According to the U.S. Bureau of Labor Statistics, employee turnover is highest in industries such as hospitality, banking and finance, healthcare and the service sector. Turnover also seems to vary by wage and role of employee. For example, employee turnover of salespeople is often particularly high. This should be of critical importance to businesses because turnover is a huge expense. According to a study conducted in November, 2012 by the Center for American Progress, the estimated average cost to replace an employee in the U.S. was 16% of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year), 20% of annual salary for mid-range positions (earning $30,000 to $50,000 a year), and up to a whopping 213% of annual salary for highly educated executive positions. That means the cost to replace a $10/hour retail employee would cost a company on average $3,328, while the cost to replace a $40k manager would be $8,000. But the cost to replace a $100k C-Suite exec is a whopping $213,000. Keep in mind that the cost to recruit, hire and train new employees and the additional workload that the process puts on management and existing employees add no value to the business. It is just a loss. So employee turnover has a huge effect on profitability.
If employee turnover is so costly and generates no value, then it should be every company’s focus to keep employee turnover as low as possible. But how? And what is the right amount of employee turnover? Given how costly it is, what should the target rate be for this “wasted” cost? While zero employee turnover is ideal, it is certainly not realistic for any organization that isn’t family-owned and operated. So what is the bulls-eye on staff retention? Continue reading