What Your High Turnover Rate is REALLY Costing You

Hiring and retention are the yin and yang of talent acquisition. Together, they keep the positions in your company filled with qualified, motivated, and innovative talent. To successfully work in tandem, they require a laser focus and the ability to shift priorities as business needs dictate it.

Unfortunately, that delicate balance is challenging to obtain, and often leaves recruiters and hiring managers with lop-sided attention. They’re either too focused on hiring when their current workforce is floundering, or vice versa. Neither result is ideal.

So we turned to our partners to ask them how they think about the costs associated with both hiring and retention, and where their priorities should lie.

Hiring good people that fit your culture and your core values is critical. Retaining your existing employees is more important, though. You have spent time and money hiring an employee, training them, and equipping them. To lose an existing employee is a huge loss. Too often, we get so fixated on finding new employees that we forget about our current employees. I encourage you to spend time with your existing employees. Ask them how their job is going. Take an interest in their family. Be proactive so you don't lose a key employee because of a small pay differential or because they don't feel appreciated.

— Jud Griggs, The Harvest Group

It's way more expensive to hire new people than to keep the people you have engaged. There's nothing that impacts your bottom line more than high employee retention.

— Phil Harwood, GrowTheBench.com & Snowfighters Institute

Turnover costs present great expenses for an organization, such as training and onboarding. Consistent attention to employee retention can be attained by ensuring job satisfaction, a healthy culture, job security and competitive salaries. Employee performance improves when they are valued. Employees are motivated when there are growth opportunities present within the organization.

— John Paganini, CrewTracker Software

The true cost of employee turnover is significantly higher than anyone thinks once you factor in lost productivity, increase in overtime, management having to cover open positions, and time spent recruiting, interviewing & training. The focus of every manager needs to be significantly increased when it comes to retaining the employees you currently have. The best way to improve hiring is to reduce turnover, resulting in the need to hire less. Companies spend so much time and energy and costs getting people in the door but rarely focus on keeping the employees you already have, which is a huge miss.

— Wes Verno, Verno Consulting

Today, hiring and retention might just be the biggest differentiators between companies that are pulling ahead and ones that are falling behind. In the manufacturing industry, there is a major skills gap. The entire industry is having trouble finding the right talent, recruiting them, and then finally, keeping them. If a company has created a culture such that they are an attractive place to work and a place that develops people from the inside, they can spend less time worrying if their hourly rate is $1 more than the person down the street. They can focus on execution and expansion.

— Chris Luecke, Manufacturing Happy Hour

A new hire is one of our largest investments as business owners, so not onboarding them well is just flushing money down the drain. Because your retention rate will be lower, your referral rate from current employees for new candidates will likely be non-existent. The cost of the retention problem many businesses face is staggering when they actually do the financial math on it. This is especially true when they haven’t taken the time to document processes well, because then it is actual knowledge they lose, not just execution capacity.

— Cullen Talley, Exit Momentum

Would you rather have a well-trained employee who leaves two years after they are trained, or keep an employee for 20 years who is untrained? I think the answer is obvious. A company succeeds and customers receive better service from trained employees. To train them effectively, you must engage the employee to determine what obstacles stand in the way of them doing their job well or what resources they need to perform more efficiently. Then, as a leader, go about removing those obstacles and providing resources. It is much less expensive to retain an employee than to hire a new one.

— John Gronski, Leader Grove

It is disruptive and expensive to lose labor and talent. We are focused on hiring the right people, giving them ongoing training and support and building a culture that makes them want to stay. Even then, you will lose people, so once you see that it is not a good fit, work quickly to reposition the person to their strengths or make a change.

— Heidi J. Ellsworth, RoofersCoffeeShop