The Real Cost of Losing an Employee is More Than You Think
With nearly two decades of recruiting experience behind us, Mac & Fulton Talent Partners knows how challenging it can be to lose a key employee. Even more, if you’re company consistently shows poor retention rates, it can drastically impact your bottom line.
Especially when it comes to executive-level talent, the cost of losing an employee can be felt for months or even years. When a person spends enough time in the C-suite, their persona eventually becomes part of your brand. In such situations, not only do you have to take decisive actions to replace your old employee, but you have to consider how these changing dynamics might impact relationships with customers, distributors, and investors.
Nobody can deny the challenges of losing a key employee in a management position. However, poor retention rates for any position can cause real problems for your business. By exploring the underlying costs of losing key team members, M&F Talent hopes to highlight the importance of protecting your employees and keeping good retention rates.
What is Considered a Good Employee Turnover Rate?
Employee retention averages are influenced by a number of variables. For example, retention rates for the information technology (IT) industry in California are much different than those for manufacturing jobs in Ohio. Even more, peoples’ motivation for leaving jobs changes dramatically across industries, markets, and even age groups.
According to the SHRM website, “retention rate is often calculated on an annual basis, dividing the number of employees with one year or more of service by the number of staff in those positions one year ago. Positions added during the year would not be counted. Smaller measurement periods can be used, as when tracking more immediate results of retention initiatives, or larger periods, as when calculating the retention of those workers who stayed after a reduction in force some years ago.”
In the event that you are wondering how well your company does with employee turnover, you can use a simple formula to get an average. To start with, divide the number of employees that quit your business by your total number of employees. Next, multiply this figure by 100 to get your turnover rate. For example, if 30 people quit and you have a total of 155 employees (30/155 people = 0.1935), you have a turnover rate of 19.35% (0.1935 x 100 = 19.35).
According to Hubspot, the national average turnover rate for all industries in the United States is 57%.
Turnover Rates in Food Manufacturing
Food manufacturing jobs have lower turnover rates than the national average. As the U.S. Bureau of Labor Statistics website explains, manufacturing jobs had turnover rates of about 39% in 2021.
Turnover Rates in the Cannabis Industry
Like the service industry, the cannabis industry is notorious for high employee turnover. The cannabis business data company Headset shows that the industry experienced turnover rates of 60% in 2022.
How Much Does it Really Cost You When Someone Quits?
Many companies aren’t aware of the many different costs that are incurred when you lose a key team member. While certain expenses like recruiting and training are quite obvious, there are other less clear factors that negatively impact your bottom line.
The real cost of losing an employee can be difficult to comprehend, as the effects of the loss are often felt years down the road. This notion is particularly relevant for employees who work hands-on with your clients – such as salespeople.
Things that cost you extra money when a key team member leaves can include a loss of productivity as well as an overall decline in customer service. In the worst cases, employee morale drops with the loss of an important team member. Depending on the position in question, you can plan on spending anywhere from 50% to 200% of the candidates’ salary during the process of replacing them.
Especially with key team members like executives, the cost of losing an employee can be felt long after they depart your operation. From a change in company culture to the costs of recruitment and training, high turnover rates are extremely challenging for any business.
The Gallop website reports that high employee turnover costs American companies upwards of $1 trillion annually. There is no doubt that this astounding figure is largely related to poor retention rates in the C-suite. When you lose a high-powered executive that makes $200,000 per year, it could cost you $400,000 just to replace them. Needless to say, these figures should be enough to make you reconsider your employee retention strategy, including both salary increases and benefits packages.
At M&F Talent, we have seen firsthand the real cost of losing an employee. If you need advice on employee retention strategies like benefits packages and wellness initiatives, we are happy to help. Contact Us today with questions!
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