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The value of 10.25% turnover reduction

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April 2, 2024By Paul Boatman, Ph.D

“Prevention is better than cure” - Desiderius Erasmus

In the war for talent, preventing employees from exiting the organization is a competitive advantage. For this reason, the most common goal organizations have when implementing prehire assessments is identifying hires who are more likely to stay. Infor Talent Science has analyzed hundreds of impact studies and determined that, on average, organizations experience a 10.25% decrease in turnover when using the system.

To put that 10.25% number in context, imagine a 200-pound person setting out to lose 10.25% of their body weight—that would be over 20 pounds! Or imagine receiving a 10.25% discount on the purchase of a vehicle. Your savings would likely be thousands of dollars. Likewise, organizations stand to benefit considerably from a 10.25% reduction in turnover.

Cost Savings

The most obvious benefit of reducing turnover is direct cost savings. Replacing employees can be quite costly, considering the expenses associated with recruitment and training of new employees, as well as hiring managers’ time that could have otherwise been spent differently. Because of this, SHRM estimates that replacement costs can range from at least $1,500 for hourly employees to 6-9 months’ salary for salaried employees.

However, the importance of retaining employees does not end at direct cost savings. In fact, identifying employees who are more likely to stay and then treating those employees in a way that maximizes their desire to do so has considerable benefits.

Productivity

When employees stay with a company for a longer period of time, they become more experienced and efficient at their jobs. This means that they are less likely to commit errors, less likely to require assistance from their manager or team members, better able to problem solve, and able to accomplish more work in a given amount of time.

Institutional Knowledge

Any time an employee leaves an organization, the knowledge they had gained during their employment leaves with them. This includes knowledge about the organization, its products or services, its processes and procedures, its cultural practices, its customers, and its competitors. This knowledge takes time for a person to build, and even the best systems for maintaining that knowledge can’t prevent the drop-off when an experienced employee leaves.

Customer Service

Customer service is impacted in two ways by turnover. One way is that any time a customer-facing employee leaves the organization, fewer employees are available to service customers. This can lead to longer wait times, rushed service, and overall reduced customer satisfaction.

The second way is that experienced employees are often better equipped to handle customer inquiries and provide excellent customer service. This is because they are more likely to have faced common customer requests and complaints in the past so will have an effective response or solution available.

Morale

High turnover can lead to low morale among remaining employees, as they may feel overworked and undervalued. When an employee quits, the work to be done stays the same, so the remaining employees are left with more work. This can lead to feelings of stress, helplessness, and unfairness.

Stress and loss of morale is not limited to the departed employee’s former team members. In addition to performing their regular duties, managers must help their remaining team navigate their added workload while also engaging in hiring and training a backfill. This can lead to burnout and ultimately retention risk for managers.

Promotion

When organizations aren’t deliberate about employee retention, they stand to lose their best employees. These are the employees who are not only successful in their current jobs but also show promise to promote to leadership roles. When these employees leave, the opportunity to promote someone who already has knowledge of the organization and its products or services leaves with them.

Conclusion

Taking all of these factors into account, it is clear that finding the right talent that will stay with your organization and taking the steps to retain them is about more than saving on replacement costs. In fact, the return on investment realized by Talent Science clients is often enough to cover the cost of Talent Science along with much of the rest of the HR budget. However, the true benefits of a 10.25% improvement in employee retention are incalculable.

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