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The Real Cost of Growing Your Team (and Employee Turnover)

Published 31 August, 2020
Marquis Murray
Written by Marquis Murray

The Real Cost of Turnover

According to research, the average cost to replace a mid-level employee can be more than 20% of their salary and up to 213% for executive positions!  When you take into account that 33% of new hires leave their jobs in the first 90 days, it really starts to add up.

That’s not all. From advertising and recruiting to training and lost productivity, there are many costs associated with new hires.
Hiring Costs

The recruiting process alone accounts for a bulk of the expenses involved in hiring, including costs such as advertising open positions, screening applications, and interviewing candidates. On average, it costs $4,000 and takes 42 days for a company to fill an open position.

Onboarding Costs

Another big expense is onboarding. On average, businesses spend the equivalent of six to nine months of an employee’s salary to locate, qualify and train their replacement, not including valuable time spent by management and supervisors during on-the-job training. What’s worse is that of those new hires approximately 4% quit on their first day due to bad onboarding experiences.

Lost Productivity

This isn’t as easily quantifiable but has a significant impact on the bottom line. A new hire simply can’t be as productive as the person they’re replacing until they have all the necessary training and knowledge of your company’s processes, tools and policies. For them to be truly proficient in the role can take anywhere from six months to a year, which means potential errors and challenges along the way.

cost of hiring and onboarding

Poor Engagement

When one employee leaves, the rest of your employees are bound to wonder why, and if you’re not managing the situation, others may decide to jump ship as well. Turnover also leads to additional strain being placed on remaining employees causing overwork, eventually leading to burnout. According to a study by Gallup, disengaged employees cost their organization 34% of their salary. In other words, if you have 10 disengaged employees who earn $60,000 that’s about $200,000 of lost revenue in a year. That’s a lot of money wasted!

Knowledge Loss

Lastly, let’s not forget all the knowledge that’s lost when an employee leaves. In businesses like agencies, the departing employee is likely only one of a few with a particular skill set on your team - they may even be the only one. When that person leaves, the knowledge leaves with them, causing your productivity to take a nosedive.

PRO TIP: Have documented Standard Operating Procedures for repeatable tasks for each role within the organization.

To put this all in perspective: for a salaried worker earning $60,000 a year, your agency will likely spend $45,000 to replace them. Yikes!  

Key Considerations

  • Build a strong recruitment process by clearly defining the job, work environment, company culture, and all facets and responsibilities the employee will be expected to handle.
  • Give a good impression to new hires by getting necessary forms signed, setting up their office and gear in advance, making sure they have a security pass or key when they arrive, and supplying any tools/equipment needed to get started.
  • Make your onboarding process as smooth as possible by
    • Introducing the team and touring the office
    • Discussing workplace culture
    • Reviewing company policies
    • Assigning a mentor
    • Setting up training modules
  • Create a fun, inviting culture at your agency that keeps employees loyal and dedicated.
  • Understand what kind of work each employee likes doing, assign them to relevant projects, and provide a sense of ownership
  • Offer flexible benefits based on the employee’s changing needs.
  • Focus on getting people into projects where their passion will be best utilized.
  • Figure out which employees work best together and pair them in teams
  • Be supportive and provide opportunities to develop new skills
  • Provide clear career growth paths by setting expectations, providing challenging assignments and rewarding valuable employees


Source Notes

Average Cost-per-Hire for Companies Is $4,129, SHRM Survey Finds 

How To Calculate the Cost Of Employee Disengagement

Strategy: Costs Of Poor Communication

The Cost Of Poor Employee Communication


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Topics: Systems and Processes Onboarding