Statistic of the Month

Calculating the cost of employee turnover

When a valued employee leaves, the cost associated with this staff member’s departure will range between 25 and 200% of the person's annual compensation. And, the truth is the higher the salary, the higher the costs. This cost estimate includes the following:

• employees who will do the work until a replacement is found;
• the lost productivity of the employee while still on staff but not fully concentrating on the job;
• the possible cost of relationships the departing employee is taking with him/her (or that leave because they are ignored while the transition occurs);
• hiring costs including advertising, networking, executive search, and/or promoting from within as mentioned in the Executive Search Options article in the December 2004 MJA newsletter;
• the additional salary you may have to pay to attract candidates;
• training costs for the new employee; and
• lost productivity costs as the new employee ramps up to speed (this includes costs of using other employees time to help cover the position during the transition time.)

Costs that are more difficult to quantify include:

• disruptions in donor relations;
• the emotional costs;
• the loss of morale;
• the burnout and/or absenteeism among remaining employees;
• the loss of experience; and
• the loss of continuity.

Take heart – some turnover happens to every organization. It is virtually unavoidable, yet, it can also offer benefits. You have the opportunity to reengineer systems as well as tasks and responsibilities to reflect current needs. There might even be a reinvigoration of remaining staff through an infusion of excitement, energy and insight that a new employee can bring.

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This article is from Resources: The MJA Newsletter.
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