A brilliant electrical and computer engineer from Austin, TX had earned a promotion and raise, but then the company delayed – claimed they could only afford to promote one engineer and the other employee had seniority, but promised they would come through the next year. The engineer enjoyed his job, but he posted his resume. His talents are in demand and multiple companies called for interviews. His new job gave him higher status, a 15% salary increase, and a substantial sign-on bonus. How much did this loss and turnover cost the company who “couldn’t afford” the deserved raise and promotion?
Searching: Time and money spent finding the talent needed to fill the position. With the skills gap we discussed on a previous blog, this can take time – time that your HR needed to spend on other avenues.
Wooing/Interviewing: This can be costly – especially when you’re trying to fill high-level positions. Not only does every shortlisted candidate need to be interviewed by multiple individuals, it often involves meal and travel expenses.
Hiring/training: Every new employee needs time to adapt and “learn” the position. This often includes other staff members shorting their own responsibilities to assist the new hire, prompting a loss of productivity.
Loss of knowledge: The employee who exited knew the ropes. He knew how the company navigates, standard of operations, and wealth of practical information in addition to specific technical information related directly to his/her position. It takes time for the new employee to reach the equivalent level – more loss of productivity.
Stress/overtime: During the time between the exit of one employee and the hiring of new talent, the rest of you staff has to cover the position. This means additional stress, which reduces productivity, and overtime pay, which increases payroll costs. Furthermore, when people are trying to maintain their own work while picking up someone else’s load, quality of work, as well as employee morale and engagement typically declines, creating additional loss of productivity and ROI.
While partnering with a staffing firm can reduce many of these costs – especially the “soft” costs like reduced productivity, employee morale, etc, you still have to face the music. Statistics claim that the minimum cost of replacing talent is 30% of the income of the departing employee. Many leaders insist that it can cost up to 400% of the exiting employee’s salary when losing someone who was making $120,000 or more.
Let’s look at the engineer from Austin. His annual salary was $155,000 plus benefits, bonuses, etc. At the most conservative figure, which is unrealistic, it cost the company who failed to give the promotion/raise $46,000 to replace him. At the most liberal figure, which is equally unrealistic, it cost them $620,000. Let’s choose just shy of middle and assume it cost them $300,000. A title promotion and a 10% raise would have kept their engineer. If they continued with a 10% raise every year, it would have taken seven years before they spent $150,000. In reality, they couldn’t afford not to give the promotion and raise.
Of course, talent doesn’t always leave because they failed to get a raise. There are many valid reasons that have little to do with a company’s failure to engage the employee or compensate them sufficiently. Whatever the reason that you have positions to fill, reduce your turnover cost by partnering with Robbins Staffing. We will do the work and secure you the best match, increasing your potential to engage and retain your new hire. Contact us today.
