“Our original review of the data in 2011 showed an average turnover rate of 17 percent among respondents, and our latest 2014 review is showing a rate of 21 percent,” says Witt.
“Next, we ask respondents to identify the number of employees in their organization along with an estimate of the average salary overall. This is a rough measurement, but it serves the calculator’s purpose of generating a number to begin a discussion.”
In all cases, the same formula is used to calculate the costs: Current Voluntary Turnover x Average Salary x 50% Replacement Cost = Annual Cost of Turnover.
Note that the Blanchard model utilizes a 50 percent replacement cost to generate turnover costs, which Witt believes is a reasonable place to start.
“There are many models for calculating the cost of turnover in an organization. I have seen conservative estimates go from 30 percent of annual salary to replace an entry level employee with fewer skills to as much as 250 percent of annual salary to replace someone in a highly specialized position that may be more difficult to fill.”
In looking at ways organizations can lower their turnover costs, Witt points to research by PricewaterhouseCoopers and also that highlighted in the book The 7 Hidden Reasons Employees Leave by Leigh Branham.1
Of the top ten reasons identified by Branham, Witt believes five are within the control of managers:
- Lack of respect or support from supervisor (13%)
- Supervisor’s lack of leadership skills (9%)
- Poor employee relations with supervisor (4%)
- Lack of recognition (4%)
- Supervisor incompetence (2%)
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