The silliest practice in retention is counting all quits equally in your turnover calculations. So the purpose of this article is to “open your mind” about the problem of measuring only aggregate “total turnover. ” And why you must begin measuring, prioritizing, and focusing on the most damaging category of all turnover. Which I call “devastating turnover.”An example of devastating turnover would be, “Ouch, our AI team lead just quit and went to our competitor.” The remainder of this article focuses on revealing the different types of devastating turnover as well as the tremendous costs and business impacts associated with each occurrence.
Most ignore, so they don’t track devastating turnover.
However, if you look at what recently happened when OpenAI lost a single high-value employee (i.e., Sam Altman, its CEO), that single-employee loss by itself literally cost the company and its strategic partner Microsoft billions of dollars in value. The lesson to be learned by others is to focus your retention efforts on reducing the costliest of all turnover: devastating turnover.
Dramatically Reduce Turnover Costs… By Minimizing Devastating Turnover
Most corporate efforts to reduce turnover are spread broadly across all employees in the workforce. And that practice would make sense if the negative impacts of each employee leaving were equal. But in fact, some departing employees may be worth more than a dozen times the cost of losing the average employee. Fortunately, my research and practice have revealed that a whole category of employee turnover is so costly and impactful that it deserves special attention. I call these turnover cases “devastating turnover.” By prioritizing the minimization of these devastating errors, an organization can literally cut millions of dollars of negative turnover impacts each year.
A List Of The Most Devastating Turnover Errors
Only the uninformed assume that all employee turnover results in the same economic loss. Devastating turnover is much more expensive than its one-level down turnover category, “regrettable turnover” (simply employees you prefer not to lose). I have found that as much as 20% of all turnover should be placed in this “devastating” category. The top dozen turnover errors in this category are listed below (in descending order of impact).
- Not calculating the cost of devastating turnover is the first catastrophic mistake – some estimates put the cost of normal turnover at up to 1.5 times the employee’s salary. However, I have found that these estimates are misleadingly low. They leave out the significant costs of team disruption and customer impacts. The costs of “devastating turnover” are much higher than those of average turnover. For example, companies like Google and Apple have calculated the value of acquiring or losing a top employee to be between 10 and 300 times higher than the value of an average employee.
- Preventable turnover is inexcusable – few realize that up to 95% of turnover can be predicted. And 78% of the reasons why employees quit can be prevented by the employer (Meaning that three in four employee turnovers are preventable). So, each of the devastating turnover cases (in the following list) could have been prevented. Executives rate them even more egregious because most could have been prevented. Note: if you’re unfamiliar with turnover causes that generally can’t be prevented. They might include retirement, the family moved, a serious illness, returning to school, they started their own business, or they won the lotto. If you want to identify the real reasons why a critical employee has quit, the data shows that post-exit interviews (delayed exit interviews) can get as much as 50% more accurate answers on the actual causes of turnover.
- Losing innovators can be the most catastrophic employee loss – managers need to realize that those employees continually get their innovations implemented. Provide the organization with the highest value of any non-executive employee. In part because if they quit, their innovation projects will likely die after their departure. And they may rekindle their innovation at their new company. As a result, tracking and preventing “innovator turnover” needs to be your number one retention priority. The costs of these losses should also be estimated.
- The loss of revenue generators will be felt immediately – realize that the loss of those employees that generate the most revenue (i.e., salespeople and business development employees) will immediately drop in revenue unless they are immediately replaced with an equal level performer. Note that if the revenue generator (and their customers) quit and go to a direct competitor, the losses will be markedly higher.
- Today, you can’t afford to lose AI professionals – in a world increasingly dominated by AI technology. It is almost impossible to replace AI professionals who leave. So, anyone who has an impact on the use of AI must be considered a devastating loss. In addition to AI, most organizations are likely to have several other job families (i.e., data security and product development) that should also be considered critical.
- The loss of critical executives may even hurt your stock price – when a key strategic executive in a critical business unit leaves. It may startle your employees, get media attention, and even lower your stock price. So, at the very least, consider the sudden departure of the CEO, CFO, head of product development, and head of IT or R&D as devastating turnover. The loss of an industry icon that suddenly leaves your corporation should also be added to the devastating category.
- The loss of any on the succession plan will hurt your leadership bench strength – even if you ignore the amount of development money you have already invested in those in your succession plan. The damage will be doubled if those future leaders go to your competitors. The loss of succession plan members will also mean that your organization will have a shortage of leaders in the future.
- It hurts to lose those with extensive contacts – if you work in a business unit where relationships and professional contacts are essential. The loss of an employee with extensive industry and customer contacts will be catastrophic. It may take years to rebuild those contacts.
- Minimize turnover in mission-critical jobs – if your organization designates mission-critical business units and/or jobs. Any turnover in these strategic “game changer” areas will be highly disruptive and costly.
