The hidden cost of turnover can be the difference in companies being competitive or even staying in business. In my 16 years of experience at the corporate level in Human Resources I have been exposed  to numerous companies throughout the United States that do not have a clue as to what their cost of turnover really is. In fact, turnover cost comes directly off the company’s bottom line.

In the book “First Break All the Rules” by Marcus Buckingham and Curt Coffman, the Gallup Organization conducted an enormous study of 24 companies with 2,500 business units. Four business outcomes were measured to show their correlation.  These outcomes were productivity, profit, retention, and customer service. This study included over 105,000 employees.

The results showed that there was a direct correlation to all four business outcomes and how employees were treated by their manager or supervisor. Poor treatment results in high turnover, lower productivity, efficiency, customer satisfaction, and higher operating costs.

This means those companies that have strong managers, and supervisors that treat their employees well and represent them well, have the highest productivity, best profit margins, best customer service ratings, the best retention and lowest turnover rates.

The formula used to quantify turnover in this study was 1 1/2 times an individual’s annual salary. This was inclusive of the annual cost of wages, benefits, and the cost of finding and hiring replacements.

All companies should:

• First, measure their turnover and convert this cost to dollars.
• Second, hold managers and supervisors accountable for turnover through ratings on their own performance appraisals. (Measurement with no accountability is useless.).
• Third, conduct confidential employee opinion surveys by outside consultants and use these results to make positive changes where necessary. (If you don’t know what your company looks like through the eyes of your employees it can really cost you in more ways than one.

CEOs and senior human resource professionals in world class organizations have been using these human resource measurements and opinion surveys since the early 80s with the move to continuous improvement using Philip Crosby, Dr. Edward Deming and Dr. Juran’s as models in Total Quality Management.

Also, ZERO turnovers aren’t a “GET OUT OF JAIL FREE CARD” for organizations. I will share a real life personal example with you on a smaller scale.

In visiting a physician’s office over the period of 4 months He asked me what I did for a profession. I shared with him what we do as an employer’s membership association in handling Human Resource issues for companies of all sizes. He said this sounds interesting and I think we could use some help. He introduced me to his office manager and we set up an appointment with her for the following week.

When I visited with the office manager the following week and shared what we do to help companies in all areas of human resources. The office manager said, “I don’t think you understand I appreciate what you do but we don’t really need your help. See we don’t, and never have had any turn over in this office. During the next 3 months I noticed that the office manager was sitting in on other desks in the office. So I asked are you covering for someone on break or lunch. Each time the answer was the same. No. The fact was that the absenteeism in the office was excessive. The doctor knew that they had a problem but the office manager didn’t recognize this because they had no policies or procedures on absenteeism. No one one was being terminated for excessive absenteeism but they had no turnover so she didn’t understand the actual cost in efficiencies, customer service or morale with the other employees who always showed up for work on time.

Where is your organization today in this process?

Do you really know what your turnover is costing your company’s Bottom Line?

Wouldn’t you like to know?

In process improvement in Human resources we call this low hanging fruit, but you have to know what you are doing and how to do it.

In any business it takes 2 things to be successful:

1^st: Employees, Recruit Train and Retain the BEST People.

2^nd Capital Have the right amount of Financial Operating Capital.

If 1 isn’t in place you will lose 2^nd. It’s that simple.

If you are interested in measuring and driving out these costs we can help you at Strategic HR Partners 706-561-2465.

www.strategichrpartners.com