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How much does employee turnover really cost?

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Re: How much does employee turnover really cost?

#191

Post by st3v3r »

sputknick wrote: post #63
shanemhansen wrote: post #61

I've often been shocked at how a theoretically rational profit seeking business will happily throw millions down the drain rather than compensate an individual based on value. Ultimately I've concluded that although they may be greedy, most businesses don't make rational profit seeking decisions. They make decisions that stroke their ego, and sometimes their ego can't accept the value that certain employees bring to…

It's not about what salary that engineer deserved, but what they could command. That engineer might have done $1 million worth of work a year, and deserved a $1 million salary; but he couldn't go to another company and proclaim he was worth $1 million. He could probably go elsewhere and get a slightly above average salary, your company knew that, and that is why they paid him that.

I think the point is that line of reasoning is pretty self-defeating, because the guy left. But if they had paid him in line with what value he was bringing to the company, he might not have.

Re: How much does employee turnover really cost?

#192

Post by meheleventyone »

std_throwaway wrote: post #62
jedrek wrote: post #56

Earlier quoted context omitted.

I've been to management seminars where they downplay the importance of money, saying that employees are mostly motivated by other factors. Then I talk to my co-workers, the ones that are quitting, and about half of them leave because they've been working for 2+ years without a raise. I worked at a company where a company decided to introduce a new management program (LEAN) into one department. That 16 person departme…

Did they quit because they had a better offer elsewhere? Or did they quit because they increasingly felt they've become stuck, left behind and not valued highly by their employer?

I quit when I had a better offer elsewhere because I felt undervalued by my employer.

I went from a local company with overseas offices paying poorly for my niche into an international company paying nearly double without even flinching at negotiation. That was eye opening to me as a signed up 'what matters is autonomy, mastery and purpose' guy. Not only that but the company matched salary raises to a local unions pay negotiations which meant that my until then roughly cost of living raises suddenly doubled. I also ended up getting an annual bonus bigger than I was contractually entitled too as well. All in I more than doubled my salary which let me do things like rebuild our family home.

I realised that not only did I feel my work wasn't recognised at the previous company but they were actively taking the piss. I also realised that whilst I didn't do anything I did for the money reward (I genuinely felt this bonus scheme would have been as worthless as others) the actual monetary demonstration of value in raises and other rewards really makes your value apparent in a manner very meaningful to the rest of your life.

I still think the competition for bonuses and raises can lead to all sorts of degenerate behaviour from the POV of the business and stress on an employee but I really see the absolute value of monetary rewards now when they appear out of your expectations.

Re: How much does employee turnover really cost?

#193

Post by hengheng »

TeMPOraL wrote: post #141
marcosdumay wrote: post #129

Earlier quoted context omitted.

That's a very well known experiment, and well explained on the one TED talk I've seen it cited. The experiment conclusion is that thinking about money as a reward¹ makes people much less creative. It's simply amazing how somebody can spin this into "money doesn't motivate people". Some people will only see what they want, and make any excuse for that, no matter how absurd. 1 - Does thinking about it as a problem have…

> It's simply amazing how somebody can spin this into "money doesn't motivate people". Some people will only see what they want, and make any excuse for that, no matter how absurd. Almost nobody reads the original studies. Instead, they read news stories and articles, most written by professionals who are paid to spin it in amazing ways.

Reports on studies are there to create one-liners, bite sized phrases that are to be repeated and retold over and over.

So, memes.

Re: How much does employee turnover really cost?

#194

Post by phaus »

softawre wrote: post #169
phaus wrote: post #136

Earlier quoted context omitted.

I make low 6 figures doing network security. If I hit 200k, literally the only thing you could do to motivate me would be to treat me well and give me interesting things to do. Fortunately, my employer already does both of those. I just wish it wasn't almost a requirement to leave in order to get a decent raise. Note: I'm not expecting to make $200k in a technical role as a security analyst any time soon, its just hy…

It is also interesting to think your number, 200k, is strictly based on how much you make now. What would your 18yo self said about 100k? What do you think about a Netflix engineer making 300k? They'd probably be happy with 500k (though, cost of living, derailment ahead..).

My number's based on cost of living. At $100k, in the area I live in, I have a good standard of middle class living but I still have to work hard to save, go on vacations, and make major purchases.

At $200k, I could maintain the same standard of living, easily pay off all of my student debt in about a year (without sacrificing anything), easily buy a house, buy a new car outright after saving excess money for 3-4 months, pay for my kid's college education outright, and save a ton of money for retirement. At $100k, I constantly have to pick and choose which of these things I work on.

If I made $200k, living in the same area, I might not be wealthy in the grand scheme of things, but I sure would feel like it. About 70% of the negative stress in my life comes from anxiety about being able to afford everything my family will want and/or need eventually.

Interestingly enough, I have already lived through the experience of having my salary double almost overnight. I used to live in a relatively low-cost area, but I was still getting paid about $25k below market. Then I moved to a higher-cost area, and took a more advanced position at a company that paid a little more than market rate. Went from below $50k to just under $100k. The impact on my life was significant. I went from feeling poor and helpless to finally being able to breathe. I used to be depressed and angry all the time because I could barely take care of my family and my household. Now I'm more or less happy.

