Why Replacing a Good Employee Will Cost you $65,510

“Oh no! I didn’t know you were leaving, too.”

When a friend left his job, his coworker made the surprise comment that he was about to leave the company as well. What seemed like a few minor problems on the team soon snowballed into a costly mass exodus.

Employee retention is one of the most overlooked aspects of managing your team…right until you start losing good employees. It costs much more than you might expect to replace them. I was curious myself just how much it could cost and the surprising results are below.

Note: All salaries are assumed to be $100,000, which is $40/hr assuming you work 50 hours a week for 50 weeks a year. Adjust the numbers accordingly if anyone costs more or less for you.

The Costs of Sourcing a Hire:

Unless you’re a really hot company, it’s unlikely that great people are beating down your door to fill open roles. And even if you are well known, the best people probably aren’t refreshing your jobs page for an opening. You have to go find them.

You can source candidates a ton of different ways, but they all cost money either in the form of payment to another company or in time invested by one of your employees.

Sourcing CostsWith just a few attempts at sourcing some good hires, between third party costs and labor in your company, sourcing costs can easily reach over $26,000. The scariest thing is, you haven’t even interviewed any of these candidates yet!

The Costs of Interviewing a Hire:

Now that you have a full funnel of candidates kickstarted, you start the dreaded interview process. You’ve got to filter through all the LinkedIn profiles, social accounts, resumes, and cover letters to find those gems who will then navigate your hiring process.

Here the costs are a bit more hidden. It’s all about lost time for various team members. What other great work could your team be doing instead of working on candidate hiring? Every minute spent hiring is a lost dollar invested in your business.

Assuming you have a clear funnel where you only have to look at 120 resumes, only have a third of them make a phone screen, a quarter of those make it to in person interviews, and you prep 3 offers, interviewing costs you over $5,000. For some specialized roles it could be significantly higher if you have many more interviews and phone screens.

The Cost of Onboarding a New Hire:

Congratulations! You found the candidate you’ve been looking for. Now you need to onboard them so they become a productive, integrated member of your team. Again, you have hidden costs. Now, you have losses both in how productive a new hire is versus a veteran on your team, and your team training them (an important investment, but also a significant time sink for your team).

When you hire an employee, there’s often some kind of bonus you need to give them. It might be a salary bump, moving costs, or something else to sweeten the offer. It’s part of the cost of doing business. When you combine that with your costs as they start on your team and get up to speed, onboarding can cost you over $10,000.

Of course, we’re assuming your hire works out, which unfortunately, it won’t always. You can go ahead and double these costs and many of the ones in earlier sections if you have to go back to the drawing board on another candidate.

The Cost of Lost Productivity:

While your team member has departed, the show must go on. The rest of your team has to cover for them, whether that means writing their code, calling their leads, or finishing their reports. As much as you’d like to think the rest of the team can just make up for them, if the hire really was good, that’s impossible. Lost ProductivityWhen someone leaves, team members are distracted. Those that were close to them in particular will be less focused and productive. They’ll probably grab beers with their friend before they leave, when they otherwise may have worked late.

Meanwhile, if you push your team to cover for them, the stress and extra hours can affect their physical and mental health, which will lead to vacation and sick days. If hiring drags on, you’ll probably hire a consultant or freelancer to cover which could easily exceed $100 an hour for their work.

All of this combines to lead to a Productivity loss cost of over $24,000.

So let’s add this up…

Total Costs

Ouch! Replacing even a single team member is expensive! Wouldn’t it be a lot cheaper to retain all your good people?

What can you do?

Next time a good employee asks for a raise, investment in equipment to help them on their job, or a morale boosting opportunity is presented, consider the cost of losing them before saying, “we have no budget for this.”

If your manager is blocking you from helping your team, remind them what you’re asking for is a lot less than the $65,000 cost to replace a lost member of your team (let alone the cost of multiple losses!).

While free lunches, ping pong tables, extra vacation days, and other perks are a nice bonus, they aren’t what keep people at a company. Even raises only satisfy people for a short period of time.

What really retains teams is managing people well.

This comes by having discussions with them about their personal growth & goals, company and self-improvement, and recognizing the things that are important to them personally.

I know that’s easier said then done. You have a million things on your plate as a leader and what little time you can spare has to be maximized. And it probably isn’t right now.

You have notes on people all over the place. One on ones are sporadically effective, because you may not always be prepared for the next one. Goals are a great idea in theory, but they’re buried in your HR app you can’t stand.  There must be a better way.

Get LighthouseThat’s why I started Lighthouse. It helps you stay on top of what matters quickly and efficiently for each of your people. It’s designed with managers like you in mind, because I’m a manager myself.

If you want to be the manager people love to work for & save the costs of replacing people, sign up at GetLighthouse.com.

The Secret to Getting Any Job You Want: Focus

Whether on the subway, at home with family for the holidays or talking with friends, I often hear the same thing:

     “It’s so hard to find a job right now…”

     “I applied to 100 jobs on Monster.com and heard nothing!”

     “I applied to every job I could find and I couldn’t even get a phone interview!”

