The Real Cost of Employee Turnover

January 14, 2019

Do you know what employee turnover in your firm is costing you?  There are all the intangible costs: low productivity, low morale and high stress.  But there is also a cost in dollars – real dollars – lots of dollars.

Before we look at the cost of turnover, let’s talk about the reasons for employee turnover.  One reason for high employee turnover is the recruitment and hiring process.  In fact, a Harvard University study found that 80% of employee turnover could be attributed to mistakes made in the hiring process.  80 PERCENT!  If you’re like most attorneys, hiring for experience above all else, you’re missing the mark.  What you should really be hiring for is competence and cultural fit.  If you have competent people who share your firm’s values and culture, then YOU can give them the experience you want them to have.  All too often, “experienced people” bring the wrong kind of experience. – Bad habits, sloppy work and other “experience” that may have been tolerated by other firms.  Not the kind of experience you want them to have.  See When hiring, experience matters. But not so much.

Another reason for turnover is the failure to train and develop your people.  Most lawyers expect new hires to “hit the ground running.”  Regardless of whether the new hire is an assistant, paralegal or associate, they are often expected to sit down and start producing on Day 1 with little or no training.  (C’mon you know that’s true.)  Combine poor hiring decisions with a lack of training, and a lack of appreciation for a job well done and you have a lethal mix for high employee turnover.   Yes, lack of appreciation and acknowledgement is a huge factor in employee turnover.  See Show me the love!

Why should you care about employee turnover?  Because high levels of turnover are costing your firm at every level.  In addition to the intangibles mentioned above, other intangibles include: poor client service and time spent recruiting and interviewing.  But the cost in dollars is staggering.   The Society for Human Resource Management estimates that the cost to replace entry-level employees (recruiting, interviewing, hiring, training, reduced productivity, etc.)  is 30-50% of their annual salary.  The cost to replace mid-level employees is 150% of their annual salary.  For specialized, high-level employees, the cost can be as high as 400%!  How many employees, from assistants to associates, have you replaced in the past few years?  Do that math. Then make a commitment to get better at hiring and developing your people.

One way to improve your hiring process is to use behavioral assessments such as DISC as part of the process.  Using DISC together with appropriate skills testing and behavioral interviewing can substantially increase your chances of success in the hiring process.  Start by hiring the right people, then provide the training and development they need to succeed.  Your people with thank you, and so will your bottom line.

Click here to learn more about DISC and to download a sample Success Insights DISC Assessment.

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