It's Your Business to Know Why Employees Leave

The average cost of replacing an employee is 20 percent of the person's annual salary. Here's how can you keep these costs down


Every good manager knows that employee turnover adversely affects bottom line profitability.  Turnover costs include productivity losses during recruiting and lost work while a position is vacant, new employee setup, orientation, and most importantly training.

Corporate case studies found that for jobs paying less than $50,000 per year, the average cost of replacing an employee amounts to 20 percent of the person's annual salary. And although it may not be possible to totally eliminate turnover and the costs associated with it, knowing why good people leave can certainly go a long way in keeping these costs to a minimum.

There is good news for employers in that in this economy more people are holding onto their jobs. The bad news is that top performers, having more skills and confidence, even in a struggling economy, are the ones most likely to leave. When all things are equal, good employees will leave for small pay raises, shorter commutes, or improved benefits. Make it your mission to make sure things are not equal. Even if you cannot match what others can offer, make up for it in other ways; an additional personal day off, or flexibility of hours are some examples of incentives employees truly appreciate.

We just don’t get along

Most managers make an honest effort to hire the right person and many work enthusiastically at training them to ensure competency and proficiency. All too often, the emphasis is placed on technical knowledge of how to perform the job, and not on the “softer” people skills. Assembling a team with similar core values, views, and desired goals results in everyone working together to create compatibility and a shared vision and mission within the corporate culture. This is a critical step in reducing turnover. If you really want to fine-tune this concept, do a little research on personality types and characteristics. Pairing together the correct personality type for the job description and role within the team ensures personal success for both the employee and the team. 

This is not what I expected

Many workers quit a job in the first six months because they have unrealistic expectations about the job, the workplace environment, the culture, or the skills necessary to perform successfully. As an employer it is important to remember that the interviewing process is a two-way street. You may be evaluating the candidate to determine if they are the right fit for the job and the company, but in doing so you have a responsibility to provide a realistic preview of the job, its demands, the skills required to be successful, and a true picture of the company culture. By communicating in this way, you have the opportunity to change any inappropriate expectation that the candidate may have prior to the interview. This is your best insurance against the employee later feeling that the job isn’t worth what you are paying, or the job or workplace is not what was expected.

The employee is just not on the right seat on the bus

Sometimes there is a mismatch between the job and the person doing the job; in other words, you have the right people on the bus, but they are in the wrong seats! For instance, a mechanic may be top at his or her game. As a star player you promote them to manager or supervisor. If the employee has no people skills or manager skills, and does not know how to hire and fire people they may fail miserably at the new position.

You now have two options; you can train them to be a better manager, or move them to a new seat on your bus. To further illustrate this point, you would not want to place a software code writer in a sales position in the field calling on prospects. If you have not already done so, I highly recommend reading the book “Good to Great” by James C. Collins, which expounds on this topic.

This job isn’t going anywhere

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