“Your workforce is your most valuable asset. The knowledge and skills they have represent the fuel that drives the engine of business – and you can leverage that knowledge.”
– Harvey MacKay
In this article we explore the tangible and intangible costs of high employee attrition, which explain why retaining talent is rapidly become as important a priority as acquiring talent.
Some employee turnover is part of running an organisation. Indeed, large professional services firms expect – and therefore hire for – a certain level of attrition.
However, when attrition gets too high it can be damaging to the bottom line and business growth potential. A high turnover leads you to spend more time and resources hiring talent – which is particularly costly when seeking individuals with professional skills and qualifications
The Society for Human Resource Management estimate the cost of replacing a lost employee at 50-250% of their annual salary, depending on how in-demand their skills and experience are. Oxford Economics place the average cost of replacing an employee at £30,000, while one GroHappy client estimated that it cost them over £35,000 for each employee that left the firm.
The true cost of turnover is often underestimated. In information and interaction intensive jobs (the majority of professional services roles) the greater impact employee turnover has on overall productivity.
The cost of recruiting is just part of the cost incurred – there’s also the downtime while a new employee learns the ropes, onboarding costs and lost productivity. Equally, if an employee joins a close competitor, they may get an insider’s view into your opportunities, operations and strategies.
Costs to the bottom line are those that are the easiest to measure. However, it’s important to recognise the other costs associated with high attrition rates.
Often, firms with high attrition rates will find that they are losing their best performers. These individuals are likely to be proactive in finding opportunities and likely to be snapped up with other offers if they are looking to move on.
Losing top performers can be really damaging to an organisation – not only the knowledge that is lost when they leave, but also their ability to play a role in high value growth areas in the business. Every business needs to continuously innovate to compete in today’s business environment and they need their top performers to lead the charge.
Impact on morale is another important factor to consider. In times of high attrition, negative sentiment and feeling can spread like contagion across the workforce, further compounding your attrition rate.
Attrition rates are often in flux. Businesses, departments, teams may go through periods with high, stable or even low employee attrition.