The Invisible Employee: Using Carrots to See the Hidden Potential in Everyone, Second Edition

2.2. TURNOVER IS COSTLY

The thing about turnover is that it is expensive. Really expensive. More expensive than most supervisors understand.

In fact, turnover is by far the largest uncalculated expense in the corporate world.

According to William Bliss^[], president of Bliss & Associates, a consulting firm based in Wayne, New Jersey, that provides advice for improving organizational performance, most companies take only a superficial look at turnover.

"Management assumes that it will cost maybe $5,000 to $6,000 to replace someone. But we have documented that it's actually at 150 percent of the employee's annual compensation," Bliss says, citing as an example the fact that it often costs an astonishing $75,000 to replace an employee earning $50,000.

Those are the kinds of figures that CEOs and CFOs start paying attention to.

These calculations take into account advertising costs, temporary replacement costs or overtime costs while the job is vacant, lost opportunity costs, search firm fees, relocation costs, time to interview, time to orient new hires, and time to train the new person. However, they don't and can't take into account the loss of valuable knowledge and experience, customer service disruption, loss of client knowledge, lost sales costs, emotional costs, loss of morale, burnout/absenteeism among remaining employees, loss of experience, lack of continuity . . . and the list goes on.

Now, here's a macro view of this problem that we've never seen printed before: In the ...