In the last 4 years, during a recession that crushed our generation in the employment market (over 17% unemployment for Gen Y) I have landed three different, awesome jobs. What makes it particularly interesting are the following facts:

  1. Each job I applied for was a reach based on my existing skills.
  2. Each job was the only job I applied for at the time.
  3. Each company ended up giving me a different job than I initially applied for, but that was an even better fit than what I started out going after.
No matter how hard you focus on getting a job, there are still only 24 hours a day. I have the same constraints as you. The problem is, when you apply for 100 jobs, you’re spreading your energy across 100 companies, while when I apply for one job, I’m focusing all of my energy on one company. That concentrated energy gets you noticed and gets you the job. How is this possible? In simplest terms, it’s all about focus.

Let’s look closer. I’m sharing all my secrets for getting the perfect job:

Step 1: Choosing the right company.

There are thousands of companies out there and especially as our economy finally recovers, many of them are hiring. For those of you who applied to 100 jobs, you know this is true.  What really matters though is picking one company that you really want to work for.

It’s up to you to decide what matters most to you. Is it location? Company size? The market they work in? You want to choose the two or three most important things and use that to filter the companies you see that are hiring. Then you should dig into the company closer and see who gets you excited. Every company has an “About” page full of information about who they are. Keep searching until one of them stands out for you. If you’re going to put a ton of effort into pursuing one job, then you should make sure it’s a job you really want.

Step 2: Plan your attack.

Applying for a job is a lot more than writing a cover letter and submitting a resume. If you are going all in on one job, you need to do some serious prep.

Start by tearing apart their website. Then Google them. Learn everything you can about them. Pretend you have to give a major presentation for a class about them. Next, research the people you may be working with; if you’re a designer, look up other designers at the company, if you’re in HR or marketing, look at those departments specifically.

Step 3: Fire the first shot.

As you do your research on the company, see if you know anyone who works there or if you have a close friend/mentor/family member who knows someone there. If they do, ask for their help in getting an introduction into the company. Ideally, you want it to be someone in the department you’re applying to (if the company is big enough to have departments), but work with whatever you have.

Completing this step means getting an intro to someone in the right department. The real trick to succeeding in an interview is getting past the mess of general applications.  An intro directly to the person hiring is how the pros get it done; they end up at the top of the proverbial resume stack…unlike the “spray and pray” kids from Monster.com that never get past the inbox.

Step 4: Follow up with value.

Now that you’ve submitted a great resume and cover letter tailored to the company and target job along with that intro to someone in your target department, it’s time to take your game to another level.  You’re now going to create content to add value to your (hopefully) future employer.

The goal with the content you create is to show competence in the job you hope to do for them and also show an understanding of their company and their present challenges. If you’re a designer, perhaps it’s feedback on the design of some of their site or a proposed new design for something they have. If you’re a developer, you could make a small app with their API and include feedback on how they could make the API better.

If you’re on the business side, try submitting feedback on their product from a user perspective or even gather some insights from their market that would be valuable to your target supervisor.

Another great trick I’ve used is to literally tell them what I’d do if I had the job.  I once submitted a 7 page document full of ideas of how a startup could engage its community and build buzz. It made for great conversation fodder in the interview and made me stand out against candidates who had more impressive work experience than I did. Startups love do-ers and this showed I was someone who got things done and had my own initiative.

Step 5: Double down and be persistent.

The great thing about submitting all this content to your target employer is that when you’re following up to find out where you are in the interview process, you’re not just bugging them, you’re sending them something of value. Each time you follow up in the process, try to have something of value to give them along with the ping. It will keep you on their radar and impress them with your persistence.

Do you have time to follow up with potential employers when you submit 100 resumes? Obviously not, which is why your new tactic of following up and adding value will stand out so much.

Step 6: Crush the interview and close.

With all the goodwill you’ve built up by getting a good introduction to someone on the team you want to join and submitting valuable content to them, you’re extremely likely to get brought in for a full interview.  When you do, your goal is to show you’re as good in person as you are in all the electronic interactions you’ve now had.

When you come to the interview, come ready for everything. Find out everyone you’re interviewing with and research all of them like you already did the company you want to work for. Have something interesting to talk to each person about that shows you did your homework on them. Refresh yourself on all the research you’ve already done and be prepared to talk about and build upon the ideas you submitted in the content you’ve produced.

The great thing about all this effort is that on top of impressing everyone at the company, you should have a very clear idea of what the company is like and be ready to contribute in a big way from day one.

Step 7: What if I don’t get the job?!?

So there is is always the chance that despite all your efforts, you won’t get the job, it’s rare, but it does happen. What’s great is that very often when someone puts in this kind of effort a person hiring will do one of two things:

1) Try to find another job for you so the company can still hire you.

2) Refer you to someone in their network that could hire you.

I have personally experienced scenario 1) twice in my career and have friends who have ended up very happy in roles that came from referrals in scenario 2).

If all else fails, brush your shoulders off and move on to the next job. This much hustle is guaranteed to pay off sooner rather than later.

How would you recommend standing out in the job applicant crowd? Have you found a job and have advice to offer? Tell us in the comments!