Why Poor Employee Retention Is So Expensive
When you think about all the ways in which your business may be losing money, employee turnover is probably one of the most obvious ones.
If you’re running a small business in 2016, then you know that employee turnover is a serious problem – especially if you run a business that depends on hourly employees. And even though employee turnover is such a blatant and serious issue, there are many business owners who still underestimate the financial ramifications of constantly losing and then having to replace employees.
The general perception seems to be that you’re only losing money while you’re short-handed and looking for a replacement. So if you find and hire someone new in a week, you’ve only really lost a week’s wage in productivity, right?
Wrong. There’s so much more that goes into the entire process – many hidden or not-so-hidden expenses that many business owners and managers tend to overlook. There are many so-called “soft costs” that management tends to overlook.
Want the real scoop on why poor employee retention is costing your business so much? Here are just some of the costs that add up as you try to replace team members.
You think that you’re simply losing money on a lack of productivity while you’re looking to fill your vacancies? What about all of the money and time that goes into finding the right employee? Hiring someone new is not an event, it’s a process.
You have to create job ads, publish them and promote them. You then have to screen potential candidates. Then you have to interview all of the people who made the cut. And finally, you’re (hopefully) able to hire someone. All of this takes time, resources and money.
Writing an effective job advertisement takes time and resources. Then you have to decide how you want to it them out to potential employees. Should you publish it in a local newspaper? Should you target online job sites instead? Should you pay more to get your job ad seen by the right candidates? Should you put posts together for all your social media channels to get the word out? Should you be asking your current employees for references?
Yes, you should be doing all of that and you shouldn’t cut corners in the hiring process if you’re looking to find a quality candidate that isn’t going to leave you in the same predicament a few months after the fact.
Once you’ve found the right person, you’re going to have to onboard and train them. Quality onboarding is imperative in your fight against employee turnover. The better your process is, the better your chances are of getting your employees quickly up to speed and keeping them engaged as time goes by.
Training can cost a heck of a lot of money as well. According to a 2014 report published by Training Magazine, the average training budgets of small businesses was $308,000, with retail and wholesale businesses spending more than $500,000 on training annually. The report claims that it costs approximately $1,200 to train one employee.
How is that possible? Well, just as there are hidden costs in pretty much every phase of your business operation, there are hidden costs in the training process as well. For example, the time your managers and other employees spend on training newcomers costs money.
Training materials and equipment cost money as well. And of course, there’s always the cost that comes with a loss of productivity that is bound to take place while the new hire is learning the ropes.
Learning Curve Losses
Even when your new employee is all caught up on training and has successfully been onboarded, there’s still a learning curve. The process of learning on the job doesn’t end once the first shift has been created for that employee.
No matter how successful the training was and how good your new employee is at doing his or her job, there are going to be problems and mistakes that will occur while they are getting acclimated to their new role.
There’s probably going to be customer service problems and there’s a good chance that some of your more experienced employees are going to have to pick up the slack a bit while your new hire finds his or her feet.
Poor employee retention not only affects the productivity levels of the specific position in question, it’s going to affect your entire team. High employee turnover rates can have crippling consequences for your workplace culture as a whole.
When people are constantly leaving your company, the people who are staying are prone to be concerned about it. They might be asking why it is that so many people are leaving and even considering doing the same if the trend continues.
High turnover also makes the concept of teamwork virtually impossible. How can be learn how to work as a team when your team members are in constant flux? If your business struggles to retain its best employees, there’s a good chance that morale is pretty low all around. Having a revolving door situation at any position in your company makes it incredibly difficult to build familiarity, relationships and a positive company culture – all things that are crucial for employee retention.
As friends and co-workers continue to leave, your remaining employees can struggle to form new relationships at work, or simply be hesitant about it. Low morale leads to a lack of motivation and low productivity. That’s why it’s so important to build a positive and supportive company culture. And one of the best ways to do that is by making sure that all of your best employees both stay and continue to grow with you.