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The true cost of staff turnover

Business

Aug 29, 2019 - 3 minutes read

Objectivity Blog 416 306
Matthew Weaver
I’ve worked in the IT industry for the last 20 years with almost half of that time in my current role as Consultancy Director. At Objectivity, I’ve met some exceptionally talented people that share similar views and ambitions to my own. I realise now that building great software starts by building great teams. I spend my spare time learning how little I know about my passion for photography. And when the weather doesn’t permit, you’ll find me rolling back the years writing code on various platforms and updating my blog.
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For any organisation, high staff turnover is costly and disruptive. For a software development company, high turnover is painful. The price you pay is probably much higher than you think.

Keeping people on board

A key factor in lowering staff turnover is to find the right people in the first place. For engineers, technical ability and commercial experience are important attributes.

It’s better to train your employees and risk they leave than do nothing and risk they stay. — Anonymous

Equally important is attitude, personal aspirations and how someone fits with your company culture. Once you have the right people on board, it’s essential to keep them happy and engaged. A good salary is a key factor but there are many other things to consider. Personal development, mutual trust, career progression and a healthy working environment all play a part in maintaining a happy workforce.

Good people relish a challenge and like to tackle interesting problems. Whilst this is true, it’s important not to overload your staff. Working at a sustainable pace is important in keeping your workforce motivated. Software developers, like other knowledge workers, do not think quicker under pressure.

The nature of the problem

Software engineers carry a lot of information around in their heads. As far as work goes, this will consist of technical knowledge and domain experience. You have to replace this information when people leave. It may not be too difficult to find someone with similar technical abilities. Replacing their domain experience is a different matter.

People build working relationships with each other over time. Team members learn how to collaborate effectively with their colleagues. Changing teams around on a regular basis leads to instability. People have to learn how to work with new team members. The more people that leave, the bigger these problems become.

What does staff turnover actually cost?

An example will help to clarify the true cost of staff turnover. Let’s imagine it takes a new starter 6 months to become fully productive. If the new employee learns new skills at a steady rate, they will spend half of their first 6 months training.

Consider an average monthly salary of £3000 with 15% employment overheads. This means the cost to employ each person is £3450 per month. So the initial cost of training is £3450 * 6 months * 1/2 = £10,350. Now apply this to a company with 1000 employees and 25% annual staff turnover. So 1000 * 25% = 250 people leave each year. The cost of replacement is 250 * £10,350 = £2,587,500.

This adds up to a yearly cost of more than two and a half million pounds! That’s before considering recruitment costs and the disruption to your other staff members. Try it our for yourself – you can tailor this spreadsheet to model your own organisation.

Someone has to bear this cost and usually it’s a combination of you and your clients. Finding the right people in the first place can significantly reduce this cost. It will also lead to a happier workforce and happy people do the best work.

Dataops Ebook 416X300
Matthew Weaver
I’ve worked in the IT industry for the last 20 years with almost half of that time in my current role as Consultancy Director. At Objectivity, I’ve met some exceptionally talented people that share similar views and ambitions to my own. I realise now that building great software starts by building great teams. I spend my spare time learning how little I know about my passion for photography. And when the weather doesn’t permit, you’ll find me rolling back the years writing code on various platforms and updating my blog.
See all Matthew's posts

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