Workforce turnover is an important issue for HR and business leaders to consider when making new location decisions. Talent market alignment with a specific business plays a role in workforce turnover management and, when managed effectively, can result in operating cost reduction and increased revenue.
Turnover is top of mind for business executives due to its cost implications. Human resources expenditures like exit interviews, posted open positions, training and development and benefits enrollment add up quickly. A larger part of the cost is operational, including lost sales revenue, longer lead times for products, loss of institutional knowledge and added work for other employees.
While turnover costs vary by company, the general consensus is that costs increase with higher levels of skill and experience. As a percentage of salary, estimates are 50% for entry level, 125% for mid-level, and 200% for executives.
Workforce turnover is causedby several micro and macro-level factors:
- Industries that offer greater stability and compensation tend to have lower turnover than ones with fewer benefits (ie. finance versus retail) or more volatility(ie. energy)
- Higher levels of job specialization tend to reduce turnover due to different levels of education, training and skill (ie. accountant versus entry-level customer service representative)
- : Stiff competition from similar employers in a market that are seeking the same talent can increase turnover rates
- Limited opportunities to increase skills or advance within an organization can lead to higher turnover
- Markets with high cost of living correlate with higher turnover due to employees seeking to improve wages to make ends meet
Turnover Variation By Select Cities and Industries
Many of these factors can be evaluated and mitigated through an organization’s location strategy. To understand more on this topic, contact Business Consulting. Our team is dedicated to ensuring clients achieve success in their location decisions.