…in pounds and pence
A resignation is never (or at least very rarely) a positive thing. At its most base level, this is an individual making a decision that your organisation is no longer the place they consider to be where they should be – for whatever reason that might be. As leaders, we have to learn to develop thick skins in order to not take every single one personally but there’s always an initial sting…and then comes the blow – what is this going to cost me?
It can be quite difficult to know the exact cost of losing an employee. This is because so many aspects are somewhat intangible. Sure, we can count how many hours of work time are involved in the recruitment process, the cost of advertising the role and the time spent onboarding your new recruit – most of us know what the rough hourly rate is for our people. But, what about the loss of productivity in your outgoing team member? Likelihood is that their last week isn’t going to be the most productive they’ve had as their mind will already be somewhere else.
Also, what about the emotional impact on the rest of the team? It’s easy to underestimate how much the loss of a well-liked colleague can affect your people. Let alone, potentially putting the question in their heads – “is there somewhere better for me too?”
So, if we can’t properly measure the ‘intangibles’ let’s focus on what we can measure – what is the cost of losing one of your people, in pounds and pence?
Studies show that the cost of an employee exit comes to around a third of their salary. If we were to base it on the average UK salary (£29k) then every departure is costing you the best part of £10k – one single resignation, £10,000.
So, what happens if we look at it over a whole year? The accepted average staff turnover rate in the UK stands at 15%. This obviously ranges from industry to industry (Sales and Marketing can be as high as 31% whereas Legal stands at around 12%).
I’m sure those of you better at maths than me have worked this out already but that means if your staff turnover sits around the national average the equation looks something like this:
What’s the magic number you’re left with? Was it higher or lower than you expected? And, that’s with an average turnover!
So, the (possibly slightly laboured) point I’m getting at is staff retention should be at the top of our priority lists. It’s hard enough recruiting to grow without spending time continually replacing.
So, how do we make them stay? How do we reduce those costly resignation letters coming in?
Many of the signposts point to working culture and whether or not your people feel included, that they belong and have a shared purpose when it comes to staff retention. We’ve written before about studies showing that over 30% of us are looking for a new job at any one time. On top of this, employees who say their company has a poor culture are another 24% more likely to be looking for a new job.
The facts are that if people feel like they belong somewhere then they are far less likely to be looking elsewhere.
If we want to start bringing that magic number down in increments of £10,000 then we’d do a lot worse than taking a look at the culture that exists within our organisations and asking whether or not our people truly feel like they belong. Otherwise, we might well find that number moving in the wrong direction.