For the last three years, one employee voluntarily quit their job every second of every minute of every hour of every day of every month of every year.  Based on national averages, the replacement cost of these voluntary terminations is $9,000 per second. 

If you are an average reader, in the time it took you to read the first paragraph, today’s businesses spent over $200,000.  They didn’t invest it in better processes or procedures, improved recruiting policies, better performance management systems, or increased ethical conduct.  They spent the cash watching people go through the hiring/quitting revolving door!

But they don’t know what was spent, ’cause it never shows up on the company’s profit and loss statement.  No line item states “Cost of replacing labor”. Most companies don’t know what their turnover is, even fewer know the cost of replacing workers inside their organization.

This is your first task.  Work with your human resource staff to determine what the average turnover is.  Find out how long the average employee stays, and where the turnover spikes are in your organization.  Then calculate the actual cost of replacing a worker.  Because I am in a good mood, instead of trying to do this from scratch, I’m going to send you to the U.S. Department of Labor.   You can use their worksheet, it’s pretty complete. 

If you would rather not go through the process, figure that an hourly employee costs you 35% of their annual salary to replace, and a salary employee costs you 66% of their annual salary.  Both of these numbers are very conservative, but that’s the goal of determining these numbers.  If you are conservative in your assumptions, the number you come up with will be lower than what you are really spending.  None of those fancy folks in the C-Suite will put up much of a fight.

In Europe, the word “Turnover” can mean sales/profit.  Funny how the word has two completely different meanings on both sides of the Atlantic, but how intertwined they are.

Now, get “mathing”…