On July 18, ERE.net featured “How to Really Calculate the Cost of Employee Turnover,” which highlighted a few key metrics that factor into the real cost of turnover. The opening statement stands out:
Employee turnover costs are often described with generic numbers such as “$X,000.00 per employee” or “X percent of annual salary.”
Turnover cost, specifically “X percent of annual salary” — which can also be translated to $$, is one of the most effective KPIs to use in achieving the real measure. They tell a much deeper story than the “generic” term implies, and they are much easier to use. In 2010, while doing research at Aberdeen Group, we found that most companies use replacement costs to measure the cost of turnover. After taking out some outliers in high-volume/low-skill environments and some very high-level C-suite and management consultants, the analysis showed on average that using 86 percent of starting salary is a very fair estimate of the cost of turnover. NOTE: One of the research notes where this finding was published can be found here (page 2).
Here are four reasons why this metric is effective and not as generic as one might think: keep reading…