InSights - What you didn't know you didn't know

Causes and Cost of Unwanted Turnover

Causes and Cost of Unwanted Turnover

All organizations expect a certain amount of turnover. In small amounts, turnover keeps the organization fresh with new talent and ideas. However, when turnover is higher or unwanted, the result quickly turns negative, costing the organization considerable time and money to hire and train new personnel.

For sales teams, this expense can be surprisingly large. The direct replacement costs for a telesales employee can range from $75,000 to $90,000, while top sales positions can cost a company as much as $300,000. While these figures are dramatic enough, they don’t reflect the fact that many sales positions are specifically compensated for sales results, which means that a company pays an opportunity cost (in terms of lost sales and lost customers) while the replacement is being trained.

This problem is compounded by the fact that, for sales positions, there is no easily identified resource pool. Statistically, more than 50% of college graduates in the United States, regardless of their major, are likely to become salespeople. However, of the over 4,000 colleges in this country, only a few dozen have sales programs or offer sales courses.

Engaged salespeople with the skills to succeed are usually self-motivating, but unwanted turnover (top performers who leave on their own) still occurs. So what is the cause?  Many organizations mistakenly believe that employees leave jobs primarily for better wages, benefits, or both. The actual causes are quite different:

Reason #1: Poor Job Fit. Research based upon several thousand exit interviews shows that one of the primary causes for top performer turnover is actually poor job fit. Employees become frustrated when they can’t do the job they want to do. A Talent Audit, an ongoing review of competencies in each role, can demonstrate that as much as 65% of job dissatisfaction, leading to unwanted turnover, is a result of these job mismatches.

In order to overcome the problem of poor job fit, a Talent Audit can identify sources and causes of failure for each position, identify the key skills to overcome those failure points, and assess incumbents against the skills that ensure success. It also provides a guide for conducting exit interviews, documenting turnover causes, and establishing a plan to reduce the defects.

Reason #2: Incompatibility with Management. The other well-known cause of turnover is incompatibility between subordinates and their managers. As with any organization, the responsibility to correct that error must lie with management itself. Ideally, the process should be that management conducts an analysis to determine which managers are best in which jobs, managing which people.

However, it should be noted, that relatively few superstars leave as a re­sult of tension with their supervisors. The reason is quite simple. Most managers have their hands full dealing with bigger problems. Even when superstars bend the rules (and they usually do), their contribution is too valuable to disrupt. Hence the typical sales manager’s lament “I’d fire him–but he keeps beating quota.”

Historically, time and the vast amounts of data needed to perform that analysis have made that process prohibitive.

By identifying which managers are likely to thrive in any given role, companies can improve the job match of managers and subordinates, reducing unwanted turnover and continually engaging employees.