The high cost of turnover

Research suggests that employees place a high value in their jobs on capability—which can be translated roughly as the latitude and ability to deliver results to both internal and external customers. High perceived capability can, in turn, lead to reductions in the rate of employee turnover.

Successful organizations have lower employee turnover than their competitors. Even firms that have relied upon high employee turnover—for example, fast-food chains, which have tended to hire low-skilled employees at minimal wages and provide them with minimal training—are beginning to understand that satisfied, long-term employees help build customer loyalty and satisfaction and cost less to manage. As a consequence, these companies are starting to question their traditional assumptions.

The visible costs of bad hires and high employee turnover show up in related costs, such as:

• Additional recruiting and training expenses
• Lower productivity on the part of co-workers and managers

A broad range of hidden costs can be equally damaging. High employee turnover can have a negative impact on:

The morale of other employees

• The quality of service provided
• Customer retention
• Productivity and profitability

Use the information you generate from calculating the cost of employee turnover in your own organization to help convince colleagues that it makes economic sense to hire, train, support, and reward loyal employees.