Employees are the greatest assets of any company. Most companies invest heavily in hiring, training, and maintaining a superior and successful team of individuals, and devote the biggest portion of the budget to salaries and benefits. We know that as experience grows, employees appreciate in value over time. And as employers, we hope that after investing so much effort into their success, employees will stick around long enough to truly benefit our organizations. That’s precisely what makes employee turnover such a difficult problem to solve.
Today’s experts can’t seem to agree on how much employee turnover costs. One industry-based study reported that each lost employee could cost up to $20,000 for companies in the information, financial, and business industries—but others estimate up to twice an employee’s annual salary. While that number remains elusive, the monetary value your company will accrue by reducing employee turnover is reason enough to start trying something new.
The following three-pronged approach will help you take a holistic look at employee turnover in your company and solve related issues across all segments of the employee “lifecycle.”
Ways to Reduce Employee Turnover Costs
Employee turnover costs come from a complicated mix of recruiting, hiring, training, and productivity loss over time—so it’s worth examining all stages of the employee’s stay to find ways your company can improve. This three-part plan is a great place to start.
1. Hire the Right People
Forbes, WSJ, and Business Insider all identify this as a major way to prevent employee turnover, so that’s where we’ll start. Companies must revolutionize the hiring process in order to find employees that are a good fit, both in skills and in motivation—and I don’t mean switching to a new one-way video interviewing system or hiring a third party to perform initial recruiting. Completely the opposite, in fact. Cut out the middleman and get rid of all the vague, unclear elements of your hiring process.
I recommend making the interview process more personal, with one-on-one interactions between new talent and their managers or upper leadership staff. Revise your interview questions to get at whether or not this person will be a good culture fit. Include brief pre-employment assessments or assignments to evaluate real job-related skills. Finally, frame your “about our company” speech to clearly state how your company handles work-life balance, stressful seasons, and challenging expectations. One interview like this will reveal—both to you and to your new hire—whether this partnership will work.
2. Create a Stay-worthy Environment
After the initial hiring decision, it’s your responsibility to make sure your ongoing work environment is conducive to employee success. There are many facets involved in creating a positive and growth-focused work environment, so start with the basics:
- Make sure your employees receive competitive or above-market pay and fantastic benefits—and reevaluate what you’re offering every six months to make sure you’re staying abreast of the industry.
- Give your employees more autonomy in general, and offer them the freedom of flexible schedules.
- Create opportunities for career growth by empowering employees’ long-term goals, offering skills training, and encouraging passion projects.
- Prioritize healthy work-life balance (this means severely cutting down on those after-hours emails).
With this established foundation, go above and beyond by setting up a meaningful employee recognition program. This system will reward your high achievers and motivate the entire company toward greater success. Plus, it’s a straightforward way to show your employees you value them and their hard work—and that respect is a worthy benefit all on its own.
3. Collect Meaningful and Measurable Data
The last element of this three-pronged approach to reducing employee turnover is constant data collection—both while the employee is still with the company and when they choose to leave. You can’t possibly know how your employees feel about their work, their managers, and the company as a whole unless you ask them. Employee satisfaction surveys are a cost-effective tool we can all use way more often (even once per quarter) to keep our finger on the pulse. Ask for feedback during annual or semi-annual reviews, and always conduct exit interviews.
If employee turnover costs are a significant problem in your company, you’ll also want to start collecting detailed data sets relating to retention and related expenses. Keep track of turnover rates (making sure to clearly differentiate between new hire and existing employee rates) and work to measure exactly what cost your company incurs with each unfortunate departure. Assign this task to a collaborative team of professionals from the operations, HR, and finance departments—or start the preliminary accounting yourself using a spreadsheet calculator. Continually compare your results with industry averages to make sure your company is on track.
My final piece of advice is to synthesize all the information gleaned through the holistic approach above and understand exactly who’s leaving your company and why. Are they new hires, low performers, or seasoned veterans? Take these observations and improve the onboarding, communicating, and evaluating processes within your company. Reducing employee turnover doesn’t just reduce costs—by taking the time to understand these details, you’ll be able to improve morale, instill confidence in your employees, and provide your team with an even better working experience.
We’re in the business of helping employees love to come to work each day and helping employers reduce their turnover costs. We help companies achieve their goals through successful employee recognition programs that have a big impact on the bottom line. Interested to learn more? Let’s talk.