How much does employee turnover cost?
It’s a question we’ve answered several times, in several different ways. Indeed, there are multiple calculations employers can use to determine how much they can expect to spend to replace a departing worker, factoring in variables such as hiring, onboarding, training, time to productivity, and overall workforce engagement. Even if you’re not sure how to measure turnover at your organization, you can feel its costly burdens—the hours spent covering multiple jobs, the flurries of emails and calls, the flagging morale, the missed opportunities (lost sales, increasing rates of customer complaints, technology stagnation), et cetera.
Given all this, you’d think employers would treat turnover like what it is—their #1 problem—but the sheer magnitude and complexity keep things difficult to quantify and, therefore, to address. Jack Altman, CEO of Lattice, compares it to the mindset of pre-1960s smokers:
“[P]eople tend to optimize what they can measure. Doctors believed that cigarettes were bad for human health as early as the 18th century, and scientific studies about the link between smoking and lung cancer started surfacing in the medical literature as early as the 1920s. Even though people generally knew cigarettes were bad for you, it wasn’t enough, and smoking in America surged dramatically during the first half of the 20th century.
Employee turnover, like cigarettes in the 1920s, is generally understood to be bad, but there is little awareness of its quantifiable impact.”
To boost awareness of the dramatic costs of employee turnover, and help employers get a real sense of its impact, Lattice created a straightforward formula: regrettable departures multiplied by the average cost of those departures.
“As an example, if you are a 150 person company with 11% annual turnover, and you spend $25k on per person on hiring, $10k on each of turnover and development, and lose $50k of productivity opportunity cost on average when refilling a role, then your annual cost of turnover would be about $1.57 million.
Reducing this by just 20%, for example, would immediately yield over $300k in value. And that says nothing of the emotional headache and cultural drain felt from losing great people.”