A recent survey conducted by SHRM shows that it costs an average of 6 – 9 months of salary to replace a salaried employee. The costs scale with the candidate’s role in the company.
For example, a CAP study found average costs to replace an employee are:
- 16 percent of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328.
- 20 percent of annual salary for midrange positions (earning $30,000 to $50,000 a year). For example, the cost to replace a $40k manager would be $8,000.
- Up to 213 percent of annual salary for highly educated executive positions. For example, the cost to replace a $100k CEO is $213,000.
Additional costs involved in replacing an employee an organisation also has to consider:
- The cost of hiring a new employee including the advertising, interviewing, screening, and hiring.
- Cost of onboarding a new person, including training and management time.
- Lost productivity—it may take a new employee one to two years to reach the productivity of an existing person.
- Lost engagement—other employees who see high turnover tend to disengage and lose productivity.
- Customer service and errors—for example new employees take longer and are often less adept at solving problems.
- Training cost—for example, over two to three years, a business likely invests 10 to 20 percent of an employee’s salary or more in training
- Cultural impact—whenever someone leaves, others take time to ask why
Considering the staggering time and effort it takes to replace a good performer managers should be looking into keeping their star performers from leaving. While companies like IBM have mastered this and have even built an AI to predict employee turnover with 95% accuracy, we can get an insight into our employee’s mindset by keeping track of a few things:
One of the key metrics managers should be tracking anyway. When an employee who has always been diligent suddenly starts slipping and missing deadlines or is just doing the bare minimum to get by, if your person has never worked hard to begin with it may be hard to tell, instead look for careless mistakes and missteps.
However the opposite of this is also true, when an employee starts performing much better and is actively closing out all pending deadlines. While the performance boost would be a good indicator for a manager, surveys have shown that a lot of people feel guilty about leaving and generally try to quit on good terms with the employer.
Managers should generally have an ear to the ground regarding an employee’s behavior, some things to keep an eye out for is if they stopped participating in general office discussions and start to isolate themselves, or if they start using up their vacation and sick leaves in a short period of time and are taking more time off work for doctor’s appointments.
Generally, employees tend to use up their benefits before leaving. Also keep an eye out for an increase in private cell phone conversations and sudden lack of communication. A general air of tardiness is also another sign, if they start arriving late and leaving early when previously they were punctual.
One of the biggest reasons given by an employee jumping ship is the lack of engagement and leadership. Managers need to ask themselves constantly if their employees are engaged, but what does that mean exactly? Here are a few traits that engaged workers share in common :
- They seek out challenging work
- They’re good at resolving and/or finding solutions to problems
- They proactively share ideas and solutions with colleagues
- They offer support to colleagues who are busy
- They seek out training and development opportunities
As a leader you should be looking to ensure that your subordinates have proper direction and support. Look into facilitating some team-building activities, let your employees feel like they’re contributing to the company by highlighting and praising them for the impact they are making for your organisation.
Adopt an open door policy and encourage employees to come talk to you about any issues they may be facing at work and don’t be afraid to share your mistakes so everyone can learn from them.