Hello jabs-ga,
You have asked about a topic that is of immense continuing interest to
all organizations. My research shows that discussions of the cost of
employee turnover, the dangers and difficulties of involuntary
termination and the advantages of employee retention are ever popular
in the human resources and business press. There is lots of
information available on the costs of turnover, various calculators
for figuring out the numbers for your organization, and the techniques
necessary for improved employee retention.
On the other hand, there is not much available on how much it costs
specifically when a middle manager fails. The management numbers are
rolled into the general turnover statistics. There are many
difficulties in getting accurate numbers for management turnover
because manager terminations are frequently hidden. The standard
reasons for terminations are:
* Resignation
* Mutual agreement
* Reduction in force
* Unsatisfactory performance
* Misconduct on the job
* Retirement
Although the real reason for terminating a manager may be
“unsatisfactory performance” it is very likely that in many situations
the real reason is cloaked under one of the other labels. Employers
frequently try to deal with employee performance problems by
encouraging the employee to leave. In the current recessionary period,
many of the “reduction in force” casualties were let go for
performance reasons. Offers of early retirement packages are also
frequently offered.
There is some information available on the associated costs of
management failure. This information is implied in the standard costs
of termination and replacement for any employee along with added
considerations for the impact of ineffective or harmful supervision
and leadership within the organization and on everyone the
organization deals with, i.e., vendors, customers, investors, and the
general public.
I was able to locate some industry reports on turnover along with some
articles in the trade and business press. There are many human
resources consulting companies that specialize in industry surveys, so
it should be easy for you to get additional information on specific
industries of interest to you.
I’ve organized the information I collected under topic headings that
should give you an overview of what’s available as well as leads for
further research for greater depth in your explorations. in the
future, you might also want to take a look at how these issues are
addressed in the "performance management" and "human capital
development" literature. I believe this research will give you a broad
overview of the costs involved with employee turnover. Please ask for
clarification on any of the information I’ve furnished.
I wish you happy explorations.
czh
=============================================
EMPLOYEE TURNOVER COSTS – GENERAL INFORMATION
=============================================
Most of the articles and studies addressing turnover costs divide
these costs into two major categories: separation costs and
replacement costs. Some of the studies also divide the costs into
tangible and intangible costs. Here is a collection of reports that
give you a perspective on these approaches. In addition, one of the
major reasons companies are reluctant to take action against poor
performers is their fear of lawsuits for wrongful termination. The
costs involved with litigation are another factor to consider.
http://www.mrinational.com/client/turnover.htm
The Cost of Employee Turnover
Would it surprise you to learn that it will cost at least 150% of a
person's base salary to replace him or her? Actually, the more you pay
a person, the higher that percentage will be - because the more you
pay this person, obviously, the more you value their contribution to
the growth and success of your business.
http://www.townofcary.org/agenda/councilmin00/41300j3.htm
How Turnover is Calculated
Staff distinguishes between voluntary and involuntary turnover and
their respective causes. Voluntary turnover, as reported here,
includes all separations initiated by employees. For the most part,
these are resignations, but also include elective retirements.
Involuntary turnover includes dismissals, disability retirements,
deaths, and layoffs. Also counted in this total is any employee who
resigns to avoid dismissal and any employee who is not vested in the
retirement system but who must separate for serious health reasons.
The most common type of involuntary turnover is dismissal and the
closely related "resignation to avoid dismissal".
http://www.drjohnsullivan.com/articles/1998/net19.htm
What is The Ideal Turnover Rate?
There are many opinions about what is the "ideal" turnover rate. Here
is how a CEO might look at it.
http://www.employeeretentionsurvy.com/
How do you manage turnover?
Distinguish voluntary turnover (separation) from involuntary turnover
(termination or being fired). Termination may be profitable as poor
performing employees are culled from the company. What hurts is when
good employees quit.
