THE COST OF EMPLOYEE TURNOVER

The employee turnover creates critical issues to the organization that resulting incur additional costs that were not budgeted. These costs are not only involved in recruitment, selection and trainings. The turnover of employees generates many more costs to organizations and this article tries to brief some of those costs as a result of employee turnover.

 

Recruitment Cost

According to Taylor (2002), recruitment is the process which involve in identifying and attracting talents who likes to work for the company. The recruitment process consists with two main components. Initially to identify talents the organization needs to understand the knowledge, skills and competencies that the candidates should have to perform the duties of the job in vacant. Then it is important to understand the source of candidate which means that where the company can find such talents in the market, weather from a competitor, from the labor market. Thus, this process needs a lot of time and efforts from the HR department and company has to pay salaries for the employees who are involve on this process. This need directly the time and the efforts which can be utilized for other job function of the organization and indirectly its cost since the company has to pay salaries for those employees.

The next step in recruitment is attracting talents to the organization. Once the source of the employees has decided it is important to communicate to those possible employees to attract them to apply for the existing job vacancies. This communication will be through Advertising or through recruitment companies. If the source is from advertising this involve lot of further efforts to plan the advertisement and planning the media, and buying the media. Further the company has to bear a certain amount of money for the advertising agencies as well as the media organizations. Further if the organization has selected to recruit through a recruitment company still the company has to make a payment for them though it does not involve more time and efforts.

Thus, it is clear that the recruitment involves with costs such as time, efforts, and money which the organization has to bear directly.

 

Selection Cost

Mathis and Jackson (2008), have stated that selection as the process of identifying and choosing the best talent to perform the duties of the organisation from the pool of talents that identified through the recruitment process.

It is important the organization to process the applications of all the applicants and to have an initial selection to decide on who will be select for the further selection process based on the qualifications and experience. Then the company has to choose selection method of the employees which can be a combination of selection methods such as tests and interviews. Then the organization has to inform the candidates to participate for the selection process and then to conduct the selection based on the identified selection method. Finally, it is important to get the references from the referees as well. 

The said process involves a lot of time and the efforts from the organization than the recruitment process and still involve direct costs such as telephone and postal charges though comparatively low compared with the recruitment process.

 

Training and Development Cost

Renolds, Caley, and Mason (2002), have stated that training as the process of establishing knowledge and skills that are required to perform duties to an employee. Further at the on boarding it is important for the organization to give an understanding about the organization culture which such an understanding is very important for employees to adjust for the new environment and perform their tasks. The organization needs to understand knowledge gaps and the skill gaps of the employees and create training programmes to bridge those gaps. Further it is important to select the best facilitator to conduct such training either from in house or outsourcing which involves cost. Further the time that the employees are spend at training programmes involves the opportunity cost of time which consider that this will be productive in future performances. Thus, this seems that the process needs efforts and time to find competency gaps and need money to hire facilitators.

 

Loss of Talents and Productivity

Employee attrition not only involve with time, efforts, and money to spend to recruit, select and on-board new talents. But involve in further indirect costs such as losing the productivity of the organization.

The newly selected employee will take a certain amount of time to adjust for the new environment and to perform in his duties. Further based on a research Phillips (1990), has found that a newly recruit executive take 12.5 months to comfortable with the new working environment and 13.5 months to reach to his highest efficiency. Thus, this indicates that for such a long time the newly recruited employees will not be able to produce the best results for a considerable time period and the organization will not perform in its highest potential during this period which result to decrease in productivity.

 

Possibility to Loosing Clients

During this less productivity period the existing customers will not get the same services that they got from the organization which result a failure in delivering the customer satisfaction. Thus, the customers will be unsatisfied since they also used to compare the service level that they got from the organization. On the other hand, the employees who leave the company will try to attract the customer to their new organization with the use of their relationships with the customer where the customer feel happy with the competitor, though the service provider is new but happy with the relationship. This will result in losing the customer base of the organization to its competitor.

 

Excessive Workload on Others

Due to the attrition the existing employees of the organization have to take care of the work of the employees who left from the organization. Even after the recruitment of the new employee they have to help him till he will be confident on the job. Thus, this will create a situation where the workload of the existing employees will increase and this result loss of moral of the existing employees which will affect negatively on the productivity of the employees. Such a less productivity will result many damages such as loosing clients and forcing the existing employees to leave the organization due to low satisfaction.

 

References

Mathis, R.L. & Jackson, J.H. (2008), Human Resource Management, 12^th Edition, USA; South-Western.

Phillips, J.D., (1990), The Price Tag of Turnover, Personnel Journal, 69(12), 58-61.

Renolds, J., Caley, L., & Mason, R. (2002), How Do People Learn, London; CIPM.

Taylor, S. (2002), People Resourcing, London; CIPD.