Avoidable turnover costing employers big
An escalating competition for workers and a shrinking talent pool are coming together, giving employees the advantage in the job market and costing employers thousands of dollars per employee in turnover.
“Employers are missing the mark on improving retention for two main reasons,” says Danny Nelms, president of Work Institute, a HR consulting firm specializing in employee engagement and retention. “First, employers are not taking steps to understand their unique workforce; and second, they are not using exit interview methodologies that are dependable in revealing the real reasons employees leave.”
And that’s costing employers big. Recent data from Work Institute’s 2017 Retention Report estimates that it costs as much as 33% of a worker’s annual salary to replace. When the formula is applied to the median employee’s salary of $45,000, the average cost of turnover per employee comes out to $15,000.
The indirect costs of turnover are sometimes referred to as “productivity costs” that come from lost institutional knowledge, the time lag it takes to find a replacement and the time it takes for that new worker to become fully productive, according to the study.
The study looked at more than 34,000 exit interviews conducted in 2016 to uncover the top reasons employees said they left their jobs. Those reasons include: career development (22%), work-life balance (12%), management behavior (11%), compensation and benefits (9%) and well-being (9%).
The study found career development woes have been on the rise for the past three to seven years. And when breaking down reasons within career development why workers had concerns, 33% of workers reported “type of work” as a leading concern.
Employee expectations may not have matched what the type of work actually involved, where perhaps the educational system or hiring processes did not provide a realistic view of the job, the report noted.
Other concerns within the context of career development workers reported challenges include:
· Growth and development (21%)
· School (18%)
· Promotions (10%)
· Advancement opportunities (9%)
· Job security (7%)
· General career development (2%)
“Although these are the top reasons employees told us they left their jobs, it’s critical to understand that the reasons employees leave your organization are most likely different based upon our research,” Nelms says.
And while hiring and selection are important, oftentimes organizations place more emphasis on finding the people who fit the workplace as opposed to shaping the workplace to fit the best people, the study author noted.
One avenue employers can turn to look for important information is in an employee’s exit interview.
Comparing the more preventable reasons for leaving — such as career development, work environment and management behavior — to the less employer-controlled reasons such as relocation and retirement, the study finds that 75% of the reasons employees leave could have been prevented.
It’s critical for employers to ask general, open-ended questions and probe for more information so the employees open up with the issues that matter most and are not influenced by choices on a list. Further, the study found 63% of the answers were changed when the exit interview was conducted by a third party.
“Organizations must take steps to ask their workforce for feedback using reliable methodologies,” adds Lindsay Sears, industrial-organizational psychologist and associate vice-president of research and analytics at Work Institute. She pointed to a report from the Bureau of Labor Statistics that found a 46% increase in voluntary separations since 2010, suggesting that business leaders are continuing to lose employees by developing retention strategies using traditional practices and industry benchmarks.