Employee Recruiting Costs Versus Employee Retention

Recruiting Costs:

The costs of turnover are many. Direct costs include the paperwork necessary to separate former employees and exit interviews. The cost of recruiting new employees takes time and money; from advertising the open position to sifting through resumes and interviewing candidates, not to mention training; employee recruiting is tedious and expensive. In fact, the Society for Human Resource Management (SHRM) estimates that replacing a single employee costs roughly one and half times that employee's annual salary. Finding a suitable replacement can take anywhere from three to six months. Now consider that most people only give two week's notice and the indirect costs become painfully clear.

Indirect costs of turnover are lost understanding, slower productivity, missed opportunities and running behind schedule. This does not take into account the dip in morale that occurs when employees begin to leave. People of course occasionally leave a company for a variety of reasons. However, several employees leaving at once is a clear signal that something is very wrong. This is especially true of long-term employees who are in good standing with the company. The exit of a few people could turn into costly a mass exodus if the underlying problems are not corrected.

Retaining Employees:

What can be done to improve employee retention and avoid the strain of recruiting costs? There are numerous books and articles available on the subject, but one message is apparent in all of them. Basically, do not take your employees for granted. The recent recession has caused many employees to step up and take on more work for the same, or in some cases, less money. Many of them might have been happy to still have a job, but that feeling will not last forever. Studies have shown that employee dissatisfaction is increasing across numerous industries on a grand scale. If there is no work-life balance and no extra pay to compensate for the added hours, it is just a matter of time before employees simply burnout or become bitter. Fear of losing a job will not motivate people indefinitely, particularly when they may be able to find better pay or a less demanding work environment.

Those in leadership often assume high performing employees are happy and subsequently do not take the time to communicate with them. High performers are reliable and productive, which translates to content, right? The answer may be no. Communication is the key to every successful relationship, and business relationships are no different. Problem employees demand attention, but high performers need attention as well. Acknowledge and reward them for their hard work and loyalty. If you do not then a competitor might do it for you.

Anyone can talk to employees, but it takes effort to truly communicate with them. Communication requires building trust and encouraging honesty. Some employees fear retaliation if they address concerns and keep their opinions private. Create a culture of cooperation and lead by example. Listen carefully to the ideas of employees and treat them like individuals instead of cogs in a machine. Morale and productivity improve when employees trust their supervisors.

Be honest and share information with employees. Many leaders are uncomfortable sharing important business and financial information; however, truthfully presenting the facts can prevent panic. Considering the years of layoffs and business closures, employees who are left in the dark tend to fear for their futures. Silence could send them job hunting.

Valuing employees will increase employee retention. Invest in employees by training them and providing them with opportunities for advancement. No one wants to do the same thing forever. Companies would do well to try to advance from within whenever possible, and challenge employees to try new and innovative ideas. They might come up with some cost saving devices of their own.

Work-life balance is important, particularly to younger employees. According to different research, Generations X and Y place a high priority on work life balance. They are also less likely to demonstrate loyalty to a company, especially one that does not understand their personal values. Businesses need to be flexible and help employees find balance. Allow them to take time off without complaining about what an inconvenience it is. Understand that taking time to recharge will actually increase productivity. Employees who manage to balance their jobs and personal lives will prevent burnout, stay motivated and feel a greater connection to their employers.

There is no arguing with the fact that retaining current employees is more cost effective than recruiting new hires. Taking the time to invest in employees and make them feel appreciated may not seem like a dire business decision, but over time the money saved will outweigh the time spent.

For more information on how Bridge Capital can provide accelerated cash flow solutions for your business in the Suffolk and Nassau area of Long Island, NY;

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