True or false?  If you hire good people and pay them fairly, they will do what it takes to get the job done.

True or false?  When people show up for their first day of work, they are certain they have made a good decision about taking the job.

While you may like to think these are both true, 98% of business owners and CEOs to whom I have asked those very questions in workshops across the country answer “false” to both.

If you are a business leader, and you answered “true,” you have either done a lot of good work on the systems and processes around hiring, onboarding and retention, or you are living in a world of denial.  If you are not intimately familiar with the true cost of your turnover, for every role in your organization, let this be your wake up call.

A recent survey commissioned by Career Builder, and conducted by Harris Interactive included more than 3,000 hiring managers and HR professionals in multiple industries and covered companies of varying size.  There are trends you need to know about regarding turnover.

  • 34% of HR managers reported that voluntary turnover at their organizations rose in 2011
  • 30% of employers said they lost top performers to other organizations in 2011
  • 43% said they are concerned about top talent leaving in 2012

Turnover costs range from 30% to 250% of a person’s annual salary, so it can get expensive in a hurry.  If top performers leave, the costs can be devastating.

Turnover costs can be broken down into two main categories:  recruiting and keeping non-performers too long.  Here is a breakdown of what to consider when calculating the true cost of your turnover.

Recruiting costs include:  advertisement, assessments, travel fees, resume review, phone screenings, interviewing time and preparation and the time you put into creating the profile of your ideal candidate.

The costs involved in keeping non-performers too long are:  monthly salary, benefits, manager time, administrative time, lost opportunities, and the negative impact on morale while people complain about the non-performer’s job performance.

In a recent Vistage CEO presentation in Dallas, I led the group through an experience where they had an opportunity to work the numbers on their turnover using a template specifically designed for this purpose.  One of the members in the group was feeling pretty good about her recruiting hard costs because her assessment tests were only $50 each and she never flew anyone in from out of town for interviews, so her numbers came in lower than my standard example.  Things were looking pretty good at that point, but by the time she was done crunching the numbers, the cost of keeping her sales guy who made $72K salary was upwards of $3 million.

The truth about the real cost of your turnover is that it’s not just the cost of replacing someone who leaves.  Turnover costs also include the people you are keeping because you are not confident that you have the systems and processes in place to find someone better, which stops you from letting go of the non-performer and getting going to fill the spot with a top performer.

Merit Gest is President and Founder of Merit-Based Development, a Denver based firm specializing in onboarding top talent.  She is one of a small handful of specialists in the world certified and trained in both Emotional Intelligence and Cultural Transformation Tools, giving her a unique perspective for hiring, onboarding and retaining top talent.

Reach Merit at 720-980-1286 or


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