Know your odds against employee turnover
An industry mimics a machine in more ways than one. Just like a machine must be maintained, its parts replaced and its gears oiled, every industry needs its pool of talent to survive and thrive. But having a good machine is not enough to increase productivity; a delicate balance of longevity and productivity in its use is also necessary.
Things work in similar ways for employees too. The real ballgame starts after the employee is recruited and trained. How to retain the top talent in the company becomes the biggest challenge. The cycle of employee turnover is vicious, and can quickly lead a company to ruin if not checked early.
The effects of employee turnover or attrition on a company are multi-faceted. Let’s find out how:
Severance expenses are the direct costs borne by a company when an employee resigns. This also includes continued benefits, other unanticipated costs and most importantly, the time spent in conducting exit interviews, due formalities and processing the termination.
Hiring expenses are borne by an employer to hire new candidates to replace the outgoing employees. Monetary losses aside, the time required to go through various applications, shortlisting candidates and interviewing them also adds up to a significant amount. The more time each hire takes, the more the expenses. These costs can be significantly reduced by implementing online pre-hiring assessments to shortlist the best candidates.
Productivity expenses are the hardest to quantify as they depend entirely on the skill level and training requirement of the new employee. Also included in this are the hours lost in compensating for the lost employee and the time taken to get the new employee up to speed with the current scenario.
These factors don’t include the other huge loss— experience and expertise. Once an employee leaves a company, he also takes with him the experience and expertise, along with the invaluable benefits of training received at the previous company.
Rate of Employee Turnover
There is a particular formula used by many employers to calculate their employee turnover.
The number of employees who left during a given time divided by the average number of employees employed during the same time, multiplied by 100.
Used on its own, the number doesn’t count for much. These figures make a lot more sense when compared to other companies in each region and industry. Every time an employee leaves, the bottom line of the company takes a significant hit. Employers who can effectively counter attrition can enjoy not only a better position in the industry but also a motivated and engaged workforce.
(The author is a member of the Product Marketing team at Mettl, one of India’s fastest growing assessment platforms and skill measurement company. Along with writing articles for HR, he has a tendency to tinker with gadgets in his free time and is also vocal about his love for Android.)
(An HR Promotional Initiative)