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Small Business Management Article

The Cost of Losing an Employee

By

Raymond D. Matkowsky

Businesses do not track the cost of losing an employee very well and the estimates are all over the board. All these estimates are probably on the low side since I doubt that even half of all the costs are considered.

For example one study estimated that the replacement cost for a low paying job is about $3,328. A mid-level job (about $40,000 a year) would be about $8,000. That of someone earning over $100,000 a year would be $213,000.

As I said, these costs are probably low because of untracked outlays. Some of these costs are advertising for and interviewing possible new employees, training the new employee, lost productivity, disengagement of other employees and customer service errors. It is also not uncommon for customers to trust a departing employee to the point that they will follow them to their new employer. If that new employer is a competitor, you have not only lost an employee but also a customer. But, if you assume that the above figures are correct, it still represents a huge expenditure. Remember, that every penny saved goes right to your bottom line. Every expenditure comes out of your bottom line. Losing an employee should make you think because it reduces your profit!

Reasons For Losing An Employee

Employers should realize that even in an exit interview they may not learn the real reason someone is leaving. Hiring managers are curious as to why a person wants to change jobs. A new employer, doesn’t want hear a hint of discourse from a possible hire. More than likely, that prospect will not give a hint of what is truly their motivation. Therefore very seldom neither will get the true reasons for departure. A departing employee will not want to “burn any bridges behind them.” Also, it is common for a leaving employee not to reveal a departure until the very last moment for fear of retribution.

There are many reasons given for quitting one’s job. Much of the time, an employee will quote economic, opportunity, or family reasons. But in reality, it is personnel at his present employer. It might be his or her coworkers that are the problem. But, many times it is the supervisor. Someone once said that “people do not leave companies. They leave managers.” The companies that I have worked for have spent a great deal of time training lower level employees and next to no time training new supervisors. According to Recruiting Daily and based on ten years of research, a full 22% quit their jobs because of “bad management” reasons. By comparison, the lack of promotion only garners 8% of those looking for new positions.

Well-Being Of Your Employees

Your wealth and the wealth of the company depend on the well-being of your employees. Employees are the face of the company that is presented to your customers. A disgruntle employee will not present the company in a favorable light.

Supervisors Are The Key To Employee Retention

It has long been known it is cheaper to retain customers than to search for new ones. The same can be said for your employees. That being said department managers are the first-line and most important interface between the company and its employees.

Many times people are promoted to a supervisory position from within a department. This presents two immediate problems. First of all, a person now has the stress of supervising his comrades. Secondly at the same time, the new supervisor feels he has to prove himself or herself to the company. I have witnessed this type of stress in recently promoted people and many times it has led to a dissension within the department and/or the departure of the new supervisor. Supervisors should be trained in interpersonal skills and made aware of the initial problems they may face. Ignoring problems is the start of the “bad management” feelings. The next management level needs to keep sharp eye out for such a possibility and offer prepared guidance.

Guidance

It is difficult to offer any suggestions dealing with employee retention. Each situation is different and must be dealt with on an individual basis.

In general terms, first determine whether or not you have a retention problem. If you do not, you are way ahead of the game. If you do, don’t guess as to the reasons why. Most likely you will guess wrong! Find out the reasons why. You or the Human Resources Department will very likely have to go to existing personnel for confidential and periodic feedback. Again, don’t assume all employees are happy. Find out. If there are problems, do your best to address them. Not all problems are solvable, but let those who are complaining know you are looking into their complaints. Also, don’t assume they are all mal-contents. People who don’t care about the company, don’t complain.

Like treating customers, the effort may affect your bottom line favorably.


If you have any further suggestions, do not keep it to yourself. Help your fellow readers!

If you have any questions, comments or suggestions drop me a line at rdm@datastats.com.




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