Hiring new employees can be exciting. It can mean your company is growing and you need to add new staff members to keep up with a boost in business and the increased workload that comes with it (who doesn’t want that problem, right?). That said, though, hiring can also be less of a good thing if it’s a result of unexpected employee turnover. If you see employees coming and going on a regular basis in ways you haven’t planned for, it’s probably time to take a look at your internal business structure.
One of the toughest parts of an HR professional’s job is retaining employees over the course of time. Even though employee turnover is inevitable to a certain extent, it’s essential to find the root cause if it turns into an unhealthy pattern. As a talent management professional, you want to try your best to lock this revolving door, retaining current employees instead of seeking replacements. Especially since the reality is this kind of turnover affects more than just the recruitment side of the business.
Employee turnover comes with a variety of costs that can cut deeply into your business's financial bottom line. According to Bersin by Deloitte, the average cost of a new hire is close to $4,000. Where do these expenses — both the tangible and intangible — come from? How can your business mitigate these costs? We've provided a breakdown of the major expenses that give you the ammo you need to explain to higher management why action is needed to prevent poor employee retention rates.
Upfront hardware expenses
When you onboard a new employee, you'll need to provide them with hardware and equipment, such as computers, monitors, phones, headsets, key fobs and even branded clothing and accessories in some cases. A new employee is, quite literally, an investment, with hundreds of company dollars being put toward providing them with the tools they need to succeed. Believe it or not, a strong human capital management (HCM) platform can help you keep track of these expenses and where your different hardware assets are allocated in your organization so you can more easily report this information to your executives/key stakeholders and show the impact of turnover on these numbers.
The cost of training sessions
When you bring new employees into your business, one of the first things you have to do is provide them with the training they need to succeed. Some of these trainings might be conducted by your team of HCM professionals, but others may require the attention of upper-level management from a different department. Whether a training session lasts a half hour or two hours, this time cuts into the trainer's working day, reducing their own productivity during that time slot.
When employee trainings happen occasionally or at specific scheduled times, this lost time doesn't deeply impact the organization's revenue. However, when employee turnover is frequent and unpredictable, employees conducting these trainings will lose hours of time that could otherwise be spent directly contributing to their work. In business, time is money, and consistently having to train new people due to high turnover rates is a waste of both time and money. HCM software can provide your organization with valuable insight into the HR management process, making sure your business is conducting onboarding and training actions in the most productive and cost-effective ways possible.
Declines in productivity levels
You can't expect new employees to jump seamlessly into their roles on a moment's notice. Generally, it takes several weeks or months to get up to the same pace as their more tenured co-workers. Whether the new hire is an entry-level worker or high-level executive, it will take them a bit to get accustomed to how the company and their team functions. Until they’re fully ramped up, they won't be able to complete the same work at the same rapid pace as the experienced person who formerly held their position. This means your organization will go through a period of time where similar pay is being allocated to fund a smaller work output.
What’s more, the company might need to hire a temp or freelance employee to make up for any lost work that occurs between the time of the previous employee's leave and the new employee's full immersion into the role. This contract worker may also need to be trained in certain parts of your business. See the problem here? Luckily, if you use it correctly, your HCM data can help you prevent employee attrition in addition to streamlining onboarding. Built-in people analytics help you track manager effectiveness to catch any behaviors that may be increasing turnover before they have an impact and monitor employee flight risk so you can have conversations with at-risk workers before they choose to leave.
The key to employee retention
An effective HCM platform can put processes in place across HR, payroll, and workforce management that keep employees engaged. When workers are interested in the work they’re performing and feel that they’re making a difference in the organization, their workplace happiness improves exponentially, resulting in increased productivity and higher levels of retention. Keep your staff engaged and accountable by implementing an immersive HCM solution as part of your internal operations, and use the potential costs we highlighted here to convince your executives that it’s the right investment to make.