People are companies’ most important assets. We’ve all known this for a long time, but 1) we pay it lip service more often than we try to do something about it, and 2) it’s true more now than ever.
The rise of technology and the information age has resulted in more companies that compete based primarily on their people. This isn’t only true for technology companies like Facebook and Google; as software continues to eat the world and the pace of business increases, nearly all companies will live and die by their continual ability to innovate.
Despite the fact that most organizations know that their long term advantage resides in their people, most companies don’t think critically about how to increase employee retention.
In this post, I’ll argue that the core reason people don’t think about employee retention seriously enough is because they don’t know how to measure the impact. I’ll then share some frameworks for how you might associate dollar values with regrettable turnover, and once I’ve (hopefully) convinced you that this matters, give you some actionable ideas for improving the state of affairs.
The problem with not measuring employee turnover
Employee turnover is expensive.
People instinctively sense this; we’ve all felt the pain of a superstar leaving, the cultural challenge associated with the departure of a beloved employee, or even just the painful gap that is left behind by an employee who was doing an important job well.
But most people have no framework for quantifying this cost, or they never even bother to try.
The problem with this is that people 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 medial 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.
So what was the solution? In 1964, the first Surgeon General’s Report on Smoking and Health linked smoking to lung cancer and heart disease. This landmark report laid the foundation for the next 50 years of public education about the negative effects of smoking, and the results have been dramatic:
The U.S. government started running extremely effective public service campaigns over the following decades about the number of years cigarettes shaved off your life, the specific diseases you would contract and how likely you’d be to get them, and the effects on loved ones who are exposed to your second hand smoke.
In order to help people to do something difficult but valuable, such as quitting an addictive habit, a critical first step is to help them understand the cost of not doing that thing.
Understanding the quantitative impact of employee churn
Employee turnover, like cigarettes in the 1920s, is generally understood to be bad, but there is little awareness of its quantifiable impact.
A visual way to gain a mental framework for the cost is to simply draw a graph of an employee’s value to the company over time.
Maia Josebachvili, VP of of People at Greenhouse, produced a case studywhere she argued that retaining a sales person for three years instead of two, along with better onboarding and management practices, yields a difference of $1.3 million in net value to the company over a three year period
Please read full article on (Source:) https://medium.com/resources-for-humans/how-much-does-employee-turnover-really-cost