What Gallup calls the “$1 Trillion Fixable Problem That No One Is Fixing”…
What’s the problem and why is it costing US businesses a trillion dollars a year?
It’s called “voluntary turnover”…
AKA, when employees leave your employment by their own choice. Most businesses and organizations think of turnover as just another cost. Yet the Conference Board’s latest annual survey of global business leaders reveals that the #1 internal hot-button issue for C-Suite Executives is “attraction and retention of top talent.”
So, what are the costs to businesses of lost talent?
Let’s do some math.
You have an employee who is doing a good job, has been around for a while, and is making $120,000 a year. That employee leaves.
According to the Center for American Progress, it will cost you $255,600 to replace them. If they’re a high-level or specialized employee, it can take up to 400% of their annual salary. That would increase our cost of replacement to $480,000! For the sake of this example and our math, let’s presume they’re just a regular old team member.
According to business expert Josh Bersin, it can take 2 years before a new employee reaches the same level of productivity as an existing staff member. That’s after the $255,600 you just spent to advertise, hire, onboard and train. So now it’s 120k times 2 plus $255,600 – or $495,600.
Almost half-a-million-dollars.
To replace the person who you already had.
To say nothing of the impact on people who are remaining (likely lowered morale and increased workload), brain drain and the related reduction in innovation, and the loss of productivity due to the entire process.
Okay – so why did they leave in the first place? Below are the top three reasons most frequently cited in studies of why employees leave.
First, however, let’s address what most people think is the #1 reason: pay and benefits. Interestingly, a Deloitte study found that employees value “culture” and “career growth” at almost twice the rate they value “compensation and benefits” when selecting an employer. Okay…guess we’re all wrong when we thought money was the main reason…
According to Johnny C. Taylor Jr., the president and CEO of the Society for Human Resource Management (SHRM), the world’s largest HR professional society, a new – and perhaps the most important – trend is transforming the workplace: organizational culture. With employment statistically at 100%, the marketplace is more competitive than it’s ever been. Organizations with strong cultures have a distinct advantage over the field when it comes to employee retention.
According to Gallup, 75% of employees leave because of their manager or poor management. It could be something as dire as a toxic manager or as non-threatening as people feeling unappreciated. The youngest generations of workers – millennials and Gen Z – thrive under mentors and retreat under micromanagement. Which brings us to…
New Needs. Today’s younger workers want – and are demanding – mentors, not managers. When these workers don’t feel connected to the mission of the organization and don’t know their path for advancement and that their boss has their back, 87% (according to Gallup) become disengaged. That’s the first step out the door.
By focusing on these three things – a strong organizational culture, effective managers, and addressing the needs of today’s workers – companies and organizations can greatly cut down on turnover and retain their best talent.
