Placing a Dollar Value on Turnover

Getting to Turnover's All-In Cost

By Sherri Merbach Managing Director, C-Suite Analytics | March 13, 2016

The single greatest step to improve employee retention is to ask first-line managers to achieve a retention goal and then hold them accountable for doing so. This sounds like a foreign language to CEOs and HR executives who continue to ask what more they can give employees such as more money, better healthcare, improved newsletters, or a new career development program. But our research along with the research of other companies proves this is true. Our path is to first place a dollar value on turnover in order to grab their attention to take action.

The truth is, turnover percentages have little impact on hotel executives compared to dollars. Most CEOs look askance at percentages and ask for benchmarks seeking an anchor, some way to make sense of the percentage in front of them. They then learn how their company’s turnover compares to the average turnover for others, and if that comparison is OK they feel OK. Average, though, means mediocre so we have conditioned ourselves that having mediocre turnover is also OK. Which raises this question: Would you feel good if your sales and service were mediocre, too? I suspect not.

Leaving employees create costs regardless of their performances because replacements must be recruited, hired, and trained, and the empty chair during hiring and ramp-up represents no productivity versus at least some while the position was filled. Open positions also cause others to diffuse their attention from their primary jobs by filling in for others.

CEOs should be alarmed with the legitimately high cost of losing talent…and CFOs, too. Let’s connect the dots between high turnover cost and the power of first-line supervisors and make the right choice, that first-line supervisors must be accountable for retention goals.

In various studies the highest percent of managers who are held accountable for turnover in meaningful ways is just 14%. Instead executives take one of two paths: they either place Human Resources in charge of retention or no one. HR’s typical response is unleashing employee programs including exit surveys, benefit reviews, brown-bag lunches, improved company communication, and employee appreciation week. These efforts while well intended do not significantly and sustainable improve retention.

Several studies are available in the macro, from 30,000 feet, about the cost of turnover.
These include:

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