With so many challenges facing businesses in this economy, core processes can easily take priority over employee training and development. However, research reveals that employers who fail to invest in the training and development of their workforce will end up paying much more in employee turnover costs, lost productivity, low morale, and instability in their ranks. Simply put, business leaders cannot afford to ignore employee training and development.

The Costs of Employee Turnovers

For instance, a recent CAP study found that the average costs to replace an employee are the following:

  • 16% of the annual salary for high-turnover, low-paying jobs earning under $30,000 per year.  For example, the cost to replace a $10/hr. worker would be approximately $3,328.00.
  • 20% of annual salary for mid-range positions (earning between $30,000-$50,000 per year).  The cost to replace a manager earning $40,000 is nearly $8000.00.
  • Up to 213% of the annual salary for highly educated executive positions.  Costs to replace a $100,000 executive can be as high as $213,000.

However, it is difficult to determine the true cost of employee turnover because there are many intangible and often untracked costs associated with employee turnover.  For instance, most employees surveyed after they left a position cited issues with their boss as their number one reason for leaving! This reveals that much of the problem with employee morale and turnover can be attributed to poor leadership practices within management. In addition, few companies are able to effectively track exit costs, recruiting costs, interviewing costs, lost business, orientation and training costs, and other administrative costs associated with employee turnover.

What are some factors that should be considered when determining the real cost of employee turnover?  Josh Bersin of Deloitte outlined some factors, including:

  • The cost of hiring a new employee including the advertising, interviewing, screening, and hiring.
  • The cost of training and managing a new hire.
  • Lost productivity. Some employers report that it may take an employee between 1-2 years to equal the productivity of the employee they replaced.
  • The cost in employee morale.  Other employees who witness high turnover within their ranks tend to disengage and become less productive in their own tasks.
  • Customer service costs, as new employees are less adept at solving problems and take longer to process customers.
  • Cultural impact. When there is high turnover even customers will take notice and wonder why.

How to Increase Employee Retention

There are several things employers can do to increase employee retention and engagement.  While attractive benefits and other perks are important incentives to retain valuable employees, leaders need to be proactive in doing all they can to create a high performance culture in their organization that produces the results they desire.  This is why effective training and development is so important to the overall performance of the organization.

The training and development industry is growing.  Currently, nearly half of the industry is devoted to facilitating transitions and developing employees.  The reason for this is a simple one- companies know they must make changes in order to survive the current economic trend.

Astute business leaders wishing to avoid the losses incurred by employee turnover look to outside trainers and consultants for guidance and support.  This shift in focus creates a unique opportunity; instead of focusing mainly on executives and executive coaching, consultants have the ability to shape the organization at every level.  Many executives mistakenly believe that the training and development should come from within their own HR department; however, outside trainers have a distinct advantage over HR employees.  They are unbiased and opinions offered that may differ from company leaders will not be held against them.  Outside trainers can offer more objective solutions based upon careful analysis prior to implementation of the training program.

It is important that business leaders carefully examine a training program before choosing the best plan of action, and that key decision makers within the organization remain committed to the training efforts.  If not, any attempt to develop a solid and effective training program will fail, no matter how dynamic the trainers are.  Training and development is a goal that needs to be shared by all involved and should be treated like any other business venture.  Simply put, the results of any training program is determined by level of commitment to the training program.

Once the decision is made to move forward with a plan of action, specific needs must be identified.  This can be accomplished in many ways, depending on several factors.  Some common means for identifying needs can be through customer feedback, employee feedback, a variety of analytics and metrics, assessments, or interviews with key individuals within the company.  There is no “one size fits all” to identify needs, nor is there only one “catch all” training program.  A good training company will adapt training courses to meet different needs.  Having an understanding of exactly what areas of weakness need to be addressed will determine the type of training that should be implemented.  This will also help to identify who or which department should be trained.

How to Maximize Your Investment

No matter which company or what type of training is chosen, constant evaluation needs to happen on a regular basis.  It is important to monitor the situation and learning process, making adjustments as necessary.  Keep track of every stage of development and don’t wait until the end of the training period to evaluate its effectiveness. Training consultants like to receive feedback from the company, but avoid hovering or micromanaging while they are conducting the trainings.  It is important to realize that they are partnering with you to increase the productivity and profitability of your organization by helping to implement improvements.  On the other hand, consultants appreciate receiving feedback that can help them improve the training process.

Businesses are definitely facing challenges and changes.  These changes can be daunting, but they also present opportunities for organizations to grow, become stronger and more innovative than ever.  IE Leadership and Performance blends our years of experience with current cutting edge market research to provide the most effective curricula, which is fully customizable to meet the needs of our clients.  Proper and effective training ensures smooth transitions and, in the long run, has a positive effect on the bottom line.

Now is the best time to enjoy the rewards of a well-trained and highly performing organization.  Contact us today for a free 30 minute consultation.


Works Consulted

Harvard Business Review, “What Coaches Can Do for You”, January 2009, http://hbr.harvardbusiness.org/2009/01/what-can-coaches-do-for-you/ar/1

Zane Benefits, “Employee Retention: The Real Cost of Losing an Employee”, August 2013, http://www.zanebenefits.com/blog/bid/312123/Employee-Retention-The-Real-Cost-of-Losing-an-Employee

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