Avoid the Five Costs of Unplanned Turnover Among Top New Hires

When my phone rings, there is often a very anxious business leader on the other end of the phone. They will sometimes start rattling off numbers, but usually the message is simple: “Turnover among our new employees is up. Help!”  These leaders are often desperate, and they’re right to be. Turnover is always costly, time-consuming, and stressful for everyone involved.

But turnover among new hires is extremely costly, for five reasons:

  1. Replacement costs. When you lose an employee, you will incur the costs of recruiting, on-boarding, and up-to-speed training for a replacement.
  2. Lost ROI. You will lose (often to your competitor) the recruiting, on-boarding, and up-to-speed training investment you have made in the departing employee. When you lose a relatively new employee, the loss of the training investment is exacerbated because employers spend the bulk of their training investment in the first stages of a new employee’s employment. And the sooner a new employee leaves after receiving that training investment, the less time the organization has had to reap a return on that investment.
  3. Disruption in work flow and relationships. When any employee leaves voluntarily, there is disruption in work flow and work relationships – internal to the team and externally. There is also usually an increased work burden on remaining employees. When a good employee leaves suddenly and/or not on good terms, the disruptions and increased work burdens are greater.
  4. Copycat departures. When good employees leave, sometimes this triggers other unplanned departures.
  5. Loss of bench-strength. The greater your turnover among good employees, the less robust is your bench-strength of potential home-grown talent for other positions throughout the organization and up the ranks.

Yes, high turnover is bad. But not all turnover is bad. That’s why my response to desperate business leaders facing high turnover is usually to ask three questions:

  • “Who is staying?”
  • “Who is going?”
  • and “Who is deciding?”

Your goal should not necessarily be to completely eliminate turnover. That’s never going to happen. Your goal should be to take control of the turnover. You want the high performers to stay and the low performers to go. The only way you make that happen is if you are the one deciding who stays and who goes.

Your goal should be to take control of the turnover.

Ask yourself: What happens when your new employees walk through the door on day one? How do you leverage those first days and weeks?

First, make sure you know exactly what happens with your new hires in the formal orientation, on-boarding, and up-to-speed training process. Most employers have only a minimal process for welcoming new employees and getting them up-to-speed. Obviously, some employers are better at this than others. Typically, employers provide a basic introduction to the mission and history of the organization (or not,) give basic facts and figures (or not,) have new employees meet some of the key players (or not,) receive a primer in the policies and paperwork (or not,) and maybe some of the rules and traditions (or not.)

Second, consider the inevitable hand-off to the manager that occurs once the official orientation program is complete. That’s where so much of the real on-boarding action is going to happen, and that’s exactly where the ball is so often dropped.

Don’t drop that ball.

Remember, in a free market, you get what you can negotiate. If there is a superstar new hire you definitely don’t want to lose, you want to pay them what you know they are worth – in both financial and nonfinancial rewards. As the manager, you have the discretion and resources to differentiate those superstars in the way they deserve to be recognized and rewarded. If every condition of employment – not just pay, but schedule, who works with whom, promotion prospects, training opportunities, time off – is on the table, your negotiating position as a manager is stronger, not weaker.

Providing more generous rewards and work conditions to reward and retain high performers is a workplace trend that is not going to reverse for the foreseeable future, regardless of fluctuations in the labor market.