You should also differentiate short-term from long-term employees.
http://eastbay.bizjournals.com/eastbay/stories/2003/01/20/daily1.html
Companies firing more high-paid managers
January 20, 2003
http://www.nolo.com/lawstore/products/product.cfm/objectID/21DA6501-6B2D-4962-AC49D8C85182FD3C/sampleChapter/2
Firing Without Fear: A Legal Guide for Conscientious Employers
See page of cost elements in firing
http://www.cooperhealth.org/programs/employee_assistance.htm
Cooper Occupational Health Services is a leader in providing
work-related health care for over 600 companies in Southern New
Jersey. Our staff has extensive experience in the management of
successful Employee Assistance Programs in a wide variety of workplace
settings and has seen results leading to improved morale and increased
productivity.
Statistics show that 26% of the workforce is suffering from a personal
problem that has the potential to negatively impact upon their work
performance. Furthermore, within that 26%, there are approximately
10% that require close supervision by a member of the management team.
If left untreated, these problems often take their toll on the
workplace and can present as:
http:// www.flexexecs.com/fe_images/WOWno5.pdf
Why Do People Leave?
The answer is that most people leave their jobs because of their
supervisor or team leader! What is it about this workplace
relationship that makes it the number one reason so many people leave
their jobs? Basically, it's a lack-of trust, of communication, of
relevant and timely feedback, of appreciation, of fair treatment and
of information
http://www.tgci.com/publications/98summer/lettinggo.htm
Letting Go -- Terminating an employee is never easy. Don't make the
task any harder than it has to be.
Justifications for termination should be formally defined in policy
statements. The six basic reasons are:
Resignation
Mutual agreement
Reduction in force
Unsatisfactory performance
Misconduct on the job
Retirement
http://www.ache.org/mbership/AdvtoFellow/CASERPTS/discrim99.cfm
Minimizing the Risk of Discriminatory Suits
When Terminating Poor Performers
Case study of the various costs in terminating a manager.
The Business Impacts of Not Firing A Bad Employee / Low Performer
by Dr. John Sullivan
Why are you assuming firing bad employees costs you money? It saves
you money if you do the calculations right.
Good workers resent them. "A" players don't want to work with "C"
players. And C players never hire A players. Bad managers cost the
firm even more. Lawyers often try to "scare us" into not firing people
but in fact the number of "fires" that result in litigation is quite
small. By firing poor performers you will energize the best performers
and that will make you enough money to more than make up for the costs
of the few cases that do go to litigation.
http://www.crmdaily.com/perl/story/5894.html
Study: Employee Turnover Turns Off Customers
Employee turnover has a negative impact on customer service and
satisfaction across a range of industries, according to a joint study
released by Roper Starch Worldwide, Inc. and Unifi Network, a division
of PricewaterhouseCoopers.
http://www.support.com/news/pressroom/pr_20021105.asp
Employee Turnover Creates Corporate Memory Loss
80% of Professional Knowledge Is Lost When Employees Leave A Company
http://faculty.fuqua.duke.edu/areas/accounting/documents%20for%20website/cl_to_072602.pdf
The Effect of Stock Option Repricing on employee Turnover
38 page paper
http://www.isixsigma.com/forum/showmessage.asp?messageID=615
HR Six Sigma-- Employee Turnover
Discussion thread on how to apply Six Sigma methods to HR and employee
turnover
http://www.amanet.org/books/catalog/0814405975_s.htm
Six Truths about Employee Turnover
Brief article highlighting employee turnover issues.
http://home.zen.co.uk/assets/pdf/liability_whitepaper.pdf
Internet Usage And Legal Liability
If an organization has even one employee accessing inappropriate or
illegal
content, it puts the entire organization at risk.
This is a 5 page white paper that discusses the costs of liability and
raises the issues you should consider when reviewing termination
costs.
http://www.selectionresources.com/turnover.cfm
Reduce Employee Turnover
It has been estimated that the loss of a highly compensated employee
could cost up to
1 1/2 times that individual's salary.
*A major insurance company recently estimated that its average cost
per hire was $35,000. *Estimate courtesy of Brannick Consulting.
http://www.smartpros.com/x18234.xml
Understanding Turnover
Feb. 28, 2001 (SmartPros) — Turnover has become a major concern for
organizations today with labor shortages and competitive pressures
making retention of key employees a strategic issue. For larger
companies, high turnover could cost millions of dollars.
http://www.auxillium.com/staffing.shtml
Controlling Employee Turnover
Performance related terminations
===================================
EMPLOYEE TURNOVER COSTS CALCULATORS
===================================
I’ve collected a selection of online turnover calculators that should
help you figure out the cost of management turnover in your
organization. The calculators all consider the tangible costs of
termination and replacement The degree of detail they offer varies.
