An entirely fixable problem, voluntary turnover, is plaguing businesses in our nation. For new hires, the average company experiences 70% attrition in the first two years. In aggregate, companies lose over one trillion dollars annually to voluntary turnover.
While this number seems grotesquely over-inflated, it starts to make sense when you break down the actual cost of hiring an employee, which is 50-75% of their annual salary. Here’s how the costs break down for an individual organization:
A 500 person company may hire 20 people per year. Assuming an average starting salary of $65,000, excluding signing bonuses and benefits, the company would lose a minimum of $1,000,000 by the end of the employees’ second year due to voluntary turnover. Considering most 500 person companies make $50,000,000 annually, two percent of their revenue is offset by voluntary turnover. That’s a significant chunk of earnings!
Unfortunately, many companies consider voluntary turnover a necessary cost of doing business, but what if that was not the case? What if accepting responsibility for voluntary turnover by updating hiring and HR strategies could decrease attrition, increase net income, boost employee morale and even raise stock prices by 15%?
In Ambitionary's blog series, The Trillion Dollar Problem, we will delve into the complexities of organizational behavior, HR strategy and hiring, in short and sweet content designed to get you thinking. Our goal in this series is to take the guesswork and discomfort out of voluntary turnover and help you create strategies to improve retention, culture, and your bottom line.