Calculating the Cost of Staff Churn
“How am I meant to operate and be competitive if staff are so unreliable?” The exasperated question coming from a business owner is one I have heard many times in various formats. (Staff being poached; leaving for higher paid seasonal work; not being fully engaged; not being prepared to go the extra mile; keep “pulling sickies”; etc)
Here are a couple of business truths/tough reality checks of running a business: 1) You do not own your customers - they have the choice to buy from whomever they choose 2) You do not own your staff - they have the choice to work for whoever they please and/or not to work.
Some people have messy lives and that spills over into workplaces creating unreliability and a multitude of other challenges. For most employees though, the challenge around work engagement boils down to the fact that work is just a job that pays the bills. In the priorities of life having an income is important and necessary. Working for ‘you/your business’ is optional and dependent on a lot of factors. If you want people to stay and add value it is up to you as a business owner/manager to create an environment that people want to stay in and contribute towards.
The cost of not having good staff attraction and retention is detrimental to business health and growth, both in the short and long term. Have you ever worked out how much you spend getting a new employee on board and operating productively? What about the cost of losing an experienced employee? Understanding these figures can help you reprioritise how you invest in staff.
Some of the known costs include hiring recruitment agencies, cost of adverts, time in interviews (although I find the time factor is often woefully underestimated/undercosted), onboarding costs e.g. uniform, safety gear, cell phone etc, training time and lower output figures.
The unseen costs are often the hardest to appreciate. Do you calculate the cost of ‘head’ knowledge and speed of work that skilled team members often have through sheer time on the job? The (often) negative impact on the customer experience? The opportunity cost of not having someone doing the role/taking time to learn how to do the role? The cost of distracting other team members through questions while the newbie learns and trains? The drop in productivity while the internal team cohesion works it’s way through the classic cycle of “forming, storming & norming” before getting to the performing stage? Losses from staff churn can include a loss in market share, innovation and R&D, client and supplier relationships, knowledge of systems, process, etc.
When you are looking at how much you invest in your team and what each person is “worth” to the business, ensure you start with yourself - have you provided the environment that brings the best from people? Have you created a space where people want to come to work and add value through the work they do?Does your team know the impact their individual jobs have on others - both inside and outside the organisation?