Some of the calculators also help you factor in additional costs.
http://www.employersgroup.com/Data/Newsletter/2002/10/People_Product.asp
Managing Employee Turnover
High Turnover Costs Plus Inexpensive Solutions = Attractive ROI!
Estimated Cost of Turnover
Retention Solution Costs
Estimated ROI
http://www.nobscot.com/sales/calculator.cfm
Retention Management and Metrics
Nobscot Savings Calculator with Nobscot Exit Interviews
National average cost per terminating employee is often cited as 25%
of the terminating employee's annual salary. For example, if the
average salary of all terminating employees is $20,000.00/year, then
the average cost to the company per employee would be $5,000.00/year
(.25 x $20,000.00=5,000.00).
http://www.aoncorporation.com/reducing_employee_turnover.htm
Aon's Turnover Cost Estimator™ is quick and easy to use. It calculates
your direct and indirect costs of turnover to determine the magnitude
of the problem and provide a baseline for addressing turnover problems
at your company.
http://www.accountingconnection.com/turnover.asp
Turnover Costs Incurred For A Bad Hire
Case Study—A Staff Accountant at $45000/Yr.($21.63/Hr.)
http://www.abigailabbott.com/turnover.asp
Case Study—An Administrative Assistant at $30,000/Yr. ($14.42/Hr.)
http://www.sibson.com/solution/retention/cot_calculator/index_cotcalc.htm
Sibson & Company – Specialty in Human Capital Management
The following model allows you to calculate your annual total cost of
turnover for a specific group of employees. See Cost of Turnover and
Causes of Turnover.
===============================================
EMPLOYEE TURNOVER COSTS FOR SPECIFIC INDUSTRIES
===============================================
I’ve collected a selection of articles about turnover in specific
industries. If you’re interested in particular industries, you could
search for articles and surveys that address your needs. There are
many survey companies that monitor particular industries and produce
regular reports. The major HR consulting companies also have research
reports priced anywhere from under $100 to several thousands.
http://www.nobscot.com/survey/us_voluntary_turnover_2002.cfm
US Annual Employment Turnover Rates by Industry and by Geographic
Region
The following charts show the annual employee turnover rates for U.S.
employees by industry and by geographic region1. All numbers are
percentages. Employment Turnover represents turnover resulting from
employees voluntarily leaving their employment. Click here to see the
same charts for Total Separations. Data is supplied by the U.S.
Department of Labor.
http://www.culpepper.com/eBulletin/2003/JanuaryCompensationArticle.asp
Employee Turnover Down; Job Growth Slows to a Crawl
January 14, 2003 – IT industry report
http://www.sashacorp.com/turncost.html
How much does it cost to lose a front line worker?
Turnover cost $8.00 / hr. employee
Collection of links to survey results from about a dozen industries.
http://www.nationalgrocers.org/EmploTurnover.html
Employee Turnover: A Bottom-Line Issue
High employee turnover is like shrink. It cuts into the bottom line,
but it can be controlled.
Grocery industry
http://affinitybenefits.com/nrha/employee_turnover.htm
Employee Turnover
Is Your Revolving Door Costing You Money?
Retail industry
http://itmanagement.earthweb.com/career/article.php/1141681
Even In Tough Times, Worker Attrition Plagues IT Staffs
May 20, 2002
http://www.hotelschool.cornell.edu/chr/research/inbrief/empturnover.html
The Center For Hospitality Research
The Effect of Employee Turnover on Hotel Profits: A Test Across
Multiple Hotels
http://www.itworld.com/Career/1993/ITW2491/
Employee turnover: The costs are staggering
ITworld.com 9/11/00
Sibson builds three kinds of costs into its model. Direct costs
include things like help-wanted advertising, interviewing, and
overtime for employees who take on the departing workers' tasks.
