This article was originally published on the WorkForce blog.
Why people walk away from companies, and how to avoid the extraordinary cost of every departure.
K.J. poured himself a glass of cold water and sat down, finally, to make the call.
He pressed the button. The phone rang a couple times and then he heard his manager’s voice…
“Hi, K.J.,” said Melissa. “What’s up?”
“Hi Melissa,” said K.J., eager to breeze over the pleasantries. “I wanted to let you know that Brian Lewis put in his two weeks this morning.” An uncomfortable silence consumed the line. “Melissa?”
“Yes, I’m here. Brian …from the LaSalle location? The shift manager?”
“Okay. That’s bad news.” There was another pause. “Did he say why?”
“He said he got a better offer elsewhere.”
But what does that mean, anyway?
Most people hear “better offer” and immediately assume it means “more money”—and sometimes it does, but not always. Sometimes, a “better offer” has nothing to do with money and everything to do with how a person feels at work.
“Leaving for a ‘better offer’ might have nothing to do with money and everything to do with how a person feels at work.”
Either way, Brian’s sudden departure is going to cost his company a lot of money—at least 20% of his salary—which explains K.J. and Melissa’s tense conversation. Of course, that turnover expense varies by position. For example, on average it would cost employers:
- 16% of the annual salary for high-turnover, low-paying positions (e.g., someone like the retail workers Brian managed in his role).
- 213% of the annual salary for highly educated, specialized positions (e.g., someone like K.J., Brian’s district manager).
In addition to the financial implications, losing employees also dampens the overall team morale. Watching a colleague leave is disheartening, and could cause people to consider their own situation.
Therefore, preventing turnover should be a priority for all managers. But that requires a solid understanding of why it happens in the first place…
Top reasons why employees leave
According to the experienced folks at DRI, a recruiting firm, competent, valuable employees leave for all sorts of reasons that have nothing to do with their pay. Here’s a breakdown of five possible scenarios that drove Brian to pull the trigger.
It could’ve been that…
1. The job didn’t meet his expectations.
Fifteen months ago, Brian walked away from his interview with K.J. smiling, excited.
He was thrilled to have found a role that spoke to him, to his skills and ambitions. A role that he was uniquely qualified for at a company that aligned with his values. That’s why he accepted the offer.
But the longer he worked as a shift manager, the less he began to recognize his job. He began to see a gradual shift in his responsibilities, his goals and objectives (not to mention his hours). He felt conned by some kind of corporate bait and switch—and it made him wonder what other surprises were in store for him.
2. He felt a severe work/life imbalance.
Brian signed an employment contract that stipulated he work at least 40 hours per week, which was fine by him, especially since he’d be getting paid overtime.
But, in the end, the money wasn’t worth it: Brian missed every single Friday night football game his son played in that year.
3. He felt undervalued.
After working 55- and 60-hour weeks, Brian was anticipating a raise or, at the very least, a healthy dose of acknowledgment for his efforts—neither of which he ever received.
4. He wasn’t going anywhere.
Slowly but surely, Brian became aware of his own stagnation in the role that, once, filled him with so much pride. As his enthusiasm waned, so did his drive to deliver results, to accomplish goals, to make a difference.
He lost interest. He became disengaged, irreverent, because he felt stuck.
5. He was frustrated with management.
Brian didn’t have a personal problem with K.J., his manager. In fact, he liked him well enough. But as a boss, K.J. was rigid, unemotional. He had a hard time picking up signals, reading cues (or maybe he simply didn’t care to acknowledge them).
In any case, K.J.’s obtuse, oblivious nature frustrated Brian, who traced it back to the issues he’s been facing at work.
Why does employee turnover over cost so much?
When she heard the news about Brian’s exit, Melissa immediately began doing the math, calculating how much it would cost to find a replacement. She broke it down a couple ways, grouping the costs into two major buckets:
1. The Direct Costs
These variables are relatively straightforward and, therefore, easy to measure. For example:
- Hiring time: how long it takes to find, vet, and interview a candidate.
- “Tool & Tech”: computers, uniforms, key cards—these all have a dollar value.
- Assessment: a performance grace period that demands additional attention from the hiring manager.
2. The Opportunity Costs
These variables are more layered and complex, making them more difficult to measure: For example :
- Learning curve mistakes: every mistake uses up time (read: money).
- Productivity: it’s going to take months for the new hire to achieve Brian’s output level.
- Impact on customers: ultimately, every technical slip and productivity slump, will trickle down, negatively affecting the customer experience.
These outright and hidden costs are clearly worth avoiding. But how?
Drive down turnover costs by increasing employee retention
Striking a balance is critical.
If every leader in your company made it a point to balance their business needs with those of their employees, your organization’s turnover would decrease.
That’s a nice thought, you might be thinking to yourself, but it’s easier said than done.
Sure, it is—but companies all over the world are nonetheless finding success through digital workforce management which drives employee engagement, reduces stress, and increases on-the-job satisfaction. And helps you build a connected workforce with happy employees!