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Spiking turnover can hinder company growth plans

Published on May 7, 2002
on TechRepublic.Com

In the last five years, the number of voluntary employee resignations has grown a staggering 25 percent. In the IT workforce, 31 percent of workers plan on leaving their present employer within the next two years.

The statistics don't bode well for CEOs and CIOs readying for a rebound in the economy, as losing key personnel would obviously thwart good planning, growth expectations, and business strategy.

"When a company is squeezed financially and struggling to cope with market changes, the last thing it needs is to see key people walk out the door," states a report by the Hay Group titled "The Retention Dilemma: Why Productive Workers Leave: Seven Suggestions for Keeping Them." The Philadelphia-based consultancy, which helps companies measure and devise effective organizational and management strategies, recently released the report detailing how employee loss affects organizations and why employees are leaving today's enterprises.

The cost of employee turnover

The loss of top performers puts an intolerable strain on workflow management and leads to spiraling costs, according to the report. The side effects of staff erosion emerge in various ways— slipping project schedules, plummeting innovation, and declining morale.

In addition, replacing staff obviously has its own costs. According to common calculations, replacing a worker can cost an employer the equivalent of six to 18 months of that employee's salary. That calculation factors in nonsalary and benefit issues, such as project delays, lost workdays, and costs associated with recruiting and training a new hire.

Keep in mind that employee attrition isn't just affecting large employers. According to the Hay report, a 1,000-person company paying an average salary of $35,000 a year per employee (which is a low base-salary estimate for IT staffers) would see attrition-related costs soar to $4.2 million; a company with 20,000 employees would see costs rise an astronomical $83.6 million.

A good starting point for curbing staff resignations is understanding the various reasons employees leave a company. Among techies, the top five reasons for resigning, according to the Hay Group report are as:

  • IT professionals see no opportunity for advancement. Techies typically complain that they've got only one way to advance, and that is into the ranks of management. Yet many technology workers have no desire to become managers.
  • Techies often lack confidence in top management. Although manager bashing is likely common among all kinds of workers, a unique situation exists in the IT field. There is a disconnect between the workers in the trenches, who know technology inside and out, and the MBAs, who often become company VPs in charge of particular technology endeavors.
  • IT staff often feel unappreciated for work that's well done. Pizza, beer, and foosball tables may have been new and fun during dot-com mania, but after working 60- to 80-hour weeks to rush a project out the door, workers now expect something more substantial than trinkets of appreciation.
  • IT professionals sometimes believe their skills and abilities are underutilized and unchallenged.
  • The IT pay isn't up to par anymore. While salary is often an emotional job aspect for workers, a higher salary usually falls lower on IT staff's priority list than challenging work projects and learning new technologies when it comes to job satisfaction.

The Hay Group study includes normative data from approximately 1 million employees who answered 300 questions at more than 330 companies worldwide. Companies included in the Hay survey rank first and second within their industry and represent the top one-third of companies included on Fortune magazine's "Global Most Admired List."

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david southgate
writing for living.