Opportunity costs are "situations where you're not able to work at
capacity," Burchman says, "where you can't hire enough people to
handle the business you have." Sibson includes several problems in
this group, such as lost customer relationships due to poor service
from partially trained replacement employees, or valuable client lists
that leave with employees. Productivity suffers as the new hires
tackle learning curves.
Indirect costs include things you can't easily quantify, but clearly
have negative impacts on organizational productivity and know-how.
Burchman mentions lower growth rates, loss of organizational
knowledge, and reduced staff size and effectiveness. Management is
hobbled, too.
http://www.isquare.com/turnover.cfm
Small Business Advisor
COST OF EMPLOYEE TURNOVER
Detailed list of factors to include in calculating turnover costs
http://www.kioskcom.com/article_detail.php?ident=1336
Supermarkets Devise New Strategies to Battle Employee Turnover
http://www.callcenternews.com/specials/ws_000915.shtml
Study: Turnover Affects Corporate Performance
Want concrete evidence that the way you manage your front line call
center staff has ramifications far beyond the call center? A recent
study showed that employee turnover replacement costs have reduced
earnings and stock prices by an average of 38% in four high turnover
industries, including call center services. That's right: stock prices
and earnings.
Sibson Survey
http://www.hotel-online.com/News/PressReleases1998_2nd/EITurnoverRatesClimb_May98.html
EI-AH&MA / KPMG Study Finds Hotel Industry Turnover Rates Continue to
Climb
The top reasons for involuntary turnover (i.e., employee termination)
were excess absenteeism, poor job performance, frequent tardiness,
frequent guest complaints, and other issues such as theft or job
abandonment. The top reasons for voluntary turnover (i.e., the
employee decided to leave on his or her own accord) were better pay
elsewhere, better career advancement elsewhere, personal/family
reasons, intracompany transfer/promotion, and preferred job outside
the industry.
http://www.performancemgt.com/HSMAI%20Turnover%20Report.htm
HSMAI Professional Level Sales and Marketing Turnover Report
Summary of Findings
Overall sales and marketing turnover in the hospitality industry is
24.7%. (First year sales turnover is substantially higher, at between
35% and 40%). The 24.7% is 165% of the 15% benchmark for professional
level turnover across industry lines reported by the Society for Human
Resource Management (13% as reported by Watson/Wyatt Worldwide). That
is, one of four people left during the reporting period. This is a
very significant problem for the industry, made worse by the fact that
first year turnover of sales and marketing professionals is so high.
As an industry, we’re doing something wrong.
============================================
RESEARCH, WHITE PAPERS, CONSULTING COMPANIES
============================================
This is a sampling of research and theoretical works on the subject of
employee turnover. The Bureau of Labor Statistics and the Department
of Labor sites offer a huge variety of statistics on workforce issues.
http://www.bls.gov/jlt/
The Job Openings and Labor Turnover Survey (JOLTS) program produces a
new monthly study that has been developed to address the need for data
on job openings, hires, and separations. Estimates from the JOLTS
program are not seasonally adjusted, and therefore comparisons of
JOLTS estimates should be based on the same month in different years.
http://www.bls.gov/bls/topicsaz.htm
Topics A-Z
http://www.dol.gov/dol/contact/contact-topics-statistics.htm
Statistics
http://www.fba.nus.edu.sg/fba/mscphd/Index0005.htm
The Impact of Human Resource Management Practices on Employee Turnover
Using the Buck HRM AuditTM, we surveyed the HRM practices of a sample
of firms in Singapore. The results from stepwise regression indicated
that firms that have formalized Job Analysis activities had the lowest
level of employee turnover in general, and particularly, during a boom
year. However, during a recession, firms that have formalized HR and
Succession Planning had the lowest turnover rates. Implications of the
results are explained in terms of goal setting theory. The importance
of formalizing and setting work standards and activities for employees
using a job analysis, as well as determination of human resource skill
requirements and career paths through HR and succession planning, were
able to reduce employee turnover due to the benefits of setting
specific goals.
