By MARGARET KIOKO

Results from Deloitte’s Best Company To Work For survey has shown that one of the key reasons employees voluntarily leave an organisation is not the company or the work, but the immediate manager.

This places accountability for employee retention firmly in the hands of the managers in our organisations.

Understanding why employees stay with an organisation is just as important as grasping why they choose to leave.

SEASONED EMPLOYEE

Few human resource professionals know that the cost of replacing one employee equals one to three times their annual salary and total benefits, plus the additional cost of lost revenue that the seasoned employee would likely have generated.

But that is not all.

Tougher to measure are the hidden costs associated with staff turnover, which most companies do not calculate.

Firms fail to calculate the hidden, indirect opportunity costs that impact both directly and indirectly on the bottom line.

What are the costs you should be factoring in to determine the real cost of employee turnover to your organisation?

Direct costs to fill a vacant position include sourcing costs, advertising, résumé screening, interviews, background checks and assessments costs. Then there is the on-boarding and orientation costs, training costs, and the cost to temporarily cover an employee’s duties, such as overtime for other staff or temporary staffing wages.

Indirect costs include conducting the exit interview and the administration cost to process a resigning employee. There is also the cost of lost knowledge, skills and contacts that the person leaving is taking with them out your door.

An employer should also worry about the cost of the manager’s time in understanding the work that remains and how to cover it until a replacement is found; the cost of the hiring manager’s time; and the reduced productivity of the staff/team who are “covering” a vacant position.

The firm also has to bear the cost of losing customers that the employee is going to take with them, or the amount it will cost you to retain the customers of a salesperson or customer service representative who leaves.

DECREASED CUSTOMER SATISFACTION

After an employee leaves, there will be decreased customer satisfaction and errors. A new employee has to be trained, hence there will be low productivity for a while — the experienced workers will be overtaxed to cover for the new employee. 

How should employers deal with this?

It is important for them to shift the paradigm of viewing employees as a “cost”.

Employees are in fact an “appreciating asset” — the longer they stay with an organisation the more valuable they become over time — they learn the systems, products, services and how to work optimally within the organisation to deliver the desired business results.

Research shows companies that effectively appreciate employee value enjoy a return on equity and assets more than triple that experienced by firms that do not.

When looking at Fortune’s 100 Best Companies to Work For, stock prices rose an average of 14 per cent per year from 1998 to 2005 for these firms, compared to 6 per cent for the overall market.

The Deloitte survey, which was launched last month, will explain what employees value, whether or not employers are meeting these expectations, and some of the key drivers of staff retention.

Employers that persist in viewing employees as a “cost” are creating their own barriers to realising a return on their most important assets — their employees. 

The writer is a human capital consultant with Deloitte East Africa. The views expressed here are the writer’s.

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