Employee turnover costs companies significantly, ranging from 50-150% of an employee's annual compensation. To retain top talent, companies should share their long-term vision to give employees meaning in their work, conduct employee satisfaction surveys to understand reasons for leaving, offer flexible work schedules and personal days to improve work-life balance, create focus groups to discuss corporate culture, and conduct exit interviews. The document provides strategies for companies to discuss with HR and senior management to reduce costly employee churn.

1. Executive Summary
Reduce Employee Turnover Costs
There are many statistics and complex methodologies to support the notion that
employee turnover costs are seriously affecting mid-sized enterprises. On the low
end, the Hay Group reports that the cost to replace an employee is 50% of their total
compensation, including benefits. On the high-end, Hewitt & Associates puts the cost
between 100-150% of annual compensation. While executive management and sales
staff are more costly to replace, churn in any function affects the bottom-line.
How Can You Retain Top Talent?
• Share Long-Term Vision - it is critical that all employees understand the
long-term vision for the organization to find real meaning in their work. In
particular, star performers who are shut out of the high-level strategy and
direction of the company will be the first to defect, while costing the most.
• Conduct Employee Surveys - establish an annual Employee Satisfaction
Survey to gather information and determine some of the reasons why people
may be looking for greener pastures. Be sure to keep this anonymous.
• Consider Flextime - for employees who are managed based on deliverables,
consider implementing a flextime policy, which allows for telecommuting. Best
Buy recently instilled a Results-Only Work Environment and boosted
productivity in their corporate office by over 35%.
• Offer 'Personal' Days - consider offering 1 day per month/quarter for a
personal day. This will allow your employees to take care of business in their
personal life without having to call in sick to work for fear of persecution.
• Create Focus Groups - bring leaders from each level in the organization
together for informal employee focus group sessions. Discuss corporate
culture, social activities, and the work/life balance at your company. Use our
Facilitating Insightful Focus Groups report for advice.
• Do Exit Interviews - last but not least, be sure to conduct an exit interview.
Use Demand Metric's downloadable Exit Interview Questions Tool for help in
this area.
Action Plan:
Discuss with HR - schedule a meeting with your HR Director to discuss strategies
that will reduce churn. If necessary, get employee churn on the agenda for a senior
management meeting to get top-level support and buy-in.
© 2009 Demand Metric Research Corporation