They come in, drink coffee, socialize and collect their paycheck. But…do they actually do anything while at work? Every company has its share of top performers who bring great value to the company, however, the low performers of each company can be causing more damage than you think. Gallup estimates that it can cost on average 150% of the employee’s annual salary to replace them, but what is the cost if you keep them?
A low-performing employee or even a disengaged employee can cause much more damage, and even cost more than the turnover cost. The actively disengaged employees are more likely to steal from their companies, negatively influence their coworkers, miss work days, and drive customers away. From depleting company morale to bleeding productivity dollars, where is the balance between employee retention and quality turnover?
Jack Welch, CEO of General Electric, viewed that 20% of employees are at the top of the productivity curve, 70% of them are doing their jobs well but not excelling, and 10% are hurting the company by underperforming and should be fired. Take a hard look around at your employees. Can you mentally peg who is in the top and who is in the bottom? It may be time to evaluate who you should be keeping for merit and who you are keeping because of the hassle of finding new employees.
If 10% turns out to be the golden turnover number, a look at the turnover rates by various industries can provide insight into who is leaving and from where.
2013 Total Employee Turnover rate by industry:
- All industries 15.1%
- Banking & Finance 17.2%
- Healthcare 16.8%
- Hospitality 29.3%
- Insurance 10.4%
- Manufacturing & Distribution 13.3%
- Not-for-profit 15.3%
- Services 15.2%
- Utilities 7.2%
Hospitality comes in as number one in employee turnover and insurance rounds out the bottom at just above 10%. Is the turnover in your industry in your control? Take a look at your industry and see where you fall.
Let them walk
Sometimes the decision isn’t up to you. Employees can leave for any reason from better career opportunities, better pay to change of location. Do you have an employee who wants to leave? The turnover number can be scary, but the thought of a counteroffer can be even scarier yet. 70-80% of the employees who stay as a result of a counter offer leave within nine months.
If an employee wants to leave, they will, and the sooner the better. Don’t waste time and resources on keeping an employee with one extra benefit or small raise. They have made up their minds and want to leave. Let them walk.
The tough decision
Take a look at your employees. Can you mentally rank who is in the top, who is in the middle and who is in the bottom? Retain who you want and think long and hard about the low performers. Take action today to implement solid performance reviews, stay interviews and real-time communication via tools like Yammer, 15Five and Asana. An impromptu raise or a publish endorsement may make all the difference for keeping the ones you need, and a tough performance review may be necessary to determine who your company could live without. The bottom percentage of your company could be costing you more than it costs for them to stay. With employee engagement costing more than $500 billion per year to the U.S. economy, don’t let one bad apple poison the rest of the barrel.