I often get asked by CEOs and company presidents about ways they can increase employee retention. My first reaction is to ask them, “What is the cost of losing and replacing an employee in your organization?” That question is often met with a blank stare and a puzzled look. “We have never put a number to that…” is a common response. So let’s start here…

What I know, after presenting in front of some 4,000 CEOs and company presidents over the past 5 years, is this: If it’s not a number on the P/L sheet… they don’t put the time and resources towards dealing with it. It’s not that I’m saying that company leaders are callous; I’m just saying that they only have the bandwidth to deal with items that are critical issues to the financial health of the organization. So without turning retention issues into a number, it will never get the attention and resources it needs to improve.

The last stat I saw was from SHRM several years ago. At that time, they estimated that the cost of losing an employee, recruiting their replacement, and training them equated to 38% of that employee’s annual wages. I must admit, in my opinion, that number is low, but let’s go with it for the purposes of this discussion. That would mean, if you lost and replaced four $50,000 employees last year, the cost to replace them was about $76,000. If you turned over 10 employees at that level last year the direct and indirect cost was $190,000. So where are you currently tracking that number on YOUR P/L? Likely, you aren’t… which is kind of the crux of the issue.

The retention and development programs that I teach companies to install often cost almost $0. They do, however, cost the one thing your people (including you) likely have the least of… time. It is difficult for organizations to commit the time to employee retention and development programs until they can calculate the ROI of making the effort. In the past that was hard to calculate; but no longer.

So, based on this formula, what was your organization’s cost of turnover last year? Ready to keep that loss from happening again this year? Good… More to come.

If you are looking for insight or specific action steps to grow a process within your organization to Win the War for Talent, please reach out. It’s my passion to help companies solve their talent issues, whether that is finding the right talent or retaining and developing that talent. With the right processes in place, your organization can grow and thrive even more!

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