Direct Cost of Turnover

Length: 546 words

Many managers find it difficult to retain their valuable employees. According to analysts, the responsibility of this high turnover lies on the shoulders of the manager or employer. The costs of hiring new employees, providing training, arranging benefits, and making other necessary arrangements are too high. Furthermore, the damage caused by the loss of talented, valuable, and experienced employees is another significant factor. Effective supervision is an essential element that helps a lot in retaining employees.

Even if an employer invests millions in a business, a poor supervisor can turn his money into dirt in no time at all if employees leave the organization one by one because of bad supervision. A survey of 20,000 workers conducted by Spherion revealed that 35% employees would quit their jobs within the first year of their employment if they do not receive any guidance from their supervisor. Another 41% would leave an organization in the first year if they do not find learning opportunities that particular organization.

Moreover, 40% of those employees who regard their managers as poor performers stated that they would quit their jobs just because of this reason. The American Management Association states that the total cost

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of having an employee replaced is around 30% of that employee’s annual remuneration. (Campbell, 2002) It is often seen that managers allocate a lot of their money and valuable time on the training and conscription of new employees whereas most of these valuable resources should be spent on the selection of useful employees.

A research conducted by Harvard University depicted that almost 80% of employee turnover resulted from flaws in the selection procedure. (Campbell, 2002) Employers must realize that there has been a change in the overall business sector. Nowadays, an average employee is more of an opportunist and not as conventional as employees in the past were. A conventional employee believes that maintaining a long term presence in an organization helps in his own growth inside that organization.

On the other hand, an opportunist is always on the lookout for upcoming openings and opportunities. A large number of employees are shifting themselves to the opportunist approach. Hence, it is important for organizations that they also take into consideration the approach taken by opportunists while they select new employees. Another important thing is that employers must consider the efforts of their employees.

Giving proper feedback definitely increases the morale of employees and creates a more productive working environment. To show the impact of employee turnover on the PFS unit of a particular hospital owned by United HealthCare, imagine that the funds allocated by United HealthCare for this hospital, which has 100 beds, include the costs of 25 full time PFS employees. The average pay of these employees is $21,000 and they also receive benefits which cost the organization an average of $6,300 (30% of the pay).

These workers are liable for the financial handling of $127,000 worth of average net proceeds on a daily basis. The PFS unit of this hospital has an average yearly turnover rate of 30% (7. 5 full time employees). The director and the CFO of the PFS unit assess diverse negative results in the PFS unit which originate due to various reasons. These negative impacts include but are not limited to a one-day delay in accounts receivable, a 0. 25% increase in bad debts which have to written off, and so on.

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