Originally written on November 16, 2014 8 minute read
The Cost of Letting the Good Ones Go
Every company is different, but one thing is certain; great employees require major investment. Recruiters will tell you that’s a no brainer, and it should be. However, time and time again, companies overlook the bottom-line cost when top talent leaves.
Let’s start with an example. You have a manager who’s been in the organization for 4 years, a top performer. Based off a variety of reasons, they put in their two weeks notice. What’s that really cost your business?
You can break this down into two categories; one hand are the benefits to the company if they stayed, the other hand are the costs of leaving. I’ll just breeze over the benefits, because the costs are the most overlooked and ignored. Here we go:
Benefits of Staying: Remember this is a top performer. Most often, they have stronger skills than someone who could replace them. If they stay, their skills keep growing and they challenge the rest of the organization to keep up. These are the ones who teach their skills to other co-workers, the reason why the best perk is the people.
When they stay their output keeps climbing. A number hard to measure, but we would expect them to keep producing great stuff that matters. And that’s disregarding the intangible and unforeseen stuff, because usually our best people surprise us with things we couldn’t imagine.
Costs of Leaving:
Costs vary by industry, but when we’re talking about top talent, initial costs can be upwards of 200% of their salary. *
How could that be? Consider our investment in them for a moment.
- Recruitment: We pay an entire department just to find these people. Every resume or interview, someone’s being paid to search. If we’re really finding top talent, for every 10 interviews we pay for, maybe we find 1 candidate.
- Training: Before the employee can fully contribute in their role, they need to be trained. Training varies depending on industry of course, but initially we expect the new hire to be asking more questions than producing. If we have formal training, someone is on the pay-role to conduct that too (another cost).
- Output: We sacrifice a lot when they start. Productivity and performance will most likely be low compared to our tenure folk. We know it takes time and we’re playing the waiting game before we see their potential. If they are only half as productive, we’re paying them 2x what they are producing (at first).
Here’s the Irony: We understand it takes time for people to develop, but when are they most likely to leave? It’s once they are finally developed and successful in their role. We’ve waited, invested in their growth, then they walk out the door. If the average attrition in your company is 20% YOY, that could mean upwards of 40% of your costs each year are just salvaging who you’ve lost. Woah.
There are plenty of ways to keep employees engaged and invested in you. Here are my top two:
#1 Challenge Them: Most top talent have one thing in common, they never stop learning or growing. Give them freedom, allow them to participate in discussions about the business. If they have an idea for something that can help the business, let them work on it. First make sure they are excelling at their core role though. If they are a top performer, they’ve earned the credibility to work on other ways to impact your bottom line.
#2 Recognize Them: Studies are beginning to glean that recognition is more motivating than money or rewards. Another ironic part to this, recognition takes almost no time. Working into weekly conversations that you are thankful for their effort goes a long way. As an anecdotal story, I was fortunate enough to be recognized by one of our directors a few months ago. That was almost more fulfilling than completing the project. It energized me to keep furthering some of those ideas. If you’re in a position of power, your greatest strength is recognition.
Sum it up; losing good people costs good money. Make sure your talent is challenged and recognized. Take time to ensure they understand your company’s mission and purpose. Otherwise it will end up costing you more than you bargained.