How Much Does Turnover Cost?
As I’ve mentioned several times, employee turnover is expensive for an organization. Very expensive. To help you better understand the impact, here are a few eye-opening statistics I came across.
A few years ago, Coca-Cola estimated that replacing a minimum-wage employee cost $3,637 (New Ideas for Retaining Store-Level Employees, Coca-Cola Retailing Research Council, 2000). In 2009, a study from the University of Arizona estimated the cost of replacing a generalist in a hospital at $115,554, a specialist at $286,503, and a super-specialized surgeon at $587,125.
When you factor in all the costs—including the hidden ones (lost productivity, missed business opportunities, onboarding efforts, impact on employee morale, etc.)—you realize that turnover can lead to staggering expenses. Here’s an illustrative chart* that helps visualize these costs:
*Source: “Proving the Value of HR: How and Why to Measure ROI” by Jack J. Phillips and Patricia Pulliam Phillips
But what does this mean for a company with a turnover rate of around 11%? Let’s walk through an example to make it more concrete. Imagine a company with 1,000 employees and a turnover rate of 20%. Here’s a simplified breakdown of the organization into four job levels:
A 20% turnover rate would therefore cost this company $6,056,050 per year! don’t know about you, but those numbers make my head spin. Go ahead—calculate your organization’s annual turnover rate and the associated cost. Do it before heading off on vacation; you’ll need time to digest the information!
Remember: every 1% reduction in your turnover rate represents significant added value for your organization. Let’s take the same example but lower the turnover rate to 18%.
That’s still a $1,107,350 difference… That’s your added value—finding the program or launching the initiative that will help you lower your turnover rate by just 2%.
