Losing a key employee from a company, big or small, can have positive and negative effects on a company’s future. The loss of an employee may be due to a variety of factors. It may be due to a family relocation, or that the employee decides to join another company that may have recruited them with a better opportunity. Or simply that an employee is unhappy and proactively applies to other jobs looking to make a transition.
Some companies will offer incentives or counter offers to try to keep the employee, but in the long run it’s usually not a great idea to do this (for the employer or the employee accepting the counter-offer). Watch for an upcoming article on this topic.
Many studies calculate the monetary cost of losing an employee at 1.5-2x of the departing person’s yearly salary. Here’s just a few costs associated with turnover:
- Cost of hiring a replacement (whether using internal HR or a specialized recruiting firm)
- Investment of onboarding and training the new employee
- Cost of errors (new employees are more likely to make costly errors)
- Cost of lost opportunity (due to client knowledge, or process knowledge that a new employee may not have right away to spot opportunities for continuous improvement or additional revenue streams).
And no matter how much the exiting employee spends conducting knowledge transfer and training of a new employee, losing a key employee also contributes to loss of information. When someone walks out the door, they are not just taking specific job knowledge but also institutional knowledge centered around company history, relationships, and experience in the organization that takes time to learn. These assets must be redeveloped by the new hire, over time and with job-specific training.
When a well-trained, well-liked employee resigns, regardless of their role, it can be a loss to the overall productivity of a company. Depending on whether the company has found a replacement before they leave of course plays a big factor. Interviewing candidates and finding the right person for the role can take a considerable amount of time.
Sometimes other employees within the company take over the departing employee’s tasks (i.e. they are shared among other team members in the interim). This can help with productivity; however, the new responsibilities may contribute to the team members slacking on their previous tasks associated with their roles.
However, losing a valuable employee can also present positive opportunities for a company.
Some examples may include:
- A person taking over the employee’s duties may have a different perspective that can provide improvement in areas not expected (a pair of fresh eyes on the same work can be a good thing)
- The person that replaces the employee may come with more experience in the same industry, possibly even from a competitor with new input that could make a real difference in the company’s future.
- During an exit interview, the company may learn things from the departing employee that may enable improvement in a key area that could positively affect not just a single role, but others as well, creating value not otherwise visible.
Although a valued employee’s loss can be painful, there can be upside for a company that is willing to remain open-minded about continuous improvement – not just for employee retention but also for company effectiveness and growth. Saying goodbye to a valued employee can be difficult but the opportunity to discover, inspect and rethink the role, can be equally as rewarding.
The key to any successful business is recognizing challenges and learning from them. Employee turnover is one of these, and while frustrating and costly, it can be a great opportunity for growth.
Have you found any negative or positive outcomes of turnover you can share?