- Prevent those with company secrets from quitting – if an employee who knows a lot of company secrets or your master plan quits. And then goes to a competitor, the costs to your company will be extraordinary.
- When others follow those who quit, your turnover costs may double – whenever a well-admired professional manager or employee leaves. There is a high probability that another desirable employee will shortly follow them. So, costs of any “follow them” turnover losses must be included in the cost calculations of the original departing employee.
- Where the departed employee ends up working matters – last but not least, most fail to realize that it can be twice as costly when a departing top employee goes directly to one of your product competitors. Once they get settled at their new company, they will likely share their knowledge of many of your best practices (technically, they can’t share secrets). It makes sense to track where all of your high-value employees land after they quit. This can be easily done on social media or by viewing their updated LinkedIn profile. And when one of your bad managers or toxic employees ends up at one of your competitors. In a roundabout way, your organization may benefit.
- Losing recent hires will be costly and frustrating – because you have invested so much time, recruiting resources, and effort into your new-hires. Everyone will be frustrated if they become early turnover or if they must be terminated. And reopening the search will extend the loss of team productivity (due to the vacancy) for months.w
Additional Devastating Turnover Errors… That Have Slightly Lower Negative Impacts.
In addition to the top 12 most devastating turnover errors listed above, a few additional devastating turnover errors are producing a powerful but slightly lower level of business impact.
- Using only a single turnover percentage will make it difficult to identify problem areas – As I mentioned earlier, most organizations only calculate the aggregate turnover percentage (i.e., the percentage of all employees that leave during any year). However, relying solely on that single overall number will likely hide the real stealth damage occurring under the radar in important areas like “devastating turnover” and diversity turnover.
You should also realize that when you count all turnover as bad. That may inadvertently cause some managers to try to eliminate all turnover. Even turnover that falls into the “good turnover” category (e.g., when a toxic employee is let go or when a soon-to-be laid-off employee quits). I recommend revealing the separate turnover categories that fit under that all-encompassing turnover percentage. The additional turnover numbers you might need to report include devastating turnover, diversity turnover, performance turnover, new hire turnover, preventable turnover, and good turnover. For comparison purposes, it’s also wise to estimate the turnover rates of your competitors.
- Not calculating the damage differential between normal and devastating turnover will cost you – you will likely need a high level of executive support before they allow you to prioritize the turnover/retention of key individuals and jobs. The language of business is the dollar. I have found that the best way to get that support is to quantify all of the various turnover costs and impacts in dollars. Then, executives can more easily do side-by-side comparisons between normal and devastating turnover costs, as well as other common business costs. Incidentally, the best way to make your dollar estimates credible is to work with the CFO’s office to verify the accuracy of your numbers.
- Losing diverse professionals will be painful – because almost all organizations struggle to reach their diversity goals in professional positions. The loss of a single, well-admired, diverse role model may trigger the loss of other diverse employees. This loss of well-known diversity professionals will also likely damage both future diversity and regular recruiting.
- Losing those in hard-to-fill positions will be painful – losing an employee who works in an “impossible to fill” professional position will be costly. And those costs will increase even further when the position takes a long time to fill or is never filled.
- Employees who are angry when they leave can have negative consequences – losing a key employee to turnover is a major loss. But there is always a chance they will return someday as a boomerang rehire. However, when employees are angry when they leave, that anger /unhappiness may prevent them from ever wanting to return. So, the cost of eliminating their possible return must be calculated and reported.
- Losing key informal leaders on critical teams will be disruptive – many don’t fully understand the consequences of losing informal leaders where informal leaders are those unsung team members (without a leadership title). They build cohesion and get things done with little fanfare. So, losing even one of them on a critical strategic team will likely disrupt a team for months.
|If you only do one thing – find a cooperative executive. And informally ask them to list the most damaging instances of turnover that they can remember during the last year. And then see if any of those most damaging turnover cases were given extra weight in your turnover metrics. If not, you need to change your reporting to make future devastating turnover cases more prominent.
In my experience, it’s hard to find a more mismanaged and less data-driven HR area than employee turnover and retention. This occurs even though executives are constantly sounding off about “bad” employee turnover. The complaints will continue until the turnover/retention effort first becomes data-driven and HR and individual managers are fully accountable for producing significant results.
However, after that, I have found that you won’t be able to expect a significant improvement in your turnover results until you begin to identify and then prioritize the costliest segments of employee turnover. That means focusing on the most damaging types of turnover, which I call devastating turnover. Unfortunately, I have also found that executives still won’t fully support this prioritization until HR puts a dollar amount estimate on the costs and the disruptive business impacts of devastating turnover. So executives can see and fully understand the huge differential in consequences between devastating turnover and regular employee turnover!
Note: on 12/11/23, a companion article will be published on my site that covers another important turnover category, “good turnover,” which can actually produce positive impacts.
Note: If you need more detailed information covering what’s wrong with most employee retention efforts. You can find it here.
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