What is the REAL cost of your employee attrition? (Part 2 of 2)

Overwhelmed with the Costs of Replacing Lost Employees?

In our previous post, we covered some of the costs associated with Employee Attrition. Today, we will discuss in more detail some of these costs:

  1. Recruitment Costs
  2. Training Costs
  3. Lost Productivity Costs
  4. New Hire Costs
  5. Lost Sales Costs

Recruitment Costs

  1. The cost of advertisements (from a $200.00 classified to a $5,000.00 or more display advertisement); agency costs at 20 – 30% of annual compensation; employee referral costs of $500.00 – $2,000.00 or more; internet posting costs of $300.00 – $500.00 per listing. Talk to your Staffing Team and determine what costs are being incurred to hire your open positions.
  2. The cost of the recruiter’s time to understand the position requirements, develop and implement a sourcing strategy, review candidates backgrounds, prepare for interviews, conduct interviews, prepare candidate assessments, conduct reference checks, make the employment offer and notify unsuccessful candidates. This can range from a minimum of 30 hours to over 100 hours per position. Now, what’s the cost of the internal or external recruiter fulfilling these roles for you?
  3. Calculate the cost of a recruiter’s assistant who will spend 20 or more hours in basic level review of resumes, developing candidate interview schedules and making any travel arrangements for out of town candidates. How much more are you spending for these tasks? If no assistant is involved, then how much more time is the recruiter spending on these tasks?
  4. The cost of the hiring department (immediate supervisor, next level manager, peers and other people on the selection list) time to review and explain position requirements, review candidates background, conduct interviews, discuss their assessments and select a finalist. Also include their time to do their own sourcing of candidates from networks, contacts and other referrals. This can take upwards of 100 hours of total time for a single position.
  5. Calculate the administrative cost of handling, processing and responding to the average number of resumes considered for each opening at $1.50 per resume. How many resumes are they receiving for the open positions?
  6. Calculate the number of hours spent by the internal recruiter interviewing internal candidates along with the cost of those internal candidates to be away from their jobs while interviewing. Many contact centers use front line supervisors to interview candidates. What is the cost of this practice?
  7. Calculate the cost of drug screens, educational and criminal background checks and other reference checks, especially if these tasks are outsourced. Don’t forget to calculate the number of times these are done per open position as some companies conduct this process for the final 2 or 3 candidates. If you are hiring a class of 20 new hires, then your costs are significantly higher. What’s the total cost per employee?
  8. Calculate the cost of the various candidate pre-employment tests to help assess a candidates’ skills, abilities, aptitude, attitude, values and behaviors. If you aren’t using a pre-evaluation test, then you are probably spending more money on interviews or overall attrition. Is your employee evaluation EEOC certified? What would be the cost of a lawsuit to defend your evaluation if it’s not EEOC certified? Significant amounts of money have been spent defending these types of lawsuits.

Training Costs

  1. Calculate the cost of orientation in terms of the new person’s salary and the cost of the person who conducts the orientation. Also include the cost of orientation materials.
  2. Calculate the cost of departmental training as the actual development and delivery cost plus the cost of the salary of the new employee. Note that the cost will be significantly higher for some positions such as sales representatives and call center agents who require 4 – 6 weeks or more of classroom training.
  3. Calculate the cost of the person(s) who conduct the training.
  4. Calculate the cost of various training materials needed including company or product manuals, computer or other technology equipment used in the delivery of training.
  5. Calculate the cost of supervisory time spent in assigning, explaining and reviewing work assignments and output. This represents lost productivity of the supervisor. Consider the amount of time spent at 7 hours per week for at least 8 weeks.

Lost Productivity

As the new employee is learning the new job, the company policies and practices, etc. they are not fully productive. Use the following guidelines to calculate the cost of this lost productivity:

  1. Upon completion of whatever training is provided, the employee is contributing at a 25% productivity level for the first 2 – 4 weeks. The cost therefore is 75% of the new employees full salary during that time period.
  2. During weeks 5 – 12, the employee is contributing at a 50% productivity level. The cost is therefore 50% of full salary during that time period.
  3. During weeks 13 – 20, the employee is contributing at a 75% productivity level. The cost is therefore 25% of full salary during that time period.
  4. Calculate the cost of coworkers and supervisory lost productivity due to their time spent on bringing the new employee “up to speed.”
  5. Calculate the cost of mistakes the new employee makes during this elongated indoctrination period.
  6. Calculate the cost of lost department productivity caused by a departing member of management who is no longer available to guide and direct the remaining staff.
  7. Calculate the impact cost on the completion or delivery of a critical project where the departing employee is a key participant.
  8. Calculate the cost of reduced productivity of a manager or director who looses a key staff member, such as an assistant, who handled a great deal of routine, administrative tasks that the manager will now have to handle.

Administrative New Hire Costs

  1. Calculate the cost of bring the new person on board including the cost to put the person on the payroll, establish computer and security passwords and identification cards, business cards, internal and external publicity announcements, telephone hookups, cost of establishing email accounts, costs of establishing credit card accounts, or leasing other equipment such as cell phones, automobiles, pagers.
  2. Calculate the cost of a manager’s time spent developing trust and building confidence in the new employee’s work.

Lost Sales Costs

  1. For sales staff, divide the budgeted revenue per sales territory into weekly amounts and multiply that amount for each week the territory is vacant, including training time. Also use the lost productivity calculations above to calculate the lost sales until the sales representative is fully productive. Can also be used for telemarketing and inside sales representatives.
  2. For non-sales staff, calculate the revenue per employee by dividing total company revenue by the average number of employees in a given year. Whether an employee contributes directly or indirectly to the generation of revenue, their purpose is to provide some defined set of responsibilities that are necessary to the generation of revenue. Calculate the lost revenue by multiplying the number of weeks the position is vacant by the average weekly revenue per employee.

Summary

Calculating and adding all these costs, given our original example of the $50,000 person can easily reach $75,000 to replace them. As you can see, the costs and impact associated with an employee who leaves the company can be quite significant. This is not to say that all turnover should be eliminated. However, given the high cost and impact on running a business, a well thought-out program designed to retain employees may easily pay for itself in a very short period of time.

If your contact center or organization is struggling with employee attrition, then we have a diagnostic tool to help you understand why attrition is negatively impacting your organization. Contact us about using D.I.AL.O.G. to help you. Here’s a link to more information about the D.I.AL.O.G. tool:

http://www.inspiredperformancesolutions.com/assessments.html

You may reach us at:

Dave.Gregory@inspiredperformancesolutions.com

or

Lee.Pemberton@inspiredperformancesolutions.com

 

 

 

 

 

Advertisements

Tags: , , , , , , , , , ,

About davegregory

Dave Gregory, Chief Learning Officer for Inspired Performance Solutions, Inc., believes in the power of the strengths movement. During the past 15 years, Dave managed the Learning Solutions activities of Qwest’s Mass Markets Group, including call centers, retail stores, indirect retail, e-business, collections, alternative markets and the small business teams. Mr. Gregory graduated from Creighton University’s School of Law in 1993 earning a Juris Doctor. He completed his undergraduate education receiving a BSBA with an emphasis in marketing from the University of Nebraska-Omaha in 1990. Mr. Gregory has more than 25 years experience in business development and consulting.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: