Here's Why So Many Companies Are Losing Employees Shortly After Onboarding

In today's business environment, no industry is safe from the extraordinarily expensive problems of talent turnover. Here's why — and how leaders can keep employees engaged and committed.

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By Christopher Allen

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Has America lost the will to work, or have organizations lost the will to connect with talent? Today's business leaders are faced with new labor market challenges requiring better efficiencies in onboarding techniques to quickly establish competencies and retention techniques that can keep skilled labor engaged and committed. The data suggest that in today's business environment, no industry is safe from the extraordinarily expensive problems of talent turnover.

Related: A High Employee Turnover Rate Means It's Time to Reevaluate

Turnover rates

Voluntary turnover rates (employees leaving without being fired or laid off) are predicted to jump nearly 20% in 2022. At a macro level, it might be easy to attribute these numbers to the crushed retail sector struggling to keep storefronts open, but turnover is hitting nearly every industry sector, including those with high-paying desirable job openings. The key industries with greater than 18% turnover rates are as follows:

  • Technology
  • Life and medical science
  • Consulting
  • Manufacturing

Predictably, 45% of voluntary turnover stems from employees less than one year in the role. Imagine being in an onboarding session at your new job, looking around the room at 30 other people and knowing about 15 people the room won't stick it out a full year. High attrition places real burdens on organizational culture for employees who stay. With continued turnover, remaining employees quickly become overwhelmed with the volume of work, they find themselves continually providing on-the-job training to new teammates, and they have limited energy to form bonds with individuals who are unlikely to stay the course.

The U.S. Bureau of Labor Statistics continues to report the turnover trend is continuing, and in many cases, accelerating.

Related: 9 Ways to Retain Your Top-Performing Employees

The real cost of turnover

Organizations can plan for or even design business models that encourage natural turnover of talent. In consulting practices, it's not uncommon for organizations to both keep a flat organizational structure and cap career ladders to just a few potential rungs for promotion. With few promotional opportunities for employees, career growth naturally encourages more senior employees to move on, keeping labor costs lower in the long run.

However, today's compressed and stressed labor market makes designed turnover more expensive. With unfilled jobs and recessionary pressure, compensation for willing workers is increasingly putting pressure on hiring managers and margins.

When an employee voluntarily leaves, especially unexpectedly, the real cost of turnover becomes more than just an HR expense. When productive talent with organizational responsibilities exits, organizations incur a myriad of additional expenses:

  • Lost opportunity costs

  • Increased stress on remaining employees resulting in:

    • Reduced client experiences and work quality

    • Negative pressure on culture

    • Increased demand for high performers to provide on-the-job training

There are several managerial accounting frameworks to track the true cost of turnover. A simple equation is to sum the core costs of replacement and skills acquisition:

  1. HR hiring costs

  2. Onboarding

  3. Proprietary skills development

  4. Lost productivity until new talent is found

Then multiply the sum of 1-4 by the total number of employee positions turned over annually to find the total cost in a fiscal year. The types of roles turning over also matter a great deal when accounting for the cost of turnover. Skilled and professional talent pools often take longer to replace and may require using hiring services that command up to 20% of a first-years' salary just to place a single person, with a 6-month guarantee on fit. Under conditions in which hiring also requires luring talent away from existing jobs, the cost of replacing talent can reach higher than 100% of annual wages for a single employee.

Related: Here's the Secret to Reducing Employee Turnover and Cutting Costs

Solutions

The answer to solving and reducing organizational turnover is multifaceted. No singular solution is likely to magically sustain a business model, increase productivity and keep employees happy.

Arguably, the key component is to establish a belief in each new employee that they can and will be successful and happy in their new role. An individual may already hold positive beliefs upon accepting a new position, but it isn't guaranteed. Additionally, upon accepting a new position, everyone is walking into an organization holding a set of beliefs about their own likely outcome (worried, nervous, disappointed, overwhelmed, excited and enthusiastic).

As a business leader, the ranging beliefs of new hires is an important cultural component to understand. The first impressions from hiring processes and job training are precious moments to motivate and establish positive bedrock beliefs.

Individualized motivation techniques require understanding and supporting each employee and creating opportunities to change or reinforce positive beliefs. Broadcast tools like PowerPoint slides and video lectures are inadequate solutions used in onboarding to reach individuals.

Motivationally empowered training embraces individual practice and provides facilities to explore tasks and skills by seeing the consequences of each action or decision. With contextualized scenarios (situations that look like the actual space of a performance), training can ease new hires into a world where their practice matches the real world in an authentic way. The higher the degree of individualized support in authentic contexts, the greater the connection to role expectations new hires will have once they finish onboarding.

By addressing beliefs, setting realistic expectations and supporting individualized paths to role mastery, leaders have a basis to use a wider array of techniques to keep employees engaged and committed.

Christopher Allen

Entrepreneur Leadership Network Contributor

CSO - Allen Interactions | COO - Nova Space Inc.

Christopher Allen is focused on creating digital learning strategies for Fortune 500 organizations and K-12 as CSO of Allen Interactions. In 2021, with Joseph Horvath, launched Nova Space Inc., to provide professional development for the space industry, where Allen serves as COO and Chairman of PCS.

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