Costing High Turnover

The challenge for HR managers is to hire right-first time, every time. But what if it was the wrong hire?

If your selection methodology is not robust, your selection decisions will result in the hiring of some sub-optimal people. Over the years, this rapidly accumulates to being a very sizeable and costly problem.

Negative Impact - Let us count the ways:

• Average and lower performing employees require more training and more time and attention from their managers. This time is in itself costly, and the knock-on effect is a reduction in management effectiveness in other crucial areas;
• The best employees produce 2-5 times more revenue than the lower performing employees. How are your most recent hires doing?
• With high turnover – the reputation your organisation has with both clients and prospective candidates can be harmed;
• Customer satisfaction is directly impacted by errors, ineffective customer service, loss of ‘corporate history’ and knowledge;
• Mediocre staff take time to become productive – the best staff will ‘hit the ground running’, quickly assimilate new skills and knowledge, and will be fastest at reaching their top performance;
• Your “Competitive Advantage” is negatively impacted by the “lost opportunity” of not having the best person in the job. Think of a underperforming new employee. Where would your company be now if you had hired the best employee in the first place? What amount of lost revenue and productivity does this represent?
• High performers in a team may resent having to ‘carry’ average or poor performers. Also, managers may have less free time to spend developing their ‘top talent’. This impacts morale and retention of the best people, especially if they are not developed and recognised.
• Higher HR costs are associated with time spent in disciplinary interviews, terminations, exit interviews and new recruitment activities.

Adapted from article by Alan Le Map of Latitude Organisational Consulting