My friend Bob Meis told me he would rather hire good people with the risk of having them leave.…Than hire lousy employees and risk having them stay! 

Can there be any truer words for an HR department, a manager, or the CEO of a company? No!  

Christina Merhar reports that “Studies on the cost of employee turnover are all over the board.  Some studies (such as SHMR) predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $40,000 a year, that’s $20,000 to $30,000 in recruiting and training expenses.

But others predict the cost is even more – that losing a salaried employee can cost as much as 2x their annual salary, especially for a high-earner or executive level employee.

Turnover seems to vary by wage and role of employee. For example, a CAP study found average costs to replace an employee are:

  • 16% of annual salary for high-turnover, low-paying jobs (earning under $30,000 a year). For example, the cost to replace a $10/hour retail employee would be $3,328.
  • 20% of annual salary for mid-range positions (earning $30,000 to $50,000 a year). For example, the cost to replace a $40k manager would be $8,000.
  • Up to 213% of annual salary for highly educated executive positions. For example, the cost to replace a $100k CEO is $213,000.

What makes it so hard to predict the true cost of employee turnover is there are many intangible, and often untracked, costs associated with employee turnover.

So, what is the real cost of losing an employee?

In a recent article on employee retention, Josh Bersin of Bersin by Deloitte outlined factors a business should consider in calculating the “real” cost of losing an employee. These factors include:

  • The cost of hiring a new employee including the advertising, interviewing, screening, and hiring.
  • Cost of on-boarding a new person including training and management time.
  • Lost productivity… it may take a new employee 1-2 years to reach the productivity of an existing person.
  • Lost engagement… other employees who see high turnover tend to disengage and lose productivity.
  • Customer service and errors, for example new employees take longer and are often less adept at solving problems.
  • Training cost. For example, over 2-3 years a business likely invests 10-20% of an employee’s salary or more in training 
  • Cultural impact… Whenever someone leaves others take time to ask “why?”

One of the reasons the real cost of employee turnover is an unknown, is most companies don’t have systems in place to track exit costs, recruiting, interviewing, hiring, orientation and training, lost productivity, potential customer dissatisfaction, reduced or lost business, administrative costs, lost expertise, etc. This takes collaboration among departments (HR, Finance, Operations), ways to measure these costs, and reporting mechanisms.

Best practices on employee retention…

So, what can you do about employee retention? We recently outlined seven tips for employee retention. Some of these employee retention tips include:

  • Benchmark your employee retention rate
  • Use proven retention strategies, not guesswork
  • Don’t assume employees are happy (create a high-feedback environment)
  • Implement a health benefits program such as a traditional health plan or defined contribution health benefits
  • Provide different benefits for different employees (focusing on the high-value, expensive to replace employees)
  • Conduct exit interviews

Here’s my rules to follow:

  • Take your time hiring the right person, not just a warm body
  • Train them to Develop
  • Budget personal development into their salary
  • Make sure they see the vision of the company and how they will be a part of it
  • Evaluate them regularly
  • Teach them Emotional Intelligence
  • Show them how to be clear with themselves and with others
  • Encourage them to have a voice, have crucial conversations
  • Get them to commit and then hold them accountable
  • Create a safe, results driven culture that encourages family and fun


I know this type of culture exists, I have personally seen and experienced them.

My hope for you is that you have too, because life is too short.

Why be miserable?