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