Attrition is a long-sworn enemy for companies across the globe, well-known for side effects such as recruiting costs and productivity loss. However, too frequently talent management executives only become aware of attrition’s quieter repercussions when they are dealing with the aftermath. Uncovering the hidden costs of attrition can help you realize the importance of focusing on your retention efforts. Here are some impacts to be aware of:
1. Time Required in Hiring the Replacement
On average, it takes 52 days to fill an open position, which was up from 48 days back in 2011, according to Bersin by Deloitte. Filling a new position is not only tedious, but also a huge reduction in monetary advancements to the company. In fact, Deloitte states that in a 2-3 year time period, managers are likely to invest 10-20% of an employee’s salary or more in training. Time is of the essence and should be focused on pressing matters where attention is deserved.
2. Loss of Future Leaders
Employees with strong leadership capabilities are hard to come by. When an individual with these characteristics leaves your company, the potential candidate pool for hiring managers becomes smaller. This reduction could even jeopardize any career advancements for the manager himself, due to the need for an internal replacement. Now marked as a mediocre manager, opportunity limitations might transpire for new assignments and other internal projects as well.[clickToTweet tweet=”Engaged teams grow profits 3x faster; engaged employees are 87 percent less likely to leave (Gallup)” quote=”Engaged teams grow profits 3x faster; engaged employees are 87 percent less likely to leave (Gallup)”]
3. Potential Leader Loss and Internal Promotion
Those with strong leadership capabilities are hard to come by. In fact, over the next five years, 84% of organizations will anticipate a shortfall in the minimum number of qualified leaders, according to Glassdoor. When an individual possessing such characteristics leaves the company, the potential candidate pool becomes smaller for hiring managers. This reduction could even jeopardize any career advancements for the manager himself, due to the need for an internal replacement. Now marked as a mediocre manager, opportunity limitations might transpire for new assignments and other internal projects as well.
4. Reduced Pay and Bonuses
Forget about stock opportunities or any thought of bonuses and pay raises. With high turnover rates, managers will likely endure lower performance appraisals and forced ranking scores, which will directly affect paychecks and threaten any thought of upcoming pay raises.
5. Knowledge Loss = Reduced Business Results
Losing a single top-performer with strong business knowledge increases the likelihood of long-term vacancies and/or hiring weaker replacements. 75% of the demand to hire new employees is simply to replace workers who have left the company, according to a Subscribe-HR article. At the expense of this lost talent, organizations will compromise their continuity of day-to-day operations and any agility of adapting efficiently. Business growth and results will cease until the newcomer acquires the necessary institutional knowledge.
6. Lost Innovation, Ideas, and Company Secrets
Certainly, internal position vacancies reduce quality information and ideas. When talent leaves, these ideas and secrets are disseminated at the benefit of the competing company and ultimately result in double turnover costs. Say goodbye to your competitive edge.
7. Losing Key Employees Weakens Your Team’s Culture
Company culture binds the workplace together. Any loss of a key employee reduces meaningful internal company connections. When replacing this employee, maintenance of the workplace culture becomes difficult, especially if the new hire begins to implement cultural values of his or her own.
8. The Negative Impacts of Turnover on Future Hiring
Word will spread of your company’s reputation of high turnover rates. These consistent job openings, could influence some of the industry’s best workers to seek out better opportunities, while taking their talents elsewhere. In a Glassdoor study, 69% of new hires indicated they would not take a job with a company that had a bad reputation, even if they were unemployed.
With so many negative repercussions, the loss of even one single employee will negatively impact company retention rates. In fact, the cost of losing a top performer can exceed 10 times their salary. However, by the time managers witness some of these impacts, the harm is done. On top of that, most HR departments lack competency in quantifying the significance of good people-management.
In one instance, Talmetrix helped a company which had recently experienced a 10% attrition rate increase in 6 months, bring their attrition rate down by 12%. After pinpointing the attrition sources through employee feedback surveys, Talmetrix was able to save the company $460,000 in annual savings.
Interested in knowing how increasing your company’s retention would affect your own cost savings? Reach out to the Talmetrix team for a custom analysis today.
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