16 Aug The Intriguing Link Between Stay Interviews and Turnover’s Cost
Let’s assume we all agree that Stay Interviews are an ideal solution to improve employee retention. The value of Stay Interviews, then, can only be measured by how many dollars are saved when turnover falls.
Our clients typically see a retention improvement of 20% or more in the first year after we help them implement Stay Interviews. The true value of this savings is based on which positions improve and the dollars saved for that job. So here’s a way to measure those savings.
Turnover’s costs must include two sections of data, (1) the cost to hire and (2) the cost of lost productivity.The cost to hire is the easier of these two calculations and can be determined by costing the value of recruiting, hiring, onboarding, training, and providing equipment for each individual new hire. The cost of lost productivity, though, requires a little more fresh thinking and a little more math.
The calculation for lost productivity makes these valid assumptions:
1.The sum of all employees’ work equals the sum of all revenues
2. Each individual employee’s proportionate contribution to these revenues is directly correlated to how much the company pays for that employee’s job
3. The first category for lost productivity has to do with how many workdays the job is open after the incumbent employee leaves and before a replacement employee is hired
4. And the second category for lost productivity has to do with the how many workdays the replacement
employee must work until she can do the job on her own without assistance…or said another way, the
So the formula for lost productivity is this:
(A x B ÷C) x D
+ (A x B ÷C) x E
= Lost productivity due to turnover if…
“A” is average employee’s annual contribution (annual revenue ÷ FTE)
“B” is targeted job’s value compared to all jobs (targeted job’s annual comp & ben ÷average employee’s
annual comp & ben)
“C” is 240 which is # workdays in a year
“D” is # workdays position stays open on average
“E” is 50% of the number of workdays until new hire reaches average productivity; 50% is applied because the new employee is contributing each day on an increasing scale until she reaches full productivity
Give this formula a road test for a high-turnover job and then add the cost of hire. Then multiply this cost by the total number of employees who will turnover in this job this year and share this cost with your executives.Now you’ll have a new weapon to gain their support to conduct Stay Interviews.
For more information about Automated Stay Interviews click HERE