THE HIGH COST OF EMPLOYEE TURNOVER
by Don Phin
Money has little to do with turnover. Most surveys have found that satisfied employees won’t leave a job unless they’re offered a raise of 15% or more. So why are they leaving? In this document, Don Phin uncovers the answers to this poignant turnover question.
It costs approximately $50,000 to replace a $50,000 a year worker — and the more the employee earns, the greater the expense of replacement. Replacing an executive can cost two to three times their annual salary. A turnover cost of “only” 15% for rank and file employees remains a substantial figure.
According to an extensive survey by the Gallup Organization, employees leave their jobs for three basic reasons — none of which involve money:
- Mis-hiring. Companies that don’t follow a powerful hiring process wind up with misfits. In many cases, ineffective orientation compounds the problem, leaving employees to ask themselves, “Why am I here?”
- Lack of growth opportunities. Most valuable employees want to be able to grow in their careers. Employees who don’t have a clear understanding of their career path will also leave.
- Poor relationships with their boss. Nobody wants to work for a jerk. Bosses who are too controlling or too distant will foster turnover. This is yet another reason why management training remains so valuable.
Money has little to do with turnover. Most surveys have found that satisfied employees won’t leave a job unless they’re offered a raise of 15% or more. Once workers receive a “fair” wage, salary quickly drops to between fifth and seventh place on their list of concerns — below such factors as job satisfaction, benefits, stress levels, and acknowledgment. The only exception to this truism is the low wage earner who needs to earn a “living wage.”
As a rule, the older and more experienced the worker, the lower the turnover rate. Although this statistic has an inherent bias, employers who use low wage employees should consider hiring senior workers to reduce their turnover cost. For more information on job retention and turnover, visit the federal Bureau of Labor Statistics site (www.bls.gov).