Ruche Media Company (RMC)* is a global media company with 24 offices located around the world. The corporate headquarters of this $260M organization is based in a major metropolitan city in North America. Most of the 1,100 employees are based at the corporate headquarters while the remaining workforce is located in sales offices located in major metropolitan cities throughout the world.
After reviewing where turnover was the greatest, RMC then calculated the turnover costs. It was agreed that turnover rates, as defined by Dr. Jack J. Phillips, would be utilized to calculate turnover costs. The table below contains a list of turnover cost ranges as a percent of annual wage or salary as captured from dozens of impact studies. The data are arranged by job category, ranging from non-skilled, entry-level positions to middle managers. The ranges listed represent the cost of turnover as a percent of annual wage/salary and are rounded off for ease of use and communication. The costs represented in these studies are fully loaded and include the exit cost of the previous employee, recruiting, selection, orientation, initial training, wages and salaries while in training, lost productivity, quality problems, customer dissatisfaction, loss of expertise/knowledge, supervisor’s time for turnover and temporary replacement costs. The data in this table reflects studies in industry and trade magazines as well as practitioner publications, academic research and independent studies conducted by professional organizations and associations.
In order to obtain an average cost of turnover that could be used per turnover, RMC calculated the cost of turnover for each individual who left the organization during a 12-month period by multiplying that individual’s wage/salary by the median percent of annual wage/salary for the job category appropriate for that individual. The cost of each turnover during that period was then totaled and divided by the total number of individuals during that period to arrive at an average turnover cost of $116,927.09 per employee. Using this average cost of turnover, the total cost of turnover company-wide was calculated at $28.3M; almost 11% of annual sales!
*Company name has been changed
