It’s Cheaper To Keep ‘Em

Losing a good employee is going to cost you

Compared to my mom and dad, who stayed with one employer for more than 20 years, I am practically a mercenary when it comes to jobs,” says George Thompson, a 38-year-old corporate attorney who works in the legal department of Sony Corp. of America in New York City. Employed with Sony for more than five years, Thompson knows he’s a valued employee, based on feedback and reviews: “My supervisor trusts me. I think well on my feet. I fully understand the issues surrounding business and I have the ability to offer creative solutions to the complex problems that often come up when negotiating large deals.”

So what should a manager recognize in an employee like Thompson to keep him engaged at work? “I’m looking for challenges. I don’t mean that every day should be a new challenge, but they should come along fairly frequently. When you are doing the same thing over and over again, you have a tendency to become restless. I want to be utilized to my fullest potential. And I certainly don’t want to feel like just a cog in a machine,” Thompson explains.

He’s not alone. Sharp, innovative professionals today place greater emphasis on the quality of their job experiences rather than longevity in a position. “The highest turnover rate is always with the youngest and newest people in the workforce,” says Gregory P. Smith, author of Here Today, Here Tomorrow: Transforming Your Workforce from High-Turnover to High-Retention (Dearborn Trade; $24.95). “They don’t have loyalty to a company; they have loyalty to themselves. And if they don’t feel the company is taking care of them, they’re going to leave.”

Research shows that approximately 22% of American workers voluntarily leave their jobs within the first year. But the search for new, quality employees has financial implications for the company. Turnover and replacement costs vary, but depending on salary level and job responsibilities, a private company loses, on average, more than $13,000 when a full-time employee leaves — up 6.8% from 2002, according to a recent Employment Policy Foundation study.

Smith calculates that replacing a worker who makes $48,000 a year could cost a company up to $40,000 in lost productivity, having to place recruitment ads, interview new candidates, train new employees, and pay overtime to other employees who now have to pick up the slack. The cost can be even greater if relocation fees are involved. (Learn how to calculate turnover costs at www.keep

ingthepeople.com.) “Most companies don’t even measure this. They just accept that people quit and need to be replaced,” says Smith. “But if you’re a good businessperson, you want to create an environment where people don’t leave. It’s cheaper to retain your people than to constantly replace them.”

Experts agree that there is often incongruence between what many managers believe and the reality of why employees leave. More than half of all exiting employees cite better pay and benefits as their reasons for moving on, however, “many times they’ve decided to leave because they don’t like the people, the boss,

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