Paying employees to stay doesn’t necessarily retain top talent–an assumption many leaders still believe to be effective. Even with traditional business models and management styles quickly eroding alongside digital transformation. Losing your best people means losing your reliable winners, your constant innovators and your most effective problem solvers.
In the US, the cost of turnover is steep. Here's how it breaks down for an individual organization:
The annual overall turnover rate in the U.S. in 2017 was 26.3%, based on the Bureau of Labor Statistics.
The cost of replacing an individual employee can range from one-half to two times the employee's annual salary -- and that's a conservative estimate.
So, a 100-person organization that provides an average salary of $50,000 could have turnover and replacement costs of approximately $660,000 to $2.6 million per year.al
Here are the top five predictors of turnover (Gallup):
The immediate manager. If employees report that their manager's expectations are unclear; or that their manager provides inadequate equipment, materials, or resources; or that opportunities for progress and development are few and far between, watch out: Trouble is on the way.
Poor fit to the job. Another sign of trouble appears when employees perceive that they don't have opportunities to do what they do best every day.
Coworkers not committed to quality. Watch for employees who perceive that their coworkers are not committed to a high standard of work.
Pay and benefits. Engaged employees are far more likely to perceive that they are paid appropriately for the work they do (43%), compared to employees who are disengaged (15%) or actively disengaged (13%). And pay and benefits become a big issue if employees feel that their coworkers aren't committed to quality; they may feel entitled to extra compensation to make up the difference or to make them feel like they are truly valued by their employer.
Connection to the organization or to senior management. Another key sign that turnover may be looming appears when employees don't feel a connection to the organization's mission or purpose or its leadership.
A widely held assumption is that money alone can curb turnover. According to extensive research by Gallup, this assumption is untrue. In fact, At least 75% of the reasons for voluntary turnover can be influenced by managers.
There are three distinct areas of focus to ensure employees are engaged at the managerial level - a first line of defense against high organizational churn:
Employees don’t cite lack of pay as a reason for leaving when they perceive their coworkers to be pulling their weight equally. "Inequity in effort likely drives greater emphasis on pay as a determinant of perceived value," says Harter, who coauthored 12: The Elements of Great Managing.
Creating a workplace culture that is inclusive, transparent, and values recognition for the contributions by its employees who work toward a shared goal can help minimize the impact of perceived workload inequity.