Re: How much does employee turnover really cost?

#195

Post by flukus »

softawre wrote: post #174
JamesBarney wrote: post #116

Earlier quoted context omitted.

This is the best candidate ad I've ever seen. This makes me really want to work at Netflix.

Same with their presentations at conferences. They hire really good people, pay them a ton (300k+), and fire them when they stop performing. It's a good way to get great people, if you can afford it.

That gets into a murky definition of "performing" though. Performance is often limited by other people, many of which may be long gone. It can also create a culture of people unwilling to admit mistakes. It doesn't take long for these behaviours to produce massive amounts of technical debt.

The policy doesn't seem to be working for their UI team either.

Re: How much does employee turnover really cost?

#196

Post by euphoria83 »

nine_k wrote: post #168
euphoria83 wrote: post #29

This article missed the fact that the cost to the company in trying to keep the employees who will leave every year might be greater than the cost of losing them. For e.g., in the example given in the article, the company loses 1.57 million due to employee turnover. However, who knows how much the company might have to spend to keep those employees from leaving. The cost would be high because the effort spent on empl…

Let's estimate. Assume that the company loses 10 employees and loses $1.57M as a result. This means that it would be better off if it spent less than $157k on each employee, on the average, to prevent the loss. $157k is a yearly salary of a senior developer, or maybe the entire yearly cost of a senior employee outside the hotbeds like SV or NYC. We can cautiously suppose that a company could retain the employees with…

The money that they can spend per employee is 1.57M / # total employees. Not, 1.57M / # of employees who left. They don't know who will leave. Their cost of good initiatives will be spread over all their employees.

Re: How much does employee turnover really cost?

#197

Post by euphoria83 »

jackaltman wrote: post #186
euphoria83 wrote: post #29

This article missed the fact that the cost to the company in trying to keep the employees who will leave every year might be greater than the cost of losing them. For e.g., in the example given in the article, the company loses 1.57 million due to employee turnover. However, who knows how much the company might have to spend to keep those employees from leaving. The cost would be high because the effort spent on empl…

That's a valid point, that it could potentially be more expensive than it's worth. In other words, it is possible to spend too much on trying to make your employees happier. I wasn't trying to argue that the optimal amount to spend on employee turnover is infinite, but I do think most companies dedicate less than the rational/optimal amount of effort on it.

I totally got your point. I am playing Devil's Advocate to those who are recommending going to the other extreme and spending enormous amount of money for employee retention, including a significant increase in per employee salary.

Re: How much does employee turnover really cost?

#198

Post by flukus »

beachy wrote: post #156
georgeecollins wrote: post #67

Here is a strange thing I have seen: Turnover is bad for a company overall, but good for H.R. HR teams are more important the more there is a need for recruitment. I have seen them be the part of the company that says "we are a team like a sports team, not a family," implying churn is OK. That is good for their productivity, particularly if their workload is on boarding and "culture" as well as recruiting.

Turnover is not always bad by any means. Often a company accumulates (bad hires, acquisition, good apples going stale) people who would be better off gone for everyone's sake. There's good turnover and bad turnover.

But when turnover is high the good ones are much more likely to be leaving.

Re: How much does employee turnover really cost?

#199

Post by willhslade »

ajmurmann wrote: post #143
battlebot wrote: post #99

Earlier quoted context omitted.

The biggest thing the US needs is a management overhaul.

What and from which countries in particular do you think the US can learn?

Germany, Japan, and the UK.

Managers not MBAs is a good book that summarizes the problems with the current management culture.

Basically, by having a class of people who have never done the grunt work of a particular job, you ruin what the Army calls "Unit Cohesion".

Re: How much does employee turnover really cost?

#200

Post by dikdik »

sputknick wrote: post #63
shanemhansen wrote: post #61

I've often been shocked at how a theoretically rational profit seeking business will happily throw millions down the drain rather than compensate an individual based on value. Ultimately I've concluded that although they may be greedy, most businesses don't make rational profit seeking decisions. They make decisions that stroke their ego, and sometimes their ego can't accept the value that certain employees bring to…

It's not about what salary that engineer deserved, but what they could command. That engineer might have done $1 million worth of work a year, and deserved a $1 million salary; but he couldn't go to another company and proclaim he was worth $1 million. He could probably go elsewhere and get a slightly above average salary, your company knew that, and that is why they paid him that.

Interesting. Often I hear that you are only worth what value you can provide in any one role. Like for me working in bioinformatics, I am paid much less than if I took my skills to pure tech. There is only so much value my skills can provide in this industry, but if I went to tech my skills could provide 3-4x the value.

Despite being able to show I could get paid much more at a tech-company, my company will not pay me more. However, you are claiming that the opposite is also true. You are not paid based on the value you can provide to an organization, but based on how much you COULD provide to other organizations.

So I think you are wrong. These are all just attempts to justify why companies are averse to highly paid employees, but will happily spend 10x a key employee's salary on a new machine or on a month worth of consultants.

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