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Articles
Calculating the “real” cost of employee
turnover
To calculate the “real” cost of employee
turnover, you need to consider numerous areas affected by turnover. Top
and bottom lines are affected and the recovery process is painful. The
examples listed below will give you specific details on each aspect of
calculating the “real” costs of employee turnover in ANY business of ANY
size.
ADVERTISING
Each time you replace a person you must
advertise the availability of the job. Newspaper advertising, chamber,
web sites, magazines, email newsletters, association newsletters, direct
mail, job fairs, booths, open house, etc. Then of course you must calculate
the amount of “time” that’s spent to create the ad and the advertising
strategy. Once you calculate the cost of “time” don’t forget to add in
the cost of the actual advertising. To get your final costs take the salary
of the individual or individuals that are responsible for this portion
of the “recruiting” effort, track the hours spent, figure salary per hour
and you’ll have your “time” costs. Then, add in the actual expense of advertising.
That’s the “real” cost of the advertising portion of TURNOVER!
INTERVIEWING TIME
Each time you interview a candidate whether
it’s formal or informal, whether on the phone or in person it’s costing
you money. You’re spending money when you go to get the mail, open the
“resume” mail (email & snail), when you read the resumes, respond to
inquires, check references and discuss the position with internal team
members. Once again look at the salary for individual or individuals involved
in this portion of “recruiting” and track the hours spent. That will
give you your “time” costs. In addition, you may incur “interviewing expenses”
to promote the position and/or your company. For example: you may take
applicants to lunch or you may have additional managers in the company
conduct the interviews so you can get different opinions. Don’t forget
to calculate the “time” spent by all that participate.
TRAINING
Each time you train a new person it costs
you money. Here’s how… the person that does the hiring usually does some
training, then asks a fellow employee to help out with training. The “time”
you spend training, no matter how formal or informal, the “time” you spend
explaining the job responsibilities to the fellow employee and the amount
of time that they spend actually training the new person are all COSTS!
Look at all the salaries involved, create an average hourly wage, calculate
in the hours spent on this portion of the recruitment process and you’ll
have another piece to the REAL cost of TURNOVER! Wait, it’s not over! The
costs of training are not just measured in “time”. Continue reading for
the other side of “COSTS” regarding training.
MANAGERS’ LOST TIME FOR THE REST OF
THE TEAM
Each time YOU, the leader, take “time”
to focus on the “recruitment” process you take valuable time away from
the rest of your team. You forget them. You’re not focusing on their successes
or challenges. You’re business suffers, you lose track of current and future
projects. You become overwhelmed, stressed, forgetful and perhaps even
a little grouchy. You’re the leader! You’re the top! You’re the one, they
emulate, they watch your every move, and they count on you and whether
you like it or not they look up to you. So first they will follow the leader!
You see in a quiet way your actions are giving them permission to act the
same way when there’s a change or challenge for them to deal with. They
lose focus, organization is an issue, there’s no motivation and attitudes
are negative. And that’s not all! When you have a leader that’s not
leading the team, you get a team that’s not functioning as a team. They
take it out on each other with pettiness, bad attitudes and then of course
the way they treat each other is the way they’ll treat, YOU GUESSED IT,
the paying customer! You’re external customers are getting attitude, bad
service, etc. BOMBS AWAY!
That’s your bottom line!
EFFECTS ON EMPLOYEES
In addition to attitude being affected,
workloads are effected for each member of the team. Each time you hire
a new person you shift job responsibilities to different members of the
team. Usually you don’t even ask, you just pass it on and even more frightening…
sometimes you don’t even delegate to people that know how to handle the
new responsibilities.
Of course, most team members want to do
well and dive in so even though they’re out of their comfort zone they
may not even tell you. When workload increases, especially to inexperienced
people you create a plethora of problems. Employees will suddenly be out
sick, take personal days or vacation time and you’re so wrapped up in what
you’re doing, you may not even notice. This isn’t even the worse case scenario;
other employees start to give their notice. They’ve just had it! The costs
involved are infinite.
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