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Friday, Feb 23, 2024

TURNOVER — Minimizing Economic Loss From Employee Turnover

Every business knows that staff turnover is one of the greatest profit drains to a company.

When a desk sits empty because an employee leaves and a replacement has not yet been hired, productivity of an entire department is affected. When new team members come on board, they need time to learn their new job.

The higher level the position is, the longer the learning curve, according to human resources experts.

But the worst possible scenario is when employees leave a company for a competitor , or start their own competing business.

When employees resign from their jobs, it costs the employer money. There’s just no two ways about it. Retaining quality staff is the best option for companies.

Realistically, though, there are always some employees that will leave for greener pastures. Even the best companies lose a certain number of staff members.

So, how can a business minimize the economic impact of staff turnover?

Create company loyalty long before an employee is interviewing for other jobs. People can choose to leave a position and still feel a strong connection with the people they currently work for. It is when they feel negatively about their workplace that problems are most likely to arise.

When employees feel they are taken advantage of, or taken for granted, they are apt to leave disgruntled and help a company’s competitors. Be sure workers know they are valued for their contributions.

Along a similar vein, it is important that employees know the history of the company and personal mission of its founders. If they feel connected to the human side of the company, it is difficult to betray it.

I heard about a man who begins each of his company’s annual meetings with a video production that tells the story of his family business.

A few board members have ribbed him about the sentimental tone of the piece, saying it is like an ad for Hallmark cards, but he keeps airing it nonetheless. Why?

The film certainly isn’t Academy Award-winning material, but it clearly establishes a connection with employees. In 38 years in business, this company has never lost an employee to a competitor.

There is a reason that only a few high-level people at KFC know the colonel’s secret recipe for the famous fast food. It is the defining ingredient that differentiates KFC from its competitors. If everyone else in the restaurant business knew the recipe, there would be no reason for consumers to seek out the KFC brand.

Every business has its secret ingredients for success. Some are so unique that a business can legally protect a concept. But most are up for grabs.

Limit opportunities for idea poaching by keeping trade secrets under lock and key.

Employees who are privy to the information should be required to sign confidentiality agreements. These are legal and binding.

Many employers ask new hires to sign non-competition contracts believing they will prevent people from joining or starting their own similar businesses after they leave.

In reality, these rarely are worth the paper they’re written on. These contracts may act as a deterrent, and employers can use them to appeal to a worker’s sense of fairness. But legally they are typically meaningless.

It’s best to create an environment where employees choose not to work for competitors.

Since it usually takes longer than two weeks to find a suitable replacement for a position, encourage employees to give more notice when they resign.

I heard about a company that provides economic incentives for different levels of resignation notice. When an employee gives two weeks notice, he or she receives no compensation. If people give one month notice, they receive a bonus equal to one week’s salary. If they agree to give six weeks notice and participate in the hiring and training process, the resigning employee receives a bonus equal to one month salary.

That sounds like a lot of money, but the company’s rationale is solid.

First, the company buys time to find the right candidate. Second, it is more likely to select the best replacement when the person who currently holds the job is there to explain the day-to-day challenges. Third, who better to train a new person than the one who is currently , and competently , performing the job duties? These bonuses are investments rather than expenses.

Staff turnover costs money. This is just a fact of business. But it doesn’t have to be the economic hemorrhaging that most companies experience. With a solid human resources plan that proactively addresses turnover issues, companies can minimize loss from inevitable job turnover.

Wofford is a partner at the law offices of Duckor, Spralding & Metzger, a San Diego-based firm specializing in employment law.


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