Guest blog post from Dave Wilkinson
There is an old saying when it comes to staff turnover, people don’t leave a job they leave the management.
Here are the top five reasons why people leave:
- Relationships with supervisors / managers
- The content of the job is either boring or too ambiguous
- The working conditions, largely hours and demands from management
- Poor pay
- Better job on offer
There are some very real financial and non-financial costs associated with staff turnover:
First, employee turnover often negatively effects the consistency and quality of the service the employee is performing, usually directly damaging revenue and profitability. Employees who are planning on leaving are often not as motivated to perform at adequate levels as staff who are committed to their role
When a leaver is replaced it will also take some time for new staff to develop the knowledge and skills necessary to be proficient in their essential duties and responsibilities. It is estimated that most people don’t reach peak performance until they have been in the job for 18 months, which usually equates to 1 ½ cycles of the business year. It also takes this amount of time for people to get into the hidden routines of the job. It is virtually impossible for newly hired employees to provide the same levels of service as veterans who have mastered their tasks.
Additionally there is a considerable amount of stress created by short-timers and employees who leave, on those that remain. During the time it takes for new people to be recruited the job they are coming to do usually can’t just be put on hold until they are employed and effectively working. This can create burnout in those that stay, which further exacerbates and perpetuates the problem.
There are considered to be three sets of costs associated with replacing staff:
- Hard costs – Such as advertising are visible, and usually accounted for as a direct cost of recruiting.
- Soft costs – Includes things like, the time it takes to recruit someone and get them up to speed (usually 18 months). These costs are usually hidden an include things like the managers being distracted by the recruiting, training and extra supervision processes. Other staff working at less than optimal capacity because they are having to infill for the missing staff member. Lower levels of customer service etc.
- Opportunity costs – Includes things like missed sales, the inability to expand at the rate you would have if you had a fully effective and efficient staff and team member during that period.
As you can see the costs often become substantial. However because many of them are hidden most business owners are either unaware of them or choose to ignore them.
But, the story doesn’t end there.
If your recruiting process is inefficient or ends up recruiting the wrong person the costs escalate considerably. Take for example the scenario where you recruit someone who is either wrong for the job or is wrong for your organisation. Not only do you have all the costs I have outlined above but you will have considerable disruption costs whilst you go through the process of trying to make them fit, get them to work in the way you need them to and then quite likely eventually replacing them.
In effect recruiting the wrong person is estimated to increase the hard, soft and opportunity costs by over 120% compounding your original problem considerably! It is important that if you do get into a recruiting situation you use professionals. The return on investment of getting the right person from the start will pay you back many many times over.