- 
Here Today, Gone Tomorrow: The High Cost of Employee Turnover
by Suzanne Mark
Owner - MARK of Excellence
MARK of Excellence
Is it cheaper to work with and develop an existing employee or hire a new one? Is it cost effective to let a good employee be pirated off to someone else’s organization after your organization has invested in their training and development only to have another employer reap the rewards of your investment? Staff turnover can be a major expense for an organization. According to the U.S. Department of Labor, Bureau of Labor Statistics for 2003, it is estimated that turnover can cost an organization as must as one third of a new hire’s salary. For a position posted at $45,000 that amounts to $15,000; for someone at $100,000 it’s as much as $33,000.
But what are the costs in staff turnover? They can be both direct costs such as severance pay and leave benefits as well as re-recruitment fees for ads or headhunters. It can be indirect costs of investment in training and development of the exiting employee as well as lost staff time in interviewing and time in the learning curve for new hires getting ‘up to speed.’ But turnover costs are much more complicated and subtle than these examples.
For instance, it is estimated that there is lost productivity of up to 50% for every week a position is vacant. This can manifest itself in negative ways were other staff are then burdened with having to ‘pick up the slack,’ often times without compensation. Rather than moving an organization ahead on its goals, the team may be forced to ‘tread water’ until the team is again at full force.
In resorts where there is a high involvement with the customer both in operations, where they are utilizing the facilities regularly, or in the sales area where ‘relationship sales and marketing’ are critical, employee turnover can take a toll on the bottom line. There is a subtle cost of ‘under serving’ our guests. A well-trained employee who has developed relationships with our guests provides an enhanced experience and satisfaction as well as bringing greater efficiency and effectiveness to their work. Staff who deal with vendors or outside contractors also can negatively affect the resort when new relationships have to be developed to provide the level of service for which our guests have become accustomed.
We talk about the learning curve as an abstract concept, but in fact for almost any job, even the most simplistic; it can take weeks if not months and years for an employee to ‘know’ their job and more importantly their clientele. Even grounds maintenance personnel who actively acknowledge guests by name create the very homey, customer centered atmosphere that guests are seeking. By the same token, sales staff who can telephone or visit a guest on property may be trolling for referrals, but if well acquainted with our clientele make the call seem like we’re just visiting with friends rather than capturing names for referrals.
Within the deeper recesses of staff turnover lies the issue of ‘corporate culture’ and corporate knowledge. In resorts where there is high turnover, policies and procedures can become muddied and employees no longer know not only what they are supposed to do, but more importantly why they are doing it. Corporate culture and corporate knowledge are different from job knowledge. Job knowledge is the what of a job. Corporate culture and corporate knowledge are the why and how of the organization. When employees know and understand the why and how of resort sales and operations, their jobs take on meaning; their commitment is solidified and they can be less likely to ‘jump ship’ and thus reduce the high cost of turnover.
A few other less obvious negative aspects of staff turnover need to be considered. Especially in the sales department of a resort or in administration, there exists the potential of loosing vendors and guests that the departing employee takes with them. Really popular sales folks have a following. Also, consider the amount of corporate knowledge and memory that goes out the door in the staffer’s head! And lastly, think of the hours of training both formal and informal through coaching and staff consulting that has been an ‘investment’ in the future productivity. All that leaves when staff depart.
To calculate your own costs of staff turnover, we’ve included a list of articles, books and other resources for you to review and determine your weaknesses.
It’s prudent for managers and supervisors to know and understand the disadvantages of staff turnover. As the advancing summer season brings new hires and motivating seasoned workers, keep these costs and their consequences in mind. If you don’t have time to do it right the first time, will you have time to do it over after the season starts? If you hire the wrong person now, will you have time to re-hire in the heat of the season?