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Article

The Incredible Cost of Turnover

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2023-01-17

In a study done by Deloitte, they found that by reducing unwanted turnover by
just 1%, it would save them $400,000,000 per year!

When I conduct my Entrepreneurial Leadership Workshop Series the
participants, to reinforce what they learn, work in cross functional teams on
critical Initiatives. One of the most common Initiatives they select to work on
is “Reducing Turnover”.

As part of their Initiative, they need to do a cost analysis of the financial impact of
turnover for their organization and put together a plan and goals to reduce that
turnover. What is very apparent is most companies highly underestimate the
actual cost of turnover.

We need to look at this minimally from three perspectives. The first cost is
financial. The second is emotional. The third is the impact on our
customers. Let’s start with the financial cost.

Deloitte did an internal study on turnover. They researched what the savings
would be if they just reduced unwanted turnover by 1% per year. Their study
showed the savings would be $400,000,000 per year. That’s not a
misprint. $400,000,000!
What does that really mean for your company? Deloitte certainly has more
employees than most, roughly 345,000 employees in 2021. That means if they
could reduce unwanted turnover by 3450 people the impact would be
$400,000,000.

Let’s say the ratios hold for a smaller company. From what I’ve seen, I think in
many cases they do. Let’s say you reduce your unwanted turnover by 34 people or
1% of Deloitte’s goal. Extrapolated, that means the impact to your company would
be a savings of $4,000,000 per year. Yet we frequently focus on other issues when
turnover reduction may be the greatest cost saving opportunity your company
has.

Let’s talk about the emotional cost to your team. As you know, turnover creates
significant stress. What are some of the stressors?

  • Overtime your people have to work due to staff shortage causing work/life
    balance issues, physical and emotional stress, increased injuries and
    reduced production.
  • The stress of having to hit production numbers despite being short staffed
    or working with staff with limited training.
  • The loss of their friends and coworkers who they got to see each day.
  • Mistakes that are made because people are tired, frustrated and
    inexperienced or not fully trained.
  • Demands on HR to focus on replacing those lost as opposed to spending
    time on programs that can benefit your team and your company.

And last, and definitely not least is the impact to your customers. When you look
at the risk of quality diminishing, lead times not being met, you’re your customer’s
contacts and relationships within your organization changing, it puts your
relationships with your customers at risk.

My Entrepreneurial Leadership Workshop Series not only trains your people on
how to be great leaders, they will work on Initiatives like Reducing
Turnover and many others.

Our goal is to help make significant improvements to benefit your company,
your people and your customers.

Please also visit my website at www.michaeljlevin.com.

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