Why Your Organization Needs An Employee Turnover Audit

The cost of employee turnover is staggeringly higher than you may think

Presented byRon Haynes, MBA

Employee Turnover Statistics

Source: http://www.compensationforce.com/2014/02/2013-turnover-rates-by-industry.html

2013 Voluntary Involuntary Total

All Industries 10.4% 4.7% 15.1%

Banking & Finance 12.8% 4.4% 17.2%

Healthcare 12.5% 4.3% 16.8%

Hospitality 18.2% 11.1% 29.3%

Insurance 6.8% 3.6% 10.4%

Manufacturing & Distribution 8.4% 4.9% 13.3%

Non-Profits 11.0% 4.3% 15.3%

Services 11.0% 4.2% 15.2%

Utilities 5.2% 2% 7.2%

Turnover Trends

Put Another WayIn a 100 person company, on average you had to replace 15 people in 2013. Eleven quit on their own and you had to fire four.

How much did that cost your organization in money, time, lost customers, lost productivity, lost knowledge, or loss of morale?

Here’s How Much …

Using US National Averages:

At $50,000 per year, those 15 employees cost your organization approximately

$675,000

Employees Have OptionsConsider:

• As the economy emerges from a recessionary environment, employees are more willing to leave the comfort of one job or position in favor of another.

• Employers need to fill these vacancies, however they want to find the best employee at a reasonable expense.

• The best and most talented employees will be highly sought after and CareerBuilder says that 75% of your top employees are currently looking for a better opportunity.

What’s Your Organization’s Employee Turnover Rate?

How Your Employee Turnover Rate is Calculated:

Number of Separations During Time Period

Average # of Employees During Time PeriodX 100

Key Point:

Turnover that exceeds your industry’s average should be considered preventable.

All Turnover Cannot Be Prevented

Some Employee Turnover is natural and cannot be prevented. Sometimes people just have a need to “move on.”

What’s not natural is an organization with turnover far exceeding the industry average.

Blue = industry avg.Red = excessBlack = remaining

employees

What Are Your Costs?

Example:You run a mid-size business with 500 employees and last year your Employee Turnover Rate indicated that 35 employees voluntarily terminated above the national average for your industry.

That could mean your company experienced between $1,300,000 and $1,800,000 in unnecessary expenses.

Those expenses came directly off your bottom line.

What Are The Expenses Associated with Turnover?Real Life Example: District Manager making $70,000/yr replaced with a $75,000/yr employee. Same perks, same benefits. Position open eight weeks.

Separation Expenses: $80,702Replacement Expenses: $44,848Post-Hire Expenses: $19,571

Total Cost to Replace?

$145,121

What Are The Expenses Associated with Turnover?Real Life Example: Store Manager making $40,000/yr replaced with a $42,500/yr employee. Same perks, same benefits. Position open two weeks.

Separation Expenses: $14,944Replacement Expenses: $13,766Post-Hire Expenses: $13,017

Total Cost to Replace?

$41,727

Examples of Expenses We Examine in an Audit• Cost of covering the vacant position by the manager.• Cost of covering the vacant position by other employees.• Relocation expenses.• How many people were interviewed that were not hired? There are

expenses there, too.• Administrative expenses.• Human Resources expenses.• IT Department expenses.• Productivity loss.• Customer retention or loss.

All total, we will examine over 130 expenses associated with employee turnover.

The High Cost of Doing Nothing

But all these expenses are already on our books. Why do we need to identify them by position?

Imagine your company has an East Region and a West Region. The East Region is frugal, smart with their expense accounts, and has generated a 10% sales increase.

The West Region has also generated a 10% sales increase but their expenses are out of control and are 150% higher than the East’s.

Which region is doing a better job?Should their rewards be the same?

Can you justify the difference? … How?

The High Cost of Doing NothingAn Example:One District Manager was creating a significant amount of unnecessary voluntary employee turnover due primarily to his management style. Despite a year of coaching, he refused to alter his attitude and his district turnover was still very high.

Executive management decided to charge his P&L with the turnover expenses which lowered his year-end bonus a great deal.

He got the message. Coaching began to make a difference once he “saw the light.”

The High Cost of Doing Nothing

You can’t manage what you don’t measure.

The High Cost of Doing Nothing

An empty office is anUNPRODUCTIVE

office.

Does your Human Resourcesdirector know the full cost

of this empty chair?

Do you?

The High Cost of Doing Nothing

“For a company with 10,000 employees, turnover costs for entry-level workers, alone,

could reach $17.3 million.” - BloombergSource: http://www.bna.com/retaining-workers-2014-n17179881224/

At only $1,730 per worker, you alreadyknow that number is GROSSLY understated.

How Much Time Does an Audit Require?

Not a lot. We’ve completed an audit in 25 minutes and we’ve taken as long

as three hours. More co-operation means less time.

The more complicated the position, the more time it will requireto gather the necessary data to complete the audit accurately.

The good news:Once we have the data,

the next audit can be completed quickly.

What Information Will You Require to Complete the Audit?

• Various salaries or hourly rates for the employees involved

• Hiring processes and expenses

• Generally some additional information from someone on the executive team

Confidentiality is 100% Guaranteed

Who Is the “Ideal” Customer for an Employee Turnover Audit?

• Business leaders who want to lower their employee turnover expenses. You can’t lower them if you don’t know what they are.

• Consultants who work with organizations to lower employee turnover expenses.

• Human Resources directors who can authorize expenditures to uncover these expenses.

How Much Does an Audit Cost?

For $275 you’ll get a customized report showing the cost of a single position’s turnover expenses, broken down into Separation Costs, Replacement Costs, and Post-Hire Costs. Additional positions are discounted by 15%.

You’ll also get information on practical talent retention strategies to help you keep your top employees.

Everything can be conducted by email or phone call.

What’s the Next Step?

Contact:Ron Haynes870-761-7881

ronh@corter.com

View our website atwww.corter.com