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.

How to do a Jobs To Be Done Interview

Jobs To Be Done (#JTBD) is getting a lot of attention lately as a valuable, new method for product and marketing teams (if you’re not familiar check out the podcast and the Milkshake video that started it all).

For the product team, they can better understand the motivations and needs of their users. As a marketer, you can understand the journey a future customer goes through to go from considering finding a solution to their problems to actually choosing your product. This is priceless for your marketing site and copywriting as well.

There’s a lot of great posts coming out on why Jobs To Be Done matters, but I haven’t seen much on how to actually do the interviews. Since I’ve done them a bunch myself, taught a number of my friends, and written previously about how to do customer development interviews, I wanted to share the process I’ve learned and evolved:

How to do a Jobs To Be Done Interview

Getting in the right mindset

These interviews are very different than a traditional customer development interview, usability testing, and other common customer interview practices. It’s a lot more free form than other processes that usually just want to uncover a few problems or learn some basic customer demographics.

For JTBD, you need to think of yourself like a detective interviewing a witness at a crime scene, or a documentary filmmaker trying to tell a story. Believe it or not, there’s a significant process a user goes through to become a customer and it’s often measured in weeks or months. Once you finish this process you’ll be able to fill in a timeline that looks like this:

jtbd-timelineThe key is to get users thinking about their purchasing process and filling in the gaps while they remember the various events along the way. Your users won’t think of them with the words of that timeline, but you’ll see where those things happen.  Fortunately, the questions I’ll show you will help your interviewee remember the various steps.

Here’s a quick cheat sheet of the terms on the timeline with an example of a friend who bought a new car.  Skip down if you already understand the timeline.

1) First Thought: What caused the first thought to think about making the purchase? When was it?

– My friend owned a Prius and it was a few years old. One night when he was driving home from work, he hit a neighbor’s trash can that had rolled onto the road. He looked at the front of the car and saw it was kind of scuffed up, but not enough to take it to the shop. This made him think, “Maybe it’s time I got a new car.”

2) Passively Looking: What did they do while they were passively looking? For how long?

– My friend started thinking about what kind of car he would get next. He knew he wanted a fast car and was focused on luxury brands. He started browsing Audi, BMW and Lexus sites to look at their cars.

3) Event #1: What happened that switched them from passively to actively looking?

– My friend’s wife would need some convincing to agree to a new car. As it turns out, about a month after the trash can incident, her brother mentioned he needed a car. My friend could give his car to his brother in law and kill two birds with one stone.  With permission from his wife, he could now actively look for the car.

4) Actively Looking: What did they do while they were actively looking?

– My friend started looking up reviews of the various cars he was interested in and asked friends that owned the cars for their opinions. He has a long time mentor that he in particular appreciates their taste, and so he asked their opinion.  My friend is an Apple fanboy, so craftsmanship is really important to him as well. Both his mentor and his own research pointed to Audi being the brand best committed to those ideals.

5) Event #2: What was the event that made him decide to make a purchase at a specific day/time?

– My friend had two events that combined to push him to finally make the purchase. He was scheduled to have surgery soon and he wouldn’t be able to drive for awhile after surgery. Christmas was coming soon too.  He wanted to get the car before his surgery so he could enjoy it a bit first and not put off the purchase that much longer and knew he could claim it as a Christmas present to justify the purchase then. (Now those luxury ads about buying cars as gifts make more sense, right?)

6) Deciding: What helped him make the purchase?

– Now that my friend was ready to buy, he went to the dealerships and test drove the cars that were finalists (a BMW and an Audi). He had a great time speeding down the highway in the Audi, so combined with his friends recommendations and his own research, he was finally ready to buy the car.

Unfortunately, the answers don’t come out that cleanly. You will get bits and pieces of the various steps during the discussion, which is why these interviews have to be more exploratory. You should be able to assemble the timeline afterwards though and start to see how you can market to future customers like your interviewee and alter your product to better fit them (like helping them see the most important value sooner).

The Jobs To Be Done Interview Script

Ok. We’re finally here to the script. Remember, the goal of the conversation is to help the person you’re interviewing remember the steps and key moments in the process that led to the switch.

