With the beginning of a new year, many organizations set up new business goals. These sessions usually include a review of the previous year’s performance, the new goals, and then action steps to get to the new goals. Contingency plans are sometimes discussed but rarely do they include personnel. Nearly every organization goes into execution of the new plans believing that they will have the existing staff as it is today. In many industries, there is little planning for personnel turnover. Especially for those key performers who you really don’t want to lose – the regrettable losses. Turnover can hobble the execution of any plan or project with key performer turnover being devastating. By identifying the causes of turnover, solutions can be created. And by identifying the true costs of turnover, solutions can be funded.
So why do people leave? Travis Bradberry, an American author, says “Managers tend to blame their turnover problems on everything under the sun, while ignoring the crux of the matter: people don’t leave jobs, they leave managers.” There are loads of reasons for why someone would leave their manager – ranging from personality conflicts to poor communication to poor or absent expectations to micromanagement. A good indicator is the manager’s retention and promotion history. How many people does the manager retain and how many does the manager promote? A low retention rate can be indicative of a systemic problem as it can be viewed across multiple people reporting to that manager.
Additionally, is the manager set up for success in the retention arena? Do they have the skills for retaining a key person? Can they really listen to the people who report to them and hear what is not said – as well as what is said? Do they understand thinking and learning styles so that their communication can be adapted for different listeners? Do they have the skills to build relationships, quickly surface and resolve conflicts, develop skills in their people, and get barriers out of the way so that their people can succeed? If these skills aren’t present and practiced, then irritations can occur in the organization. Irritants usually get bigger with time and can eventually become a reason for someone to leave the organization. Having someone in a management position with no skills for managing people is abusive – to the manager and to their people. Investing in developing a manager’s skills sends the message that people are valued, that retention is important, and that everyone deserves to have a good manager.
Investing in skills development requires a payoff, and turnover is perfect. The bottom-line is that turnover is costly. It is common to see that replacement costs for an employee can be 1.5 to 2 times their annual salary. For high performers, the replacement cost is even higher – losing a star performer can be terrible for the bottom line. According to research by SAP and Oxford Economics, less than half of high performers are satisfied with their jobs and 1-in-5 say they are likely to leave in the next 6 months. The cost of leaving and replacement is frequently underestimated. Some costs are fairly easy to identify, but other costs are less obvious. Here are several categories for consideration:
- Cost to Hire – posting a position (recruiter, advertising), clearing potential candidates, interviewing, etc. On average it takes $4,000 and ~50+ days to fill an open position. There may also be costs associated with temporary employees to fill the gap during the hiring process.
- Cost to Onboard – getting the new hire trained (processes, tools), qualified, and up-to-speed for both the new hire and their management. On average it takes 6-9 months for onboarding plus additional time to be at the same productivity level as the person who left.
- Cost to Productivity – losing a trusted team member creates questions of ‘why did they leave’? There are also additional expectations and work – even though the organization is short-staffed. Client relationships could be in trouble or could leave with that employee. All of these lead to lower morale and productivity.
The most important cost category is the last one. The other two categories are finite in that they typically have a beginning and an ending. The Cost to Productivity, on the other hand, could create a hangover that stays with the organization for years.
If increasing retention and reducing turnover is a goal for your organization – decide to invest in skills for the managers. Allocate money in the budget and review the costs of turnover. It doesn’t take much turnover to create big costs, short term and long term. By developing managers and their skills, not only will those losses be prevented but the performance of the entire organization will be elevated. It is a worthy investment!