Includes a literature review
http://www.business.com/directory/human_resources/workforce_management/turnover/
Home > Human Resources > Workforce Management > Turnover
You can search for surveys on workforce and talent management issues,
including turnover.
http://www.bna.com/products/index.html
BNA is a leading publisher of print and electronic news and
information, reporting on developments in health care, business, labor
relations, law, economics, taxation, environmental protection, safety,
and other public policy and regulatory issues.
http://www.epf.org/
The Employment Policy Foundation (EPF) is a nonprofit, nonpartisan
public policy research and educational foundation based in Washington,
D.C. focused on workplace trends and policies. Its mission: to shape
the direction and development of U.S. employment policies by providing
policymakers, the media and the public with timely, high quality
economic analysis and commentary.
http://www.iplabs.com/hr/links.htm
Human Resources Learning Center
This page offers links to major HR organizations, directories,
recruitment, legal sites, government agencies, calculators, and other
sites.
http://www.benchmarkingreports.com/site_tools/completelisting.asp
Benchmarking Reports:
http://www.bestpracticedatabase.com/
Best Practice Benchmarking is the process of seeking out and studying
the best internal practices that produce superior performance.
http://www.rposthuma.utep.edu/turnover.htm
Employee Turnover Theories
(Excerpt from: The Effect of Context on the Multiple Dimensions of
Procedural Justice, Richard A., Posthuma, Doctoral Dissertation,
Purdue University, 1999)
Early research was concerned with understanding the motivational
antecedents to turnover and thus the importance of the appropriateness
of turnover as a dependent variable as a response to individual
motivated choice behavior. Thus, Price (1977) and others called for a
focus on voluntary versus involuntary turnover (Campion and Mitchell,
1986, Campion, 1991). However, Muchinsky and Tuttle (1979) noted that
in most studies it was not clear whether turnover was voluntary or
involuntary. A second problem noted by Muchinsky and Tuttle was that
sometimes tenure was used as a surrogate measure of turnover. However,
comparing stayers and leavers is not the same as comparing those with
short versus long term tenure. A third problem is that organizational
records of the stated reasons for employee turnover are often
inaccurate (Mobley, et al, 1979, Campion, 1991). A fourth problem is
that a dichotomized conceptualization of voluntary versus involuntary
turnover may fail to capture significant variance in the actual
reasons for turnover (Bluedorn, 1978, Campion, 1991). Furthermore,
dichotomizing a continuous variable significantly reduces the maximum
possible variance that can be accounted for. These factors suggest
that a continuous measure would be more appropriate than a simple
voluntary/involuntary dichotomous variable.
http://www.saratogainstitute.com/
Saratoga Institute, Inc., a subsidiary of Spherion Corporation, is a
global leader in human capital management, providing a unique,
comprehensive approach to the study through its Workforce Diagnostic
System.
http://www.kepner-tregoe.com/research/research-brain.html
Avoiding the Brain Drain:
What Companies Are Doing to Lock in Their Talent
This is a year-long, three-phase study of 1,290 responses of managers
and hourly workers to a nationwide survey on employee turnover. Survey
responses shed new light, from both groups' perspectives, on questions
such as:
Kepner-Tregoe clients may request complimentary copies of by
contacting their KT Account Manager. Nonclients may order the report
($375.00 U.S., per copy, plus tax and shipping)
http://www.ksrinc.com/research/pdfs/Recession_WEB.pdf
Business Strategy During the Recession
This is a 22 page market survey report on what companies are doing to
maintain competitiveness during the recession. Several tables show
that retention and employee development are still high priority.
http://www.facilitycity.com/busfac/bf_01_12_workforce.asp
Employee Retention and Hiring Are Still Important Issues
"According to U.S. Bureau of Labor Statistics, by 2006 a mere five
years away, we will have 141 million people to fill an estimated 151
millions positions," says Debbie McGrath, founder and chief instigator
of HR.com. "That negative employment is across all disciplines, not
just technology, healthcare, retail and education—all in critical
conditions today. It will impact us in every facet of our lives, from
customer service at a retail counter, to cost-per-hire for the
hard-to-find technology people."
===============
SEARCH STRATEGY
===============
employee turnover
firing managers
employee turnover statistics
benchmarking employee turnover
cost of terminating employee
terminating management employees
retention recession |
