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Over 4 million U.S. employees leave their jobs each month, which is around 2.5% of the entire US workforce.
While turnover is indeed unavoidable, companies can make use of preventive measures to control the hidden turnover costs and the turnover rates from rising.
The U.S. average annual turnover rate was 47% when last calculated in 2021.
We are going through a time where employees no longer see the need to stick to a company for years on end. With this trend, companies could struggle to manage their turnover costs. To more or less prevent that, it is necessary for organizations to raise their awareness of the hidden costs of turnover.
1. The Expensive Offboarding Process
When an employee leaves, one of the most significant and challenging costs for a company involves offboarding. This includes several expenses such as:
- Administrative Costs: These costs may include severance pay, managing COBRA notifications, conducting exit interviews, and reconciling benefits.
- Temporary Staffing: To fill the employment gap left by the departing employee, companies might hire temporary workers through agencies and spend resources on training them.
- Loss of Knowledge: A departing employee takes with them valuable institutional knowledge that could be costly to replace.
Some other offboarding costs involve the extra work hours the existing employees have to put in to negate the gap created by the ones who left the company. Most of these are monetary in nature, but some offboarding expenses are qualitative as well.
2. The Impact of Losing Relationships and Expertise
An employee who performs their role over time not only masters their tasks through specialization but also forms significant relationships within the organization. This expertise and the relationships are developed through experience, making them irreplaceable assets that cannot be quickly taught or transferred.
When an employee leaves, the organization not only faces the tangible costs of replacing them but also suffers from the intangible losses of their knowledge and relationships. These losses are profound and time-consuming to recover. While not as immediately apparent as direct financial costs, the impact on the organization is equally significant.
3. Interview and Training Costs
This is an obvious one. However, most companies do not consider them under employee turnover costs. Interview and training costs are usually considered as a part of hiring expenses. But when the process of interview and training is done to replace an employee who has left the organization, it can most definitely be considered an employee turnover cost (hidden).
You will have to set up a new job description and advertise for the vacancy. Resumes have to be shortlisted, and multiple interviews have to be conducted. Once selected, employees have to be put through rounds of training, which may cost the company their valuable time and resources.
4. Lowered Employee Productivity and Poor Team Dynamics
When an employee leaves, the rest of the team loses not only a team member but a valuable friend as well.
The loss could be reflected in the form of lowered employee productivity and friction in team dynamics.
The absence of a team member could dull down the team dynamics, making it harder for the company to carry out tasks as efficiently as it did before. Ultimately, it leads to a decreased quality of output, which may indirectly affect the revenue generation capacity of the organization.
5. The Company Culture and Employee Morale Takes a Toll
An organization might be losing a large number of employees at a time. In such a scenario, introducing a set of new hires can bring total disruption to the company culture and alter employee morale as well. If a majority of employees in a team are replaced by new hires, the existing employees in the team might not be able to handle the sudden change.
This may cause a dip in morale for the existing employees. Also, the new hires would not have practical knowledge of the culture of the company, making the transition period bumpy and uneven.
6. A Dent in Your Employer's Brand
Just like how higher employee engagement levels result in a good company reputation, high employee turnover rates may negatively affect employer brand as well.
Every candidate would be skeptical of working in an organization where employees go out through the door in less than one year of working for the firm. Building a good reputation for an organization is no small feat. It takes a lot of time and even more consistency. And one cannot really put a number on the amount a company might lose if it goes through a bad phase that ruins its reputation.
Here are 6 of the best ways in which you can mitigate employee turnover costs completely or at least reduce them to an acceptable level.
1. Equip Your Employees With the Right Tech
Often, equipping your employees with the right technology can significantly reduce turnover costs.
Regularly conducting pulse surveys can help organizations gauge their employees' needs and identify technology that could enhance their efficiency. These surveys help capture specific feedback on tools that can streamline their work or alleviate challenges.
Depending on the feedback, the solution might be as simple as upgrading their laptops or integrating new software systems. Investing in the necessary technology not only boosts productivity but also enhances job satisfaction, thereby reducing turnover.
2. Put Your Efforts Into Making the Onboarding Process Seamless
A seamless onboarding process can set a positive tone for new hires. A smooth and engaging introduction to your company culture and operations can leave a lasting impression, helping new employees feel welcomed and valued.
Conversely, a disorganized and overly formal onboarding process may discourage new hires from envisioning a long-term future with your company.
Invest in developing an effective onboarding program that showcases your company's strengths and commitment to employee success. Employ your best talent to design this process and consider integrating feedback from onboarding surveys to continuously improve the experience.
Here are 19 onboarding survey questions to help you streamline the process and ensure a smooth transition for new employees.
3. Cultivate a Positive Work Culture
Ultimately, the strength of your organizational culture can significantly influence employee retention. Competitive salaries and well-organized tasks are important, but they must be supported by a robust company culture that genuinely prioritizes employee well-being and engagement.
A positive and supportive work environment can make all the difference in retaining staff. Even during challenging times, a company known for its excellent culture is less likely to face high turnover rates, as employees feel valued and connected to the organization’s mission and values.
4. Customize Your Employee Retention Strategy
Every organization consists of employees belonging to different sets of generations. Millennials would prefer recognition and work-life balance to be the main motivators to stay at a company. But when it comes to baby boomers, stability and long-time care insurance might be the preferable factors.
Understanding these specific preferences and coming up with a personalized employee retention strategy can be an excellent way for organizations to mitigate these hidden employee turnover costs.
Make it a priority to conduct stay interviews with your existing employees to analyze what works and what doesn't work for them. It enables the company to take proactive steps to make employees stay for longer periods of time.
5. Build a Stable Employer Brand
Now this is definitely a long game, but it is definitely worth playing. Identify the core values and mission your company stands for. Create a brand image that reflects these very ideas. Every time a candidate hears your company name, the good reputation you have built over the years is what they will notice.
Emphasize a positive work culture, prioritize employee health and well-being, foster employee advocacy and facilitate peer-to-peer recognition.
6. Gauge Your Employees' Loyalty and Satisfaction
Keeping a close eye on how your team feels is key to cutting down on employee turnover costs. It's important to regularly check in with your employees to understand their loyalty and satisfaction levels. Think about using engagement, pulse, and eNPS surveys that are easy to fill out and get straight to the point. These surveys should ask how they feel about their job, the team they work with, their growth opportunities, and the overall vibe at work.
Enter ThriveSparrow. It is an employee success platform that can help you uncover insights into employee satisfaction and loyalty. With this platform, you can effortlessly deploy engagement, pulse, and eNPS surveys in minutes. Moreover, ThriveSparrow guarantees anonymity with survey results that results in employees giving their honest and transparent feedback.
Research-backed question banks help you get started quickly and alter survey questions as you wish.
ThriveSparrow's advanced analytics and heatmap tools help you decode this feedback. You can easily spot trends, identify areas of concern, and track improvements over time.
Moreover, ThriveSparrow guarantees anonymity with survey results that results in employees giving their honest and transparent feedback.
Encourage employees to share their thoughts and ideas, ensuring that their voices are heard and valued. Build a culture of trust, reduce employee turnover, and foster a more engaged and loyal workforce.
Try ThriveSparrow for free today!
The feedback you get from these surveys is super valuable. It's like having a direct line to what's going on beneath the surface. If you spot any warning signs or areas that need a bit of work, you can jump right in and sort them out.
Also, it's a good idea to have open lines of communication. Make sure your team knows they can talk about what's on their mind. This way, you can catch any issues early and show your team that you're really listening. When employees see you taking their feedback seriously and making changes, they'll feel more connected and loyal to your company.
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The more clearly you can see the hidden costs, the more efficiently you can come up with ways to handle them. We at ThriveSparrow believe that spotting the hidden costs starts with your existing employees.
Conducting customized pulse surveys, eNPS, and employee engagement surveys is a sure-shot way to find areas where the company might be losing money due to employee attrition. Use an employee success platform like ThriveSparrow to streamline the process and significantly reduce the time and effort invested.
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