The impact of turnover has received considerable attention by senior management, human resources professionals, and industrial psychologists. It has proven to be one of the most costly and seemingly intractable human resource challenges confronting organizations. This paper provides a summary of information, abstracted from published research, on the costs of turnover, factors contributing to its magnitude in organizations, and proposed remedies.
Costs of TurnoverAnalyses of the costs associated with turnover yield surprisingly high estimates. The high cost of losing key employees has long been recognized. However, it is important for organizations to understand that general turnover rates in the workforce can also have a serious impact on an organization's profitability, and even survival. There are a number of costs incurred as a result of employee turnover. These costs are derived from a number of different sources, a few of which are listed below.
Recruitment of replacements, including administrative expenses, advertising, screening and interviewing, and services associated with selection, such as security checks, processing of references, and, possibly, psychological testing.
Administrative hiring costs.
Lost productivity associated with the interim period before a replacement can be placed on the job.
Lost productivity due to the time required for a new worker to get up to speed on the job.
Lost productivity associated with the time that coworkers must spend away from their work to help a new worker.
Costs of training, including supervisory and coworker time spent in formal training, as well as the time that the worker in training must spend off the job.
Costs associated with the period prior to voluntary termination when workers tend to be less productive.
In some cases costs associated with the communication of proprietary trade secrets, procedures, and skills to competitive organizations.