The True Cost of Turnover Revealed!

Tim Sackett Good HR, HR, HR (& Life!) Advice, Influence, Leadership, Metrics, Negotiation, Seat at the Table, SHRM, The HR Profession, Tim Sackett, Trench HR

I know, I know -It’s about Damn time right! Finally, I have the answer!

First let me tell you, this is a hotly debated item around HR circles – where it is next to impossible to get anyone to agree on a formula or process for determining the cost of turnover for an individual within your organization.  Don’t get me wrong, people have tried – SHRM has their worksheet, HireCentrix has a nice model, etc. But no one can come to an agreement on what it really costs our organizations when we turnover an individual.  Are you ready?!?!

IT’s $75,000!

No, wait, I’m just kidding – it’s not $75,000, but you could probably use that arbitrary number and be just about as close as almost any actual formula that is out there. Ok, truly here it is:

Whatever your leadership is willing to agree to!

As HR Pros we spend so much time and energy working to come up with an “actual” number that we forget about the buy-in portion of why we are trying to do this to begin with.   The entire reason we (HR) care about the cost of turnover is because we want to use that number to get something – maybe a new software tool to help us reduce turnover, maybe better benefits to help us retain people longer, maybe it’s to show how much money we’ve saved the organization so we can get a big raise.  We need this number for a reason.

The problem with Cost of Turnover numbers is that they are always so high – no one in our organizations outside of HR ever believes they are “true.” “What do you mean it costs us $450,000 when we turnover an $185,000 Software Developer?! That can’t be true!”  The fact of the matter is, isn’t doesn’t matter what the number is.  If you go to leadership and you say – “Look, how much do you think it costs us when we turnover a key employee?” And then, they go – “Um, it’s probably around $50K.” At that point, you have a number to work with – $50,000 is still a ton of money to save by reducing turnover – who  cares if the true cost is closer to 10 times that amount.

One of the key components to being successful in an HR role, or really any leadership role, is to gain buy-in across a cross section of your organization.  Sometimes we get so caught up in being “right” – we forget that being “right” might not be the most important end result.  Moving your organizations HR agenda forward is the most important aspect of your role – if it means “compromising” the “true” cost of turnover to do that – so be it.  You and the organization will win in the end.

Remember the “why” when you are figuring Cost of Turnover in your organization, not the “how”.  Cost of Turnover numbers seem artificially inflated – don’t fall into the trap of thinking huge numbers will equal you getting what you want.  Many times huge “HR” numbers get you sent back to your desk because leadership isn’t willing to buy into those numbers.  Before putting in hours of time and building spreadsheets and graphs, spend some time with your decision makers to determine what they are willing to accept.  Also – HR Insider Tip – spend some time with Finance before sitting down with leadership – if your Finance Girl/Guy will back up your number – you will have much higher credibility and get to a decision quicker.

The fact is there is huge dollar savings by reducing turnover – don’t lose that by being so stuck on showing “true” numbers.