We are all familiar with the infamous tango of employee attrition and turnover costs. Over 4 million U.S. employees leave their jobs each month, a staggering fact. What is even more devastating is the financial blow a company faces with each employee departure. There are explicit costs as well as hidden ones, the latter being more complex in nature. In this blog, we will explore some of the most prominent hidden costs associated with employee turnover and discuss possible ways to mitigate them.
The U.S. Average Annual Turnover Rate Is 47 Percent! Can you believe that? 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 are struggling to manage their turnover costs. Let us analyze some of the hidden employee turnover costs:
1. The expensive offboarding process
One of the most significant expenses a company has to bear when an employee leaves them is the infamous offboarding costs.
It includes administrative costs (severance pay, COBRA notifications, exit interviews, benefits reconciliation), temporary stuffing (employment gap, recruiting through temp agencies, training temporary staff), and loss of institutional knowledge.
It costs the organization an arm and a leg when it comes to the offboarding process, making it one of the most dreaded terms in the HR world. 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 loss of relationships and knowledge
An employee spends a significant amount of time doing their assigned tasks for an organization. By doing so repeatedly, they gain a special knack for the job, which most of us call by the name specialization. Now, this is something that can be acquired only through experience and cannot be taught by training.
When employee attrition occurs, along with the monetary expenses, the loss of knowledge also takes place. Apart from that, the company loses the meaningful relationship it had created with the employee. The loss of relationships and loss of knowledge are two things that take a significant amount of time to replace. Although this particular cost is not as explicit as some others, the effect it has on the company is all the same.
3. Interview and training costs
Well, 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 interviews have to be conducted (multiple rounds). 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
An employee leaving an organization always makes the environment gloomy and tacky. If the employees were great at interpersonal skills, they would have made good friends with co-workers. In that case, the rest of the team lost 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 take 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 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.
Employee turnover rate is on the rise, and this is the hard truth. Here are 5 of the best ways in which you can mitigate employee turnover costs completely or reduce them to an acceptable level:
1. Ensure your employees have the right tech
Most of the time, all you have to do to make your employees stick with your company is to give them the help of the right technology. Conduct pulse surveys every other work and ask employees how the inclusion of particular sets of technology could help them do their work in a more efficient manner.
Here's 101 pulse survey questions to help you conduct frequent pulse surveys in a jiffy.
The type and quantity of tech to be integrated with the operations depend on the kind of feedback you receive from the employees. It could be something as simple as providing your employees with a new laptop or system to work in. Anything tech-related that removes the extra burden from your employee's shoulder is worth implementing.
2. Put your efforts into making the onboarding process seamless
New hires are full of nerves and are often jittery. They get the first taste of your company culture and office operations through the onboarding process. If you make the onboarding process a seamless and wholesome experience for your employees, that emotion and feeling stick with them.
On the other hand, if the onboarding process is poorly organized with an air of formality in it, employees might not feel like staying with your company for the long run. Put in your best employees to come up with the onboarding process and show the new hires what you are made of. Here are 19 onboarding survey questions to simplify the onboarding procedures and ensure your employees have a smooth onboarding experience.
3. Emphasis on a culture of employee engagement
Everything boils down to organizational culture at the end of the day. No matter how competitive your compensation is and how organized your daily task allocations are, if your company does not have a strong culture to back up the claims you made, then there is no surprise in employees leaving.
A company culture that puts the limelight on employee well-being and engagement creates a positive work environment. No matter how hard the sailing gets, a company with a culture of employee engagement will never have to worry about its employees leaving the company.
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 a longer period of time.
5. Building 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 advocacy and peer-to-peer recognition.
6. Gauge employee 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.