Pay attention to the hidden cost of poor leadership

It?s time to invest!

What is it costing your business each year to replace staff? Have you ever worked it out on paper or had your finance manager provide you with the data?

I?m surprised at the number of leaders I meet who have no idea. Many aren?t even sure what their attrition rate is. And when they do know, I hear various reasons that justify it, like:

  • That?s the nature of our industry;
  • We have a young workforce with no real work ethic;
  • People aren?t loyal anymore; and,
  • It?s just the way things are now, people change jobs once every 1-2 years, there?s nothing we can do about it.

And some of these reasons are true some of the time but there?s an absolute opportunity to improve retention of staff.

Most leaders are working really hard to improve the profitability of their business. To do this you essentially have two levers you can pull. The most obvious is to increase your income, generally delivering higher sales but it might also mean increase your cost of goods/service. The second is around reducing your expenses. So which is more important?

As my Dad explained to me numerous times throughout my early adult years, you get more benefit from reducing your expenses than you do from increasing your income. When you earn a dollar you are required to pay a % to the tax man. So for every $1 (AUD) you earn you only actually see $0.80 of it. And that?s before you take out any other expenses. But when you save $1 you actually see the whole $1 benefit.

Reducing attrition is one way to save. There is a big opportunity for businesses to improve their overall profitability. On average it costs 50% of a person?s annual salary to be replaced ? sound excessive? Let?s break it down?every time someone leaves your organization it costs you in:

  1. Lost productivity ? in the days/weeks leading up to their final day many staff simply take their foot of the gas and coast
  2. Going away morning teas/lunches/etc ? which can impact the productivity of a whole team
  3. Recruitment and advertising costs
  4. Time to create a role mandate and ideal candidate profile
  5. Time to screen candidates
  6. Time to conduct interviews
  7. Time to give feedback and notify unsuccessful candidates
  8. Time to conduct onboarding activities (building passes, computer access, etc)
  9. Time to induct the new recruit
  10. Training time and costs
  11. Lost productivity ? while the new recruit becomes proficient in their role

And?to recover the cost of each dollar you?ve spent on this activity you will need to make at least $1.20!

Now compare this to what it might cost to retain staff. Research indicates that staff don?t generally leave an organization, they leave a manager. And in most cases it comes down to the focus and attention a manager pays their team. One Huffington Post article references Michael Kibler, who has spent much of his career studying a phenomenon he refers to as brownout. ?Like dying stars, star employees slowly lose their fire for their jobs.? He says that ?brownout is different from burnout because workers afflicted by it are not in obvious crisis. They seem to be performing fine: putting in massive hours, grinding out work while contributing to teams, and saying all the right things in meetings. However, they are operating in a silent state of continual overwhelm, and the predictable consequence is disengagement.?

In the article Dr Travis Bradberry talks about the reasons employees leave and without exception, they all come back to how well their leader engages and inspires them. And the cost to do this is?$0!

The bottom line is this ? it costs a whole lot of money to let your staff leave and very little to make them stay. If you haven?t found a good reason to invest in your leaders, so they can learn how to retain staff, then consider this your business case. It?s time to do something!

If you?d like to know how I help organisations improve staff retention, please drop me an email or give me a call on 0407 522 888.


I am?a passionate leader with a keen focus on creating dynamic team environments through adaptable leadership.

I am?a leadership coach, trainer, facilitator, mentor and speaker who ignites vision and purpose in those I?work with. If you?d like to know more about how I?can help you or your organisation drop me?an email


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