Would you withdraw $20,000, $50,000 or $100,000 in cash from the bank and light it on fire just to watch it burn? If your company has high workforce turnover, you might be doing just that. According to the Society for Human Resource Management (SHRM), the cost of replacing someone is a minimum of 50% of the position’s annual pay with some positions costing over 200%. That staggering figure means that a part-time receptionist making $30,000 per year will cost your company at least $15,000 to replace. If your company loses a high profile management personnel making $500,000 a year, that turnover could cost up to a million dollars or more.

High workforce turnover can devastate your business because hiring and onboarding new people is extremely expensive. While having the right compensation and benefit packages is important, hiring the right people is the single most effective way to reduce workforce turnover.

How Workforce Turnover Kills your Bottom Line

Have you ever wondered why companies take so long to decide which candidate to hire for an open position? Does it seem crazy to have an entire group dedicated to recruiting? It might not seem so senseless if you consider the fact that the cost of selecting the wrong person can easily run well over hundreds of thousands of dollars along with the potential negative impact on the organization’s productivity and morale. Hires are the backbone of any company. Hiring good groups of people that will stay with you is one of the best things you can do for your business. Consistently losing people is one of the worst things that can happen to your business.

Expenses associated with workforce turnover include hiring expenses (travel, hotel, meals), orientation and onboarding. There are also expenses that are harder to quantify but could also be lethal to your bottom line. These include low morale, lost customers, and low productivity while the position is vacant and while a new hire comes up to speed with the role.

The Cost of Workforce Turnover

For the sake of an example, let’s assume an engineering manager in a mid to large company making $150,000 per year announces that she is leaving her role. From the time she announces her exit, the business starts to lose money. Even though she has given several weeks’ notice, her mind and full attention are not on your business anymore. The morale and productivity of those under her immediately plummets. All of the costs associated with the attention this manager has received, the cost of lost knowledge and the possible cost of lost customers the departing manager may take with her are incredible. She may even recruit someone from your company down the road.

We aren’t done yet. Unless there is the perfect person to promote, there will be costs associated with finding and hiring a replacement. These costs will include advertising, using a hiring agency and paying someone to sift through all of the resumes that come in. The interviewing process can be tedious and expensive. It takes time away from the interview panel and the human resource department. Once a candidate is found, there is the cost of pre-hire checks (drug screenings, work histories, and criminal background checks). Don’t forget that during this time frame (which could take months), there is no manager and the productivity of the entire department is dramatically lower.

Once you have finally found the replacement manager, you’ll have to onboard the new hire. From new hire orientation all the way to job specific onboarding, it can easily take six months to a year before a new manager is performing well enough to work alone. The amount of lost productivity during that time frame is astonishing.

The total estimated cost of replacing this engineering manager easily surpassed $300,000. Wouldn’t you rather have invested that money into new equipment or other strategic business initiatives? Now what will happen if the new manager decides to leave the company after a year? It all starts over again.

The Key to Reducing Workforce Turnover Begins with Recruitment

The simple truth is that companies cannot afford to make hiring mistakes. Finding the right match is essential because the cost of workforce turnover can kill your business. The key ingredient to finding top-notch talent that will stay with you lies within your recruiting method. Are you simply trying to fill a position or are you strategically planning the future of your business?

Harness your Culture as a Hiring Tool

When you are in the hiring process, it is crucial that you look beyond the functional abilities of potential candidates and include intangible skills such as leadership ability, collaboration, and communication. The most intellectual people in the world may not thrive in your company if they do not align with the culture and values of your business. If you screen for cultural fit in your hiring process, you will hire professionals who will thrive in their new roles. These individuals will drive long-term growth and success in the company because they fit in with the core values of your business. They will be satisfied working with you and have no desire to leave. This means that ultimately hiring the right individual will save you lots of time and money.

The key to a successful hiring process is to provide a clear definition of responsibilities for the job as well as the personality characteristics required for communication and success. You cannot just match keywords on a job description and find the perfect new hire. Specific questions should be part of the interview process to determine whether the candidate will fit within your company’s culture.

  • What attracted you to this company?
  • Why do you want to work here?
  • How would you describe the culture here based on what you have read and seen so far? Do you identify with that culture?

Maintain a Positive Work Environment

Once you have found and hired the people that fit in best with your business’s culture, you want to keep them. People want to work where they are valued and where their hard work drives the success of the company.

  • Provide challenging and clear career paths. People want to know where they are, could be headed, and how to get there.
  • Respect and recognize hard work. Hires need to be appreciated for their work.
  • Set the right compensation and benefits packages. Compare often with market trends and competition.

Whether you have a small business with a handful of people or you are part of a large company with thousands of hires, the most important asset of the business is the people. In today’s competitive market, high workforce turnover is a real threat to your organization. As you develop your recruitment process, take the time and effort to hire candidates that are likely to match your culture and ultimately stay with your business long-term. Doing so will ensure that you are building a group of world-class people rather than lighting money on fire as they take turns walking out the door.


writer Melissa Ricker


Melissa Ricker is a nuclear engineer and a professional freelance writer specializing in career growth, technical writing and online entrepreneurship. She writes a blog, Engineered Motherhood, for working mothers who need help balancing career growth and time management. 



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