The cost of replacement

Posted on April 11, 2007
Filed Under Advertising Mistakes, Socially Responsible Recruiting, Best Practices, Companies That "Get It", Retention |

Many times we talk about the cost of recruitment. Let’s stop and discuss the cost of replacement. It is a much higher number in more ways than one. What does turnover cost? Here are some costs that need to be brought into consideration:

The person who fills in while the position is vacant
Lost productivity
Out-processing (exit interview) of exiting employee
Management during transition
Training of new hire
Departmental lost productivity (continuity)
Severance (possible)
Lost knowledge/customer base/etc.
Cost of recruitment

Here is a great white paper to learn more about the cost of replacement. It even offers a great work sheet you can print out to calculate. Most organizations find that the cost of replacement is at least five times the cost of recruitment; many times up to 20-30 times the cost.

Lesson learned: It is better, easier and cheaper to retain than it is to recruit.