Hiring Costs
You might be lucky and find a candidate on a free website, but most likely you will need to post and advertise elsewhere.

Consider the following hiring costs:

1. The cost of advertising, internet posting, employment agencies, search firms, employee referral awards;
2. Increase in starting pay as salaries have risen since you last hired, bringing everyone else in the department up to market rates;
3. Time spent screening resumes, arranging interviews, conducting interviews (by both HR and upper management), checking references and notifying candidates who were not awarded the job;
4. The use of assessment testing, background checks, drug screening (usually done on more than one candidate) and time spent interpreting and discussing results;
5. Time spent assembling and processing all the new hire paperwork, explaining your employee benefit programs and entering the necessary data to ensure the employee receives a paycheck.

Training Costs
It would be nice if employees were able to integrate into their organizations without any training, but usually this is not the case. Things are done differently in every organization so you must factor in the following costs:

1. New employee orientation or onboarding;
2. Specific training for the person to do his job, such as computer training, product knowledge, company systems;
3. Time spent by others to train this person and money spent on outside training to ensure they are able to do their jobs.

Loss of Productivity Costs
Because new employees do not enter the organization completely trained, it will take time before they are fully productive.

Factor in the following productivity costs:

1. During this time of lost productivity, the person's manager is also spending more time directing, reviewing work and possibly fixing mistakes. (Errors will be made that are not caught right away and will cost money to correct down the line such as with a customer who receives an incorrect price or an incorrect shipment due to the new employee's lack of experience);
2. Add loss of goodwill as you scramble to preserve your relationship with your valued customer or client;
3. Employee moral plummeting as overworked employees assume responsibility while the new hired is being trained.

Now that you've closely examined the costs associated with each person leaving you can then plug this information into a spreadsheet to determine the real cost of employee turnover in your organization. How do you measure up? Are you in better shape than you thought? Or is it time for an intervention?

Given the high costs involved and the impact on productivity and customer retention, a well thought-out retention program can easily pay for itself over and over again. Employee turnover is a lot like eating dark chocolate. In moderation, both are fine and can even be healthy. In excess, both can have serious ramifications. Are you still interested in ordering dessert?

© 2008 Human Resource Solutions. All rights reserved.

Roberta Chinsky Matuson is the President of Human Resource Solutions (www.yourhrexperts.com) and has been helping companies align their people assets with their business goals. She is considered an expert in generational workforce issues. Roberta publishes a monthly newsletter "HR Matters" http://www.yourhrexperts.com/hrjoin.cgi which is jammed with resources, articles and tips to help companies navigate through sticky and complicated HR workforce issues.  Click here to read her new blog on Generation Integration http://generationintegration.typepad.com/matuson/. She can be reached at 413-582-1840 or Roberta@yourhrexperts.com.