A few rules for the interviews:
  1. Find people who recently purchased. Most people won’t remember well anything more than 60 days ago. The more recently the event happened, the more likely they are to remember all the details you’ll hope to capture in the interview.
  2. Don’t interrogate. You want your conversation to feel like they’re just talking to a friend.
  3. Pauses are ok. The interviewee is likely going to have to think hard to remember details. Give them time and they’ll often remember things so don’t be afraid of 10-20 seconds or more of silence.
  4. Bounce around the topics. Being non-linear in your questions often leads to new discoveries. Circle back to different things you talked about throughout the interview.
  5. The best stuff comes around 20-25 minutes in. Keep digging and listen carefully. You’ll have a real *woah* moment right around then.  For above timeline example, my friend didn’t initially realize the trash cans started his car buying process.
  6. Take notes & record the interviews. There’s lots of gold in these interviews. You don’t want to forget anything, and be able to review and share them with others later.
  7. Work in teams. A pair often can do better at examining all areas of the moments you’re trying to understand and help with taking good notes. While one person is writing a key point, the other can be asking a question.
  8. Talk to more users until they all sound the same. It generally takes 7-10 interviews to get the patterns of everyone. I found out the root cause of churn for a company by interviewing a bunch of their recently canceled customers and it was very different than what people said it was in an exit survey.
  9. Organize your findings with the Timeline and Four Forces. That’s what they’re there for. You can learn about the Four Forces here.
  10. Don’t lead the interviewee. Try very hard not to ask Yes/No questions. Instead leave room for explanation and listen. Ask lots of “why” and “tell me more” questions.
  11. Timing Matters. Try to find out the day/week/month/hour something happened. There’s often patterns to be found in that timing and it can also help them recall other details as they concentrate to remember.
Jobs To Be Done Questions to Ask:

Unlike other kinds of interviews, you don’t need to always ask every question in the exact same order. These are all just ways to explore the process of their purchase and help them remember their story.

  • When did you first start thinking about your purchase?
    • Was it in the morning or evening? What time was it?
  • Where were you when you made that decision?
  • Was anyone else involved in the purchasing decision?
    • Why?
  • Visualize the environment you were in when you made the decision to purchase…where were you? What was around you?
  • Tell me more about that…(When you hear something interesting/intriguing)
  • Did you consider any competitors? Which ones? Why?
    • Why didn’t you choose them?
  • How did you decide between what you bought and the other options?
  • Why specifically did you buy that day versus any other? Why then? What was unique about that day?
    • What else were you doing that day?
    • Did anyone contribute to sparking the decision that day? Why?
  • What were you using before you had X?
    • Why did you use that? What did you like about it?
    • When did you start using that?
    • What were its shortcomings?
    • What does the new product do that your old solution couldn’t?
  • How do you normally approach choosing a new product?
    • What was your process for this product?
      • Why was it the same/different this time?
  • How do you use the product you’ve purchased?
    • Are there features you use all the time? How?
    • Are there features you never use? Why not?
  • If in doubt, ask them to tell you more about whatever tangential thing they bring up in the discussion.

You’ll notice as you do the interview, certain moments on the timeline will fit what they’re describing. I wouldn’t try to fill in the timeline perfectly until after the interview, but while you’re interviewing you can mark in your notes when it seems like it fits with some part. If a certain area isn’t seeming to be filled in, probe more around that part in their process.

But will this work in my situation? It’s special/hard/unique.

If you can get the interviewee on the phone or to meet in person, then this will work in your situation. I have seen this work for all of the following cases:

  • Buying a car
  • Buying a scanner
  • Buying steaks online
  • Upgrading to Evernote Premium
  • Buying analytics for their business
  • Getting a gym membership for the first time in their life
  • Understanding why customers churned a SaaS product
  • Buying a 2nd iPad for a family with children
  • Buying a milkshake from a fast food chain

Even if multiple people are involved in the decision making process, any one person in the process is likely able to recall most of the key moments.

What have you used Jobs To Be Done for? What are your favorite JTBD interview questions?