How does your employee turnover compare to other companies in your industry? How much does employee turnover cost you?
A good rule of thumb is to estimate a cost of $200 per $1,000 of salary just for recruiting costs. Recognize this could be as low as $150 per $1,000 of salary or as high as $300 per $1,000 of salary, depending on seniority. To this, you should add between 50 and 75% of salary for lost productivity or missed opportunities. For example, for a sales person making $100,000, the cost of replacing them would be $20,000 plus maybe another $50,000 because there was no one to close a deal with a customer. These numbers can quickly help you justify an employee retention program.
If your turnover rate is significantly higher than average, you may need some help to determine why this is the case.
Do you have one position that’s been hard to keep filled? The employees in this position just haven’t been working out or the employees leave the company after a short period of tenure.
If this is the case, you may require some assistance to determine why.
Best-in-class companies use what are called Exit Interviews with personnel who are leaving the company. For the employee, it’s an opportunity to explain the reasons for their leaving and, for the company, it’s an opportunity to gain some insight into some possible root causes of employee departures.
Maybe the role has not been clearly defined enough. It’s possible there could be some internal conflicts based on personality or working styles. Or you may simply have had trouble finding quality candidates to fill the role.
While internal Human Resources personnel are capable of doing Exit Interviews, employees tend to be more open to someone from outside the organization who they perceive as neutral or unbiased. In some cases, they may withhold negative comments for fear they may not receive a favourable reference from the company.
Under many circumstances, doing exit interviews with former employees and determining any underlying issues within the organization can help make the next search go more smoothly. It’s an opportunity to get the role properly defined, to ensure the compensation reflects the market.
By addressing issues identified through this process, companies can also improve employee retention and avoid unnecessary searches.
The investment in exit interviews is much smaller than for a search, but one that can help get your recruiting efforts back on track so you get the right people for the job.