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The True Cost of Turnover Part 2

By: James Dix Thursday May 8, 2014 comments


Two days ago in part 1 of this blog, I wrote about the broad classifications of turnover costs. Today I will be looking into the specifics. Drawing inspiration from The Cost of Turnover by Hinkin and Tracey (Cornell Hotel and Restaurant Administration Quarterly, 41 (June): 18), the following are individual costs to consider as part of turnover:

Separation Costs

  • Exit interview

  • Paperwork processing

  • Severance pay

Recruiting and Attracting Costs

  • Advertising

  • Search and agency fees

  • Internal referral fees

  • Managerial pre-employment administrative functions

  • Applicant travel

  • Recruiter travel

  • Recruiter time

  • Correspondence

  • HR Pre-employment administrative functions

Selection Costs

  • HR interview

  • Managerial interview

  • Applicant travel

  • Background and reference checks

  • Medical exam

  • HR administrative functions

  • Managerial administrative functions

Hiring Costs

  • HR administrative functions

  • Managerial Administrative functions

  • Relocation costs

  • Signing bonus

  • Orientation

  • Formal training

  • On-the-job training

  • Tuition reimbursement

  • Uniforms

  • Security

  • Informational literature

Lost Productivity Costs

  • Vacancy cost

  • Pre-departure productivity loss

  • Learning curve

  • Errors and waste

  • Supervisory disruption

  • Peer disruption

The overall turnover cost distribution will be different for each type of job. For example, a missing salesperson will be heavy on vacancy cost. Every day that goes by with an open sales position is simply lost sales. Conversely, the turnover cost of an employee who is part of a team that works very closely on a regular basis will be light on vacancy cost and heavy on peer disruption.

While the team can still persevere while missing one member, studies show that it is troublesome integrating new team members with any given dynamic. There are a host of problems associated with new team members - one of them being that frustration sets in when the replacement isn't an exact clone of the employee who left.

Part 3 of the blog - along with a comprehensive whitepaper on turnover costs - will be coming out Tuesday, and I will also be looking at possible solutions to alleviate turnover costs.

About the Author: James Dix