The High Costs of Low Retention
Low retention equals high turnover costs. The cost to replace an average front-line employee is $13,000 (per Cox Automotive Research), and for department heads and general managers, costs can soar to millions. Here’s why:
- Recruitment Expenses: Advertising for the position, utilizing recruitment agencies, and the time spent by HR staff to review applications and conduct interviews all add up.
- Training and Onboarding: New employees need to be trained and onboarded, which involves both direct costs (training materials, trainer’s time) and indirect costs (lower initial productivity of the new hire).
- Productivity Loss: It takes time for new employees to reach the productivity level of the person they replaced. During this adjustment period, overall productivity can decrease.
- Employee Morale: High turnover can affect the morale of existing employees, who may have to pick up additional work or face uncertainty about their own job security.
- Client Relationships: In industries where employees build relationships with clients, turnover can damage these relationships and potentially lead to a loss of business.
Poor Managerial Selections and Their Consequences
- Decreased Team Productivity: A bad department head or general manager can lead to decreased productivity as their poor leadership may demotivate staff, lead to mismanagement, and result in inefficient workflows.
- Increased Turnover: Poor managers can significantly increase turnover rates, as employees leave due to dissatisfaction, stress, or a hostile work environment.
- Financial Costs: The process of replacing a manager, including severance packages, recruitment, and training, can be Additionally, the cost of a poorly performing department can run into millions due to decreased productivity and lost revenue.
- Legal Risks: Poor management can lead to legal issues, including lawsuits related to discrimination, harassment, or wrongful termination, which can be costly and damage the organization’s reputation.
- Damage to Company Culture: A bad manager can create a toxic work environment, which can spread negativity throughout the organization and harm the overall company