The labor market is — well, it’s unusual these days. Businesses in all sorts of industries are having a hard time finding workers and getting employees to stick around.

Don’t be among those bosses who shrug their shoulders and figure they just have to hire continuously. If you are, you need to know that employee turnover can cost you much more than you think.

There’s a bright side, however: You can reduce turnover, even if you operate in a business or a geographic area where good workers are in high demand.

 

The Cost of a Loss

Dõv Baron is a leadership business consultant through his firm, Authentic Paragon Alliance. He hosts a radio show and podcast on leadership, and his most recent book, Fiercely Loyal: How High Performing Companies Develop and Retain Top Talent, focuses on the topic.

“The average cost of training and development of a new staff member is one and a half to two times the annual salary of that individual,” Baron says, citing U.S. Department of Labor statistics. When your business loses a person, there is a diminishing return on the investment in hiring and training that individual.

The cost doesn’t just come in training and development expenses. Jan Watson, whose consulting firm, Inflection Point, in McKinney, Texas, helps businesses with hiring and retention, points out that when you lose workers, you’ll spend more on everything from processing the paperwork to recruiting and hiring a replacement.

Add to that the cost of lost productivity while the newcomer gets up to speed. And if the departed employee had performance problems, she observes, you’ve probably made an additional investment in coaching that person and documenting problems along the way — only to see it all evaporate when the person leaves anyway.

Don’t forget another, lesser-known cost, adds Dan Kalish, managing partner of HKM Employment Attorneys in Seattle: “Anytime an employee leaves, there is always the possibility of litigation, even if frivolous, which can cost tens of thousands of dollars to resolve.”

 

Why They Walk

We usually think better pay or benefits are the bait that employees follow when they go across town to your competitor. The truth is a lot more complicated.

OK, you’re saying, but you’re already paying competitive wages and offering good benefits. Does that mean you’ve got to pay still more for either, or both?

Not necessarily, says Watson: “Some of the most simple, cost-effective incentives range from providing an ‘Employee of the Month’ parking space, or gift certificates to a restaurant, spa or sporting event, to success-performance bonuses with incentivized goals, team rewards or trips.”

Sometimes money is just a red herring. Watson and Baron agree that money doesn’t talk as loudly as it once did.

We’re told that the under-35 set, the so-called millennial generation, is especially deaf to the sound of dollars, but it’s not just them.

“Baby boomers and millennials alike want more from working,” Watson says. “They want to belong to a work culture that provides core values, accountability and shared responsibility, effective communication and praise.”

So, she says, if you’re seeing employees flock elsewhere, consider that your work culture might be driving them away — and what it would take to fix that.

Another problem could be a bad match between the worker and the job. Watson notes that an applicant’s resume won’t actually do much to help you make a good match. Instead, she recommends a professionally designed exam closely aligned to the job you’re trying to fill that assesses not just the applicant’s technical knowledge but other necessary qualities, such as attitudes and personality traits.

Baron considers poor leadership the No. 1 reason that people quit. “Generally speaking, people don’t leave jobs, they usually leave bosses,” he says. Another problem? “There’s nothing to bond to. This means your people have no reason to be there outside of the fact that you pay them. Once someone is disengaged, it’s easy to lose them.”

 

Making Them Stay

One way to engage people is to give them a sense of their future with you. Watson suggests developing stronger professional development programs. Once an employee passes the nine-month mark, “an employer should start to discuss advancement opportunities and create a professional development plan,” she says. “This can be as basic as providing continuing education or as extensive as succession management planning and grooming the employee for leadership.”

Beyond that, Baron says it’s time to get serious about demographics. Millennials are the new workforce, and they really are different, he contends. “Trying to make them fit the mold will push them out even faster.”

He urges bosses to develop a stronger ability to relate to their employees and to foster cooperation and collaboration all across the business. “Everyone on your team needs to embrace becoming a chief relationship officer,” he says.

Strengthening the emotional bonds among employees can help foster loyalty that will lead workers to stick around. Again, that’s especially true for this new generation, in Baron’s view, and it’s why money isn’t everything.

 

The Millennial Machine

“Throwing money at millennials doesn’t really work,” he declares. “They do care about money; they have to pay bills like the rest of us. However, there is a point where money is no longer the motivator.”

What is?

“Millennials want to work for organizations that are purpose-driven, meaning it’s about more than the bottom line,” Baron says. He likes thinking big — the way Apple did when it claimed the slogan, “We’re here to put a dent in the universe.”

So the bosses need to adapt.

“With a purpose that is strong and a leader who lives, eats, sleeps and breaths it, your people will go above and beyond what is required,” Baron says. Yet very few companies, large or small, have taken the time to do that. They can start, he suggests, with a history lesson: “Sit down with the founder of the company and discover the originating purpose. What was the true driving force that made them keep going when they hit the wall?”

And if you’re that founder, maybe you can find the spark that lit your fire all those years ago in the first place — and see it catch once again in a new generation. Wouldn’t that be something to stick around for?