The Hidden Costs of Employee Attrition and How Searchlight Can Help

Posted on December 5, 2022

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RetentionTalent Efficiency

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As inflation and economic uncertainty grow, organizations are trying to control costs more tightly. Employee attrition is a major source of costs, but those costs are often spread out among many different areas, hard to quantify, and often don’t show up on the balance sheet. If your organization has tasked you with monitoring attrition more closely, do you know where to look to find all of these hidden costs?  

The Hidden Costs of Attrition

The Work Institute has found that the costs of turnover to employers exceeded $700 billion in 2021, more than twice what it was in 2009. SHRM estimates each lost employee costs their company 50-250% of their annual salary

This cost comes from several sources:

  • Work Not Done. The most basic cost of attrition is stuff not getting done, either because a role is vacant or the rest of that team is putting other projects on hold to cover those responsibilities. Managers are also distracted by the disruption caused by the person who has left, preventing them from working on other priorities that could help the team.
  • Decreased Morale and Productivity. Research from Gallup found that people with a close friend at their job got more done in less time, were more engaged with customers and other teammates, and were more likely to innovate and share new ideas. Losing people disrupts those relationships. 
  • Domino Effect. The negative effects of just one person leaving can ripple out and cause more people to leave. This is especially true if the person left due to cultural reasons; the friction with other teammates may lead to more attrition. Too much attrition across a company implies that they’re struggling and can create a feedback loop where it’s even harder to retain and hire. 
  • Recruiting Resources. Finding a new employee takes time and work from the recruiting and hiring teams. Costs include those employees’ salaries, fees for recruiters, advertising for open jobs, subscriptions to recruiting/HR products, etc. The more hiring that has to happen, the higher these costs. 
  • Lost Time. Interviews and reference checks take time that HR and other managers could be spending on other responsibilities. 
  • Training and Onboarding. According to Training Magazine’s 2021 Training Industry Report, the average company in the U.S. spent $1,071 per employee in 2021. This number is higher for small companies and lower for enterprises. This includes the cost of training products, salaries of trainers and managers who handle this, and more. 
  • Lost Knowledge. Every employee that leaves, especially those who are tenured, walks out the door with a lot of knowledge on the team, product and business that will take months to replace. According to HR industry analyst Josh Bersin, initially most employees are a cost to the organization and only become valuable over time (usually about 3-6 months). Good onboarding and training can reduce this time, but only so much. Employees that leave before this tipping point will have been a net cost to the business.

How Searchlight Reduces Attrition

One of the many things customers love about the Searchlight platform is its ability to decrease attrition and avoid these hidden costs. One customer increased retention by 20% while reducing time-to-fill at the same time. It does this by helping organizations hire people who are better aligned with their culture and manage them. Research from Deloitte and Josh Bersin has found that “job fit” is vital to retaining employees – you must have the right person for the role. Searchlight helps organizations find the right people. 

It does this in three ways. First, Searchlight helps organizations understand their own culture and predictors for employee success through our Predictive Talent Models. This data is foundational for companies to hire and train with science. For hiring, the hiring team can get on the same page about the right person for the role through a streamlined intake process. For training, managers can understand how to coach and upskill their direct reports to improve engagement, career growth and tenure.

Second, Searchlight’s Candidate Assessments helps hiring teams to understand candidates more holistically. It draws out behavioral data on candidate’s competencies, strengths and gaps, cultural alignment and career interests to build a more well-rounded picture. Armed with this information, the hiring team can make a better hiring decision.

Finally, Searchlight’s post-hire reflections allow hiring and People Operations teams to track how well their hires do, and apply that data to future hires. This data also allows them to customize onboarding to each candidate and help them reach full productivity more quickly. Research from the Brandon Hall Group found that organizations with a strong onboarding process improve new hire retention by 82% and productivity by over 70%.

All these capabilities result in hires that are a better fit for the organization and role in question. With a good fit between the candidate and their role and a strong onboarding process to set them up for success, the chance of them leaving decreases significantly

Kerry Wang

Co-Founder & CEO Kerry is the co-founder and CEO of Searchlight. After studying both Org Psychology and Computer Science at Stanford, she loves nerding out on all things people, psychology, and tech. On the weekend, you’ll find her reading a book or watching reality TV.

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