Published September 18, 2000

Employee Turn Over Rates & Employee Retention Statistics

If you've ever worked for a company where your colleagues kept coming and going, you know how disruptive high employee turnover can be. In addition to ruining the sense of workplace community, a recent study reveals that high turnover also can be very, very costly.

High turnover has reduced earnings and stock prices by an average of 38 percent in four industries where it is common, according to research by Sibson & Company, a talent management company. These industries are specialty retailing, call centers, high-tech and fast food. According to the survey, turnover rates range from 31 percent annually in call centers - the places that answer your 800-number calls when you order merchandise - to 123 percent a year in fast food. Sibson estimates it costs companies in these industries more than $75 billion a year just to replace the 6.5 million employees who leave.

And direct employee replacement costs are just the tip of the iceberg, says Seymour Burchman, a principal of the firm. Employee turnover has a significant impact on revenue at these companies because they find it hard to keep current customers, attract new ones, increase productivity or pursue growth opportunities. And the rest of the economy is not immune to these costs, either. Overall, Burchman notes, among U.S. companies as a whole, turnover has climbed to 15 percent a year.

Working to cut turnover isn't just an effort to keep low-paid employees happy, he says. The costs are immense. Consider this:

* To recoup the cost of losing just one crew member, a fast food restaurant must sell 7,613 children's combo meals at $2.50 each.

* A typical information technology company incurs a cost of $34,100 for each lost worker.

* To recoup the cost of losing just one sales clerk, a clothing store must sell almost 3,000 pairs of khakis at $35.

Reducing turnover can push a company's stock price higher, too. At one call center company, reducing turnover by half would increase profits so significantly that the price of the company's stock would rise by more than 30 percent.

Each industry has different tools at its disposal to cut turnover, Burchman says. Among stockbrokers, his company found, hiring the right people in the first place is more important than any kind of incentive firms could pay to keep brokers.

At UPS, the giant package delivery company, truck driver turnover was cut when some of the responsibility for loading and unloading trucks was shifted to loading dockworkers.

"In most companies, turnover realistically can be reduced by as much as 50 percent, even if some managers don't believe it can be accomplished," said Jim Kochanski, another principal of the firm. He said that managers should be creative in thinking of ways to attack the problem. One call center company, for example, put trailers containing what in effect were portable call centers on college campuses so that students working part time didn't need a car to get to their jobs.

Let's hope more companies are that creative.

Article - Copyright 2000 Evan Cooper. Syndicated by ParadigmTSA