Yesterday I commented that good hiring was the flip side of good retention, but is retention so very important? Is it really that expensive to replace someone? You bet it is! Is there actually ROI associated with retention? Absolutely!

Let’s start with the overt (obvious) costs. Ads and/or headhunters; value of time of the hiring team (hiring manager, peers, other managers, support people); everybody’s time preparing for the interview, interviewing, debriefing, discussing (possibly agonizing), and negotiating. Considering the hourly pay of a few managers and staff and we’re already talking substantial money.

Of course, where there’s overt, there’s usually convert (hidden). Covert costs really start running things up. Think: lost productivity—a lot of work didn’t get done because the time was being used to hire; lowered moral—the person who left had friends and colleagues who are sad the person is gone and concerned about who they’ll be working with next. The dynamics are worse if the person was laid off, in that event, besides sad and concerned add scared (Am I next?) to the mental mix. Finally, there’s the de facto truth that it takes anyplace from six months to one year for a person to become fully productive in any organization. The cost just climbed significantly (gee, this makes the overt costs look cheap)!

The cost to replace someone that I’ve heard bandied about over the years is two to six times the annual salary. But the real kicker is that that’s the good news!

Come back tomorrow for the really bad news along with proof of the ROI and an overview of what to do about it.

This entry was posted on Friday, March 17th, 2006 at 1:06 am and is filed under Business info, Culture, Hiring, Retention. You can follow any responses to this entry through the RSS 2.0 feed.
You can leave a response, or trackback from your own site.