Good help may be hard to find, but when you find it, keeping it can save you more than you realize. On the surface level, every employer understands that retaining good employees is more cost-effective than training new ones. The problem occurs when employers get comfortable, take great employees for granted, and forget how the time good employees save, and the training that went into that employee. Let's take a closer look at all the considerations to make when it comes to hiring and training new employees versus paying a little more for a well trained high performing employee.
Employee Morale Makes a Big Difference
When you are doing everything you can to keep your business afloat sometimes, it's hard to step back and think about employee morale. After all, you're paying them a good wage and helping them survive. But, that's not a leadership mindset, and all successful CEOs know this.
One of the biggest morale killers is frequent voluntary employee turnover. It has a big negative impact on employee morale, productivity, and company revenue. Recruiting and training a new employee requires staff, time, and money. The highest turnover rates are in industries like trade and utilities, construction, retail, customer service, and hospitality.
The Cost of Employee Turnover
Some studies predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager that makes $40,000 annually, that’s $20,000 - $30,000 in recruiting and training expenses. Some studies estimate even worse numbers. The “real” cost of losing an employee includes:
- The cost of hiring a new employee which includes advertising, interviewing, screening, and hiring.
- Cost of onboarding a new employee, including training and management time.
- Lost productivity – it can take a new employee one or two years to reach the productivity level of a trained employee.
- Lost engagement form existing employees – when employees work in a high turnover environment, they disengage with co-workers and lose productivity.
- Poor customer service – new employees take longer to solve company issues.
- Cultural impact – whenever someone leaves, current employees want to know why.
Why Are so Many Companies Unaware of the Cost?
Most companies don't have systems in place to track exit costs, recruiting, interviewing, hiring, orientation and training, lost productivity, reduced or lost business, admin costs, and everything else that takes place when an employee leaves. It takes collaboration among departments and effective tools for measuring and reporting.
Employee Retention Best Practices
- Benchmark your employee retention rates.
- Use proven retention strategies, not guesswork.
- Don’t assume employees are happy – create opportunities for feedback.
- Look into benefit programs like healthcare.
- Provide personalized benefits for employees.
- Always conduct an exit interview.
