

Two thoughts: * It's a good idea to try to quantify the cost of losing an employee. If you at least understand what basic costs you'll incur, such as cost of hiring, training, etc. it'll give you a basis for realizing the importance of minimizing turnover (perhaps you'll even conclude that turnover isn't a big deal in your case). But it's very hard to quantify some of the largest costs such as employee moral. I was o…

"By the time it gets to a counter-offer stage, it's often too late." - so true!

Also made me think of the Netflix HR/culture document [1] - pay the max you would be counter-offering for an employee right off the bat, don't wait unitl you actually have to give a counter offer (which would probably be too late anyway)

[1] http://www.slideshare.net/reed2001/culture-1798664

Re: How much does employee turnover really cost?

#33

Post by skylark »

I feel like the tighter your developers are with each other, the higher the impact of turnover. I personally know from experience that when my high performing friends move onto bigger and better things, they constantly encourage me to go with them or find something new myself. Entire teams can end up leaving through a sort of snowball effect.

Re: How much does employee turnover really cost?

#34

Post by rbcgerard »

Balgair wrote: post #25
dtnewman wrote: post #16

Two thoughts: * It's a good idea to try to quantify the cost of losing an employee. If you at least understand what basic costs you'll incur, such as cost of hiring, training, etc. it'll give you a basis for realizing the importance of minimizing turnover (perhaps you'll even conclude that turnover isn't a big deal in your case). But it's very hard to quantify some of the largest costs such as employee moral. I was o…

On 2: Ok all, why do diagonal promotions occur? I understand the issues around promoting when there is no room in the org chart, but I don't understand the issues with pay. Employees will shop the resume around, that is expected these days. And as the article points out, there are massive costs to a firm when those good employees up and leave. So why not just give a raise? Maybe you don't have the budget, I get that,…

I've noticed that many companies fail to recognize this, and hire two types of employees 1. Good ones who take the job for some reason, realize there are better options and leave shortly and 2. Bad ones that stay

Rinse and repeat, and the cycle gets shorter, and the problems get bigger

Re: How much does employee turnover really cost?

#37

Post by tyingq »

Balgair wrote: post #25
dtnewman wrote: post #16

Two thoughts: * It's a good idea to try to quantify the cost of losing an employee. If you at least understand what basic costs you'll incur, such as cost of hiring, training, etc. it'll give you a basis for realizing the importance of minimizing turnover (perhaps you'll even conclude that turnover isn't a big deal in your case). But it's very hard to quantify some of the largest costs such as employee moral. I was o…

On 2: Ok all, why do diagonal promotions occur? I understand the issues around promoting when there is no room in the org chart, but I don't understand the issues with pay. Employees will shop the resume around, that is expected these days. And as the article points out, there are massive costs to a firm when those good employees up and leave. So why not just give a raise? Maybe you don't have the budget, I get that,…

Often, it's because neither the company nor the employee really knows what the market rate actually is.

There is little industry agreement on what titles mean (SR engineer, for example isn't universally the same job).

And...both sides are incented to either over or under state market rate.

Re: How much does employee turnover really cost?

#38

Post by CPLX »

vinceguidry wrote: post #31

In my studies of history, I'm finding this current thrust of individuals as stores of wealth over firms and nations to be quite interesting. Back in the colonial period, everything revolved around national wealth. The crown alone sanctioned and funded expeditions, chartered corporations, and fought wars. Over the last few centuries, power gradually shifted to the firm, then to markets, and now finally to individuals.…

> Soon the world will turn completely on merit.

lol

Re: How much does employee turnover really cost?

#39

Post by ptero »

dtnewman wrote: post #16

Two thoughts: * It's a good idea to try to quantify the cost of losing an employee. If you at least understand what basic costs you'll incur, such as cost of hiring, training, etc. it'll give you a basis for realizing the importance of minimizing turnover (perhaps you'll even conclude that turnover isn't a big deal in your case). But it's very hard to quantify some of the largest costs such as employee moral. I was o…

> It's a good idea to try to quantify the cost of losing an employee.

Yes! But this is difficult. But beyond the easily computable costs (e.g., $x that the company spends on recruiting / total number of people recruited per year) there are significant costs that involve a lot of assumptions to quantify (e.g., effect of drop in team spirits). Those estimates often get discounted by bean counters exactly because they are based on some personal guesses.

In general I find the article somewhat disappointing: it refers to the need to quantify the cost of turnover and IMO does little to help people get defensible estimates. On the other hand it goes on (and on) on why it is important to keep employees. No contention, but I thought the goal was to get to this conclusion by independent, numerical means.

Re: How much does employee turnover really cost?

#40

Post by mevile »

nullnilvoid wrote: post #12

Many managers have the mindset that they can find replacements easily. If you don't do the job, there are 5 people lining up for this position. They don't realize the cost of turnover, partially because it is hard to quantify the cost. In the good old days, IBM and other blue chips would spend lots of money and send employees back to school and train them well. Nowadays, everyone is considered to be replaceable.

In my experience, this is not true in San Francisco. I've never worked anywhere in the bay area where engineers were thought of as easily replaceable. Everyone knows how hard it is to hire competent engineers around here. Even if people were lined up to replace a lost employee, just the interview process for hiring people is expensive as it takes multiple people out of their role to sit and interview someone for a day. When you lose someone, you end up with an empty position for at least a month, as even if you do hire someone right away they have to quit their current job and leave notice.
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