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Cost of Turnover in Organizations

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2). The increase in the cost of turnover depends on the accumulated learning, experience, and contacts of leaving employees (Katsikea et al. , 2014, p. 2). Losing high-level knowledge workers with specialized competencies is a costly problem for employees. Several reports and studies showed that turnover costs are high, particularly when companies evaluate their losses in terms of knowledge, experience, and contacts. Lucas (2012) described the cost of turnover in organizations. She explored the costs through a hypothetical scenario and used data from the case study of the Center for American Progress that used 31 corporations.

The findings of this study underscored that employee turnover is costly. Lucas (2012) reported that for work that earns less than $50,000 per year, the average cost of hiring a new employee can reach up to 20% of the leaving employee’s yearly salary (para. 4). She stressed that though low-paying jobs that usually have high turnover rates are less costly to replace, the cost will still reach 16% of the yearly salary and these costs can add up for large turnover rates (Lucas, 2012, para.

6). In addition, the study underscored that losing executives is the costliest of all. Replacing an executive can have expenses that can reach up to 213% of the executive’s salary (Lucas, 2012, para. 8). Guilding, Lamminmaki, and McManus (2014) described the costs of turnover for the hotel industry. They mentioned a number of real examples of companies losing tens of millions every year because of their turnover rates. One study noted that a turnover rate of 50% for front desk employees results to a loss of $150,000 every year (Guilding et al. , 2014, p.

232). Losing employees at all levels means costs for companies. Graham-Leviss (2011) reported higher estimated turnover costs for sales team members. She stressed that turnover cost can reach up to 200% of the salary because of the wide range of tangible and intangible expenses in replacing lost employees (Graham-Leviss, 2011, para. 1). Graham-Leviss (2011) determined that the tangible components of turnover costs are “severance pay, vacation accrual, and job advertising and recruiting fees, ” while the intangible costs are “the staff time needed for paperwork, recruiting, resume reviews and interviews, and then new-hire orientation and training, ” as well as “customer dissatisfaction, poor employee morale and loss of revenue during transitions” (para.

2). To reiterate her point, she gave an example of a company with 10% yearly turnover rate and turnover cost of 150% of $50,000 (yearly salary).

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preview essay on Cost of Turnover in Organizations
  • Pages: 4 (1000 words)
  • Document Type: Essay
  • Subject: Psychology
  • Level: Masters
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