Get people in the right seats, or it will cost you

$30,000 to $40,000 per employee.

That’s the replacement cost of an average worker making around $60,000 per year, according to the Society for Human Resource Management.

SHRM estimates it costs 6 to 9 months of most employees' salary to replace them, but that can go up or down depending on their position. A minimum wage worker may only cost 10% of their annual compensation to replace, but C-suite executives will hit you for a whopping 213%!

Get people in the right seat

Let’s crunch some real numbers. The Bureau of Labor Statistics says U.S. workers averaged about $51,000 per year in the fourth quarter of 2020. That means it’s going to cost at least $25,500 to replace them.

Of course, that’s just for one employee.

The average separation rate in the United States in 2019 was 22%. That varies by industry, of course, but this gives us a good starting point. If you have a 100-person company, you could expect to replace 22 of those people in just one year. Assuming they each make the national average salary, that’s a whopping $561,000 in turnover cost! If any of those 22 you’ve lost are managers or, worse, C-suite then you are in for an even bigger hit to the bottom line.

How do you turn those losses into gains? Start with your people. They have to not only WANT to stay, but they must be empowered to do a good job. Not mediocre. Not average. Not passable. A GOOD job. And, if possible, a great job. 

That’s easy to do when you have the right system in place. It needs to connect your employees with managers who embrace a coaching philosophy in a way that enables everyone, including the company, to win. So what’s the secret?

1. Switch up the seats. Not everyone is ideally suited to the position they were hired into. They may do a decent job, but eventually their lack of skills or drive will begin to show in your profit margins. You can’t force a fish to pick apples. A good coach can match their team member’s skills and aspirations up with what the organization needs.

2. Get the tools for the job. No matter what the job is, it’s made infinitely easier when you have the correct tool for it. That’s as true for plumbing as it is for performance management. That tool should facilitate frank conversations between a manager and their direct report. The focus should be to speed the pace of significant change and grow the company while developing greater potential in that employee, all while not overwhelming them.

3. Enable your managers. Their coaching will become the channel through which you’ll cascade company initiatives, develop your workforce, and increase profitability. Be sure they have the training and support they need to make that happen.

Gary Markle, chief catalyst of Catalytic Coaching Inc, is a speaker, consultant, author, and a business partner of Energage, a Philadelphia-based employee survey firm. Energage is The Washington Post’s partner for Top Workplaces.

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