Employee turnover can be very costly for a company both in direct and indirect costs. Most companies will only take into consideration direct costs such as recruiting, interviewing and training of new employees. The training cost generally is initial training, but does not include training up to the level of the person being replaced. Many companies do not also consider the indirect costs of opportunity and morale. Opportunity costs are lost business based on staff shortages to handle business or lost connection/rapport with a client due to the relationship with the former employee. Morale can suffer due to the added workload to current staff, as well as, relationships built with the former employee.
Due to the high cost of turnover, companies must focus on employee retention and measure employee satisfaction. Employee retention and satisfaction start as the first contact with that employee. Professional recruiting and interviewing processes set the tone for the employee. Orientation and on-boarding are very important to lay the foundation of their time with your company. It will set the expectations and vision of the company. It will help the employee to “buy in” as a member of the team. Also with the increasing cost of benefits, companies must be creative in recognizing employees. While recent studies show pay as the most important aspect of job satisfaction, opportunities to use their skills and their relationship with their supervisor, rank a close second. Also in the Top 5, is communication between employees and management.
Communication and rapport with employees is vastly less expensive than replacing them.