fbpx
011 290 5900 enquiries@ifundi.co.za

What does it cost if your employees leave your organisation?

Posted by Satya Radjasa

“There are two most important elements in my company: people and brand. If I have to choose just one, it’s people, because with great people, I can create excellent brands.” (Maurits Lalisang, president director of Unilever Indonesia.)

For me, this quote – from a non-HR person at one of the largest FMCGs in Indonesia – sums up how all organizations should think about their talent. It also reflects the fact that for Unilever, there’s a positive correlation between how the business performs and the emphasis it puts on people management. And it echoes this year’s Conference Board CEO Challenges report, which shows that people issues are top of the list of priorities for CEOs.

But of all the organizations that put people first, how many really measure the costs when people leave? How can you do it? And does people leaving have to be a problem?

If they’re low performers, then the answer to the last question is no. A recent study revealed that as many as 50 percent of employees are unhappy that their employers are still tolerating poor performers and people with a poor work ethic. We always tell our clients to be aware of the negative consequences of putting up with poor performers, which can include a drop in employee morale, and a feeling among high performers that there’s no point in going the extra mile if they’ll get the same amount of recognition for performing at a mediocre level.

But if the people you’re losing are valuable to your business, how can you measure what their departure is actually costing you?

Four ways to measure the impact of people leaving your organization 

1. The financial cost

In the person leaving is in a sales role, responsible for managing accounts, the financial impact can be high. Imagine a wealth management manager that holds a total portfolio account of USD 10 million – if that person leaves the company, and takes 30 percent of their account with them, that’s a loss of around USD 3 million.

2. The cost of finding someone new

Replacing an employee can cost from 30 to 200 percent of annual salary, depending on their level. So if 15 percent of your ‘critical’ people are leaving, what would the cost be?

3. The ‘brain drain’

Given that your best and most business-crucial people often know the most about your organization, losing them would have severe impact on corporate memory and knowledge – which can then have a serious knock-on effect on your organization’s ability to develop innovative product and services.

4. The effect on morale

Last but far from least, how does an increase in the number of people leaving affect the morale of the employees left behind? It’s difficult to quantify the impact, but it can be substantial.

When you consider all these costs together, it soon becomes clear why it’s so important to keep hold of your best people.

How you do that is another blog.

Article sourced: http://bit.ly/1Mo0Lgb