It costs much more than you think when a star employee leaves your company. Find out the real cost to your organization.

When a top performer walks out the door, it’s a huge loss – for you, your team and the company. The losses are tangible and intangible.

Not only do you lose their unique skills, knowledge and energy they brought to the work you lose the customer (internal and external) and vendor relationships. It impacts the morale of your team. And it happens all too often in the today’s tight talent market

That’s bad news. The worse news is losing a stellar employee costs even more than you might think.

Any idea what replacing an employee really costs? Whatever you estimated, it’s probably too low. The cost of replacing a mid-level employee, according to research by SHRM (Society for Human Resource Management) is typically 150% of their annual salary. If your manager has an annual salary of $80,000, your replacement cost will be about $12,0000. For a more senior position at $150,000, you’re out $225,000. Yikes, how did that happen?

According to human resource organizations, replacing a mid-level employee can cost 150% of their annual salary and up to 400% of specialized, high-level employees.

Why is the replacement cost of a high performer so much? Here’s how it plays out for the $65,000 high performer:

1. The person leaves. There’s a gap – work is unfinished, customers left hanging, sales not closed, and projects left in midstream. Depending on their position, figure $20-25,000 of lost revenue or work left undone over two to eight months while you look for a qualified replacement.

2. Another of your staff – who has their own work to do- tries to step in and figure out the projects, manage the department or pick up the customer relationships. Their work limps along or stops until a replacement is found. That’s two jobs being done halfway. Another $15-20,000 of lost work hours, quality delivery on projects and potential sales.

3. Your HR department receives notice to start looking for a replacement. Figure $3-5,000 spent by human resources reviewing the job, placing the ad, scanning incoming applications, doing phone screening, setting up interviews and second interviews, making an offer, negotiation and onboarding your new hire, etc.

4. Time spent by more senior personnel interviewing four to five candidates once, maybe twice, along with lost opportunity cost. $5-10,000 depending on the position.

5. A new person is hired and arrives two months later (four to twelve months for a senior position). Figure the cost of work not done or half done during the interim – Lost opportunity costs $30-40,000.

6. It could take a year for your replacement to be as skillful on the job as the person they replaced. An additional $10-20,000.

7. Higher salary – your new hire may be making more than the person they replaced. $5,000.

The total – easily 150% of their annual salary.

That’s the tangible cost. There are also the intangibles. When a high performer leaves, there’s a negative impact on the rest of the team or department. People wonder why he or she left, perhaps with a bit of jealousy of their ‘new and improved’ position. As they say, the grass is always greener…

Lowered morale sets in, perhaps a bit of unrest, as your current staff start wondering whether it’s time for them to start looking as well.

If this scenario wears you out just reading it, consider this: It’s easier, and certainly more cost effective, to invest in keeping your best, as well as your solid, performers..The good news is there are many things you can do to retain your top talent, rather than seeing them leave for your competition.

Here are a few tips for engaging your employees and figuring out what it will take to keep them around. (For more information on Keeping Your Best and Brightest, see my blog post from xxx).

  1. Check in with your team members regularly.
  2. Meet with each of your staff (no, a staff meeting doesn’t count) regularly to check on progress, obstacles and just to find out how things are going.

  3. Ask what they enjoy most about work.
  4. Are there ways you can ensure they do what they do best at work? Find out what gets in the way of making more progress, sales or delivering great service.

  5. Build the relationship.
  6. Buy them a cup of coffee or have lunch together. If your staff feels unappreciated or thinks no one really cares, they are more likely to leave when the position presents itself.

  7. Provide development opportunities.
  8. Is there training or mentoring they need to improve performance and advance to the next level? Most people are interested in moving up so they can have more responsibility and be more productive.

    Granted, there will always be the occasional person who, when they depart, leaves to the benefit of everyone. But paying attention to the satisfaction and engagement of your solid and high performers will help your team and organization perform better – and save thousands of dollars!

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