When I first moved to Chicago, I found an awesome apartment with two friends. We were living on our own, for the first time in the big city, and we had two floors and a garage and a killer back yard with a giant grill. It was pretty much the dream of any 22-year-old college grad.
But then, the real world set in. After a few months, one of the guys missed Iowa too much and decided to move back home. So my roommate and I were left with an empty room in a great apartment.
You’d think it would have been easy to fill that space. But the next three years were a revolving door of roommates: a chiropractor, a teacher, a college freshman spending the summer taking improv classes at Second City who spent late nights playing the guitar on the back deck, another chiropractor, and finally another teacher. And that’s not counting the three other prospective roommates who backed out at the last second and left us with a larger rent check for that month.
A high turnover rate comes at a huge cost. Some studies have found that it costs an average of six to nine months’ salary every time a business replaces a salaried employee. That means a manager making $40K a year will cost $20K-$30K to replace. Other studies have predicted that number could be even higher. The Center for American Progress found that losing a salaried employee can cost up to two times their annual salary, especially for a high-earner or executive level employee. Between the costs of recruiting, training, onboarding, temporary hires and separation costs, this can add up quickly. In fact, companies who are continuously onboarding and failing to retain new employees are losing millions of dollars a year.
My roommate and I certainly spent plenty of time looking for new roommates. Posting ads on craigslist, sublet.com, interviewing friends of friends, and friends of friends of friends. It turned out to be a full time job, and it didn’t always yield the best results (e.g. the improv student who drank all the rum right before he moved out). And there were way too many months where I had to pay half of the rent, instead of one third.
In addition to the loss of money, companies get hit in other ways, including lost productivity. It typically takes a new employee 1-2 years to reach the productivity level of an existing employee. Additionally, companies can see a loss of engagement: when other employees start to notice the high turnover, they can tend to disengage from the company. There’s also a cultural impact that happens with a high turnover rate. When one employee leaves, other employees start to ask why.
In case you’re wondering why people kept moving out, I’m blaming it on the fact that the third bedroom was right off of the living room, and my other roommate was on the couch every night watching the Sci-Fi network. Also, people kept getting married. As a result, our retention rate was roughly 66% each year. This could also be why I now live alone.
To calculate your company’s retention rate, just divide the number of employees who left during a period by the total number of employees at the end of the period. A healthy employee retention rate is considered to be 85% or higher.
If your retention rate could use some work, consider taking a look at your benefits package. Are you offering the bare minimum health insurance? What about pre-tax allowances like parking or commuter benefits? And don’t be afraid to think outside the box. Investing your money into a concierge program like Errand Solutions can improve retention rates drastically. In just the first year of service, one Errand Solutions client experienced a 2% reduction in attrition.
For more information on Errand Solutions and our solutions aimed to help your employee retention, give us a call at 312.475.3800 or email firstname.lastname@example.org.
Posted by Micky & Jackie