Business Strategy Employee Retention Employee Turnover

Employee Turnover Pain: Consider These Tangible & Intangible Costs, Then Slow’er Down!

What makes it so hard to predict the real cost of employee turnover is the many intangible, and often untracked, costs associated. I have listed many here:

About a month ago, I asked a group of trusted professionals this question:

What is the #1 cost of which you struggle to control in your industry?

If you were one that responded, thank you for your valuable feedback.  One of the high-ticket responses was employee turnover.

I have reviewed many studies over the years. None encouraging. One thing you can be sure of in every study: Turnover cost is high — much higher than most realize, or calculate. Just one example is a study by the Center for American Progress (CAP), which found average costs to replace an employee to be:

  • 16 percent of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year). In their example, the cost to replace a $10/hour employee would be $3,328.
  • 20 percent of annual salary for midrange positions (earning $30,000 to $50,000 a year). For example, the cost to replace a $40k manager would be $8,000.
  • Up to 213 percent of annual salary for highly educated executive positions. For example, the cost to replace a $100k Executive would be $213,000.

What makes it so hard to predict the real cost of employee turnover is the many intangible, and often untracked, costs associated.  I have listed many here:

$ Ads $ Interviews (additional interview assistance) $ Recruiting, including paperwork packets if not online $ Off Location Meeting Rooms $ Screening (background investigations, drug screens, other verifications and testing) $ Employee Referral Bonuses $ Hiring Bonuses $ Orientation $ Training $ Retraining (learning curve) $ Uniforms, badges $ Overtime Costs, including taxes associated $ Travel Costs (for management assistance, recruiting or candidate travel) $ Relocation $ Severance (or settlement) $ Additional Taxes $ Benefits Continuation And now, the really- big costs: $$ Customer Service Issues / Loss of Business $$ Stock Value $$ Loss of Customer Relationships/ Trust $$ Legal Issues $$ Workman’s Compensation (fraud) $$ Unemployment Compensation (rates) $$ Management Burnout / Turnover (overworked) $$ Remaining Employee Morale/turnover (overworked) $$ Sales Losses (damaged reputation, increased bill rate to cover costs) $$ Time Management – Spending time on turnover instead of proactive measures $$$$$$$$$ And, YOUR reputation How many of those line items have you missed when calculating turnover? How many did I miss on my list? How truly big IS your turnover problem?

Let’s play jeopardy.  The answer is: Doing the same thing over and over and expecting different results.

(Yes, the QUESTION is: What is Einstein’s definition of INSANITY?)

So, what to do? Here are Five Keys to turning this around.

#1 Make the decision to make a difference. Be accountable; it starts with you! That means stop complaining and blaming. Start facing this big ugly expensive bear with hard decisions, and act.

#2 Hold Your Hiring Manager Accountable: One of the leading causes of employee turnover is a poor job match.

#3 And when hiring or promoting, remember, a great employee may not translate to a great leader. Hire the right person, for the right role. Then, develop your entire leadership team – yes, at every level.

#4 Create a high-performance, high-trust culture, and make sure it bleeds into every process and every person in your organization. If you believe you have a great culture, yet struggle to get excellent candidates (and) your turnover is out of control, get an outside look. Sometimes we are just too close to a situation to see (or face) the root cause (or causes) of the problem(s).

#5 Winx3. What is WIN x 3? My strategy for winning in the service industry. There are three critical parties in any service industry. Your customers, your employees, and your company. When making decisions, keep all three in mind. It’s not always easy, but think about what happens to the others when any one group suffers.


I know this is a lot to swallow, and we didn’t even get into the cost of employees who quit but stay. (Gallup found that actively disengaged employees cost the U.S. $450 billion to $550 billion per year; that number doesn’t even take into account the “not engaged” employees)

What say ye? Want to play jeopardy… again. Or, revisit your plan of action. Recalculate your tangible & intangible costs of turnover; revisit those 5 steps,  and; ACT. Don’t poke the bear that will just piss him off. Take’er’down!


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