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Hidden Costs of Replacing Employees

September 3, 2003

"Researcher Richard C. Whitely has identified the hidden costs of replacing employees, many of whom leave as a result of conflicts caused by poor management practices.  There replacement has a number of costs, including:

* Lost time invested in training employees who leave.
* Lost wages or salaries paid to departing employees while new employees are being trained.
* Loss of knowledge possessed by departing employees.
* Lost opportunities and clients and customer dissatisfaction while positions remain unfilled.
* Lost productivity and morale experienced when employees leave.
* Recruiting costs and fees involved in finding replacements.
* Time interviewing candidates and training new employees.
* Wages and salaries paid to new employees during training and before they know how to do the job.
* Supervising new employees until they know how to do the job.
* Losses due to mistakes by new employees and disruptions of transition.

We know from personal experience that teams perform tasks better, produce higher-quality products, and experience greater satisfaction than individuals working in isolation (Cloke & Goldsmith, 2002, p. 12)."

Reference:  Cloke, K.; & Goldsmith, J. (2002).  The end of management and the rise of organizational democracy.  San Francisco:  Jossey-Bass.

The costs of employee turnover are high.  What are you doing to retain employees?

The End of Management and The Rise of Organizational Democracy is available on loan from the Ohio State University Leadership Center.  A complete listing of all the Leadership Center's resources is available on our website http://leadershipcenter.osu.edu/

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Created: 2008-12-22, Updated: 2009-01-09