If you think the slow economy makes it cheaper and easier to recruit employees, think again: The most recent average cost-per-hire was more than $5,100, according to the National Association of Colleges and Employers (NACE). That figure is higher for small businesses: The cost rises to over $7,600 per hire for companies with less than 500 employees.
But perhaps most unsettling, NACE points out: On average, 8 percent of those new hires will leave after one year, and over 30 percent within five years, starting the costly recruitment-and-hiring schedule all over again.
A review of 30 case studies in 11 research papers by the Center for American Progress bolsters these findings and goes even further. The cost of turnover for all job positions – excluding executives and physicians – was almost 21 percent of an employee’s salary, according to the center’s review. That works out this way: around $4,800 for jobs paying $30,000 or less, and close to $16,000 for those paying over $75,000. The study took into account the cost of hiring and training a new employee as well as productivity losses during the transition time from one person leaving and another being brought up to speed.
For Tracey Maurer, director of new business development for the University of Vermont’s Center for Leadership and Innovation (CLI), these statistics are unfortunately all too common. But she sees a solution: investing in your employees – especially through professional development – before it’s too late.
“People are not retaining their employees because employees aren’t getting the professional development they need, and they feel they’re stuck,” Maurer says. “They get recruited into a position, and they have a lot to offer, and then they’re pigeon-holed doing the same thing, but they want to do other things, and the company says, ‘You can’t do that. You have IT skills, so you should keep doing that.’ When instead, a company should be saying, ‘Yes, your IT skills are relevant to your current job, but we value you here, and you should learn leadership skills to combine with your IT skills so you can be part of a growing team.”
What Employees Can Learn
Maurer leads UVM CLI’s corporate training division, working with businesses, non-profit and health care organizations, manufacturers and government agencies to tailor low-cost, on-site training to meet employees’ needs. Her trainers come from the business world; they have years of experience in the field and work everyday with the same skills they are teaching.
Most employees seek training in areas that go beyond learning a new computer program, she says. Among the areas of training most requested by employees and employers:
- Leadership development
- Communication and negotiation
- Customer service
- Project management
- Workload and time management
- Sales and marketing, including social media
- Sustainable business practices
- Human resources and employee engagement
- Health care management
But whether or not a company chooses UVM for training, Maurer has this message for employers: “Pick some sort of training for your employees and invest in them.”
Millennials as Emerging Leaders
Changing demographics paint a picture of why experts like Maurer are concerned, and why many foresee a leadership crisis in America. By 2020, nearly 40 percent of the American workforce will be comprised of Millennials, those born in the 1980s and ’90s. Yet despite their technological savvy and social networking, many Millennials believe they lack the leadership skills needed to get ahead, according to a study by the American Society for Training and Development (ASTD).
Companies need to understand the link between investing in their employees – many of them Millennials who want to become the next leaders – and return on investment, Maurer explains.
“When you invest in your employees, not only do you save money on the cost of replacing employees because they stay with you, but they also are happier and they serve your customers better,” she says. “And that means more profits for your business.”
Links Between Training, Higher Profits
Each year, companies spend an average of about $1,200 per employee on training –$1,800 for companies with fewer than 500 employees – but that’s a pittance compared to what they could see in increased profits.
“What I want to convey to companies is that there are lots of ways you can invest in your employees. Since the recession, many companies have had to get creative on where they spend their money. Maybe they aren’t offering big bonuses, but they can invest in their employees in other ways,” Maurer says.
“One of those ways is to make sure you capture an employee’s goals – what is it that they want to do – and help them accomplish that,” she adds. “That might be paying for a certain number of days so an employee can volunteer in their community, something that has been shown to increase employee happiness. Or maybe it’s paying for an employee to go to graduate school. Maybe it’s paying for them to take a course or sign up for a certificate program. Or maybe it’s on-site training. No matter what the course, the message is the same: Investing in your employees pays off.”