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The True Cost of Turnover Part 1

By: James Dix Tuesday May 6, 2014 comments

Defining an average cost of turnover can be misleading - even within a specific industry, too much variance occurs from geography, company size, internal practices, turnover rates, and many other reasons. Instead of pinpointing an exact overall cost, over the next week, I will be exploring specific costs that apply to organizations throughout the turnover process, and I will be including some nontraditional measures that are wholly justifiable. Overall, the costs can be broken down into five broad categories: separation, recruiting, selection, hiring, and lost productivity.

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The problem with the majority of studies on the cost of turnover is that they exclude unquantifiable costs or costs that are difficult to quantify. As a result, organizations lowball expenditure on turnover, and with the Bureau of Labor Statistics reporting 4.4 million separations and 4.6 million hires just for February 2014, that's a catastrophic underestimation.

While exit interviews, background checks, and job board advertisements are easy to assign a dollar amount to, learning curves and disruption to other employees aren't easy to value as a dollar amount even though they certainly play a part in the new-hire process. Even employees who are required to train others as part of their job should be included in a cost analysis of turnover.

For example, if a manager is part of a new employee's overall training process, the manager's time absolutely needs to be taken into account. Though the net cost of the manager will be the same for the organization, consider what the manager could be doing to add value if he or she weren't spending time to train a new employee. Along those same lines, recruiters could spend more time building relationship pipelines and less time sourcing for a job that just opened up.

Read Part 2 Here

About the Author: James Dix