Tag Archives: Turnover

Turnover Continues to Cost Ad Agencies

websitelogo Turnover Continues to Cost Ad Agencies

Posted by Mark Wisniewski, Account Executive, Oracle NetSuite

Employee turnover at ad agencies may be a fact of life, but it begs one question, why does it happen and what does it really mean?

While agency turnover will always exist, there are ways to curb it to strengthen employee engagement and the bottom line. Agencies themselves are often the cause of the turnover. A big new client can result in a hiring spree, or in turn, losing a big client can bring on restructuring.

Employee turnover at agencies is approximately 30 percent a year according to the ANA, with only the tourism industry being higher. Given that people are an agency’s most important and (expensive) asset, being able to prevent or delay an exit becomes extremely important. The first choice is obviously that the employee doesn’t leave to begin with and that the initial investment into training and development to make that employee productive, reaps rewards for years to come. However, employees are still going to leave and try to find greener pastures at the agency down the street. Just delaying a move can have a tremendous impact. By keeping an employee six months to a year longer means 6-12 months of productivity and one less employee to ramp, train and develop.

Turnover costs vary with each agency and position. According to the Society for Human Resource Management, replacement costs can reach as high as 50-60 percent of each employee’s annual salary, with total costs associated with turnover ranging from 90-200 percent of annual salary. Multiply that figure by the number of employees who leave within a year to determine your organization’s annual turnover costs. The figure can be quite shocking!

There are a number of ways agencies can retain their talent such as focusing on culture, quality hires and fostering creativity. Making work meaningful and investing in employee growth (an area often neglected in the fast-paced agency world) can all be big factors on whether someone stays or goes.

Finally, technology and giving someone the right tools to perform their work properly has never been more important. Millennials expect their corporate technology to be as seamless as the technology they use in their personal lives. For example, being able to easily log time and expenses, see their work calendar, collaborate with their peers, see the project burn rate or project profitability should all be easily accessible. Oh and by the way, they expect to be able to do all this simply and intuitively on a slick UI on their phone.

Luckily solutions like this exist, but agencies need to identify and invest in technology and other areas to help curtail and prevent employee turnover. All of which can have a profound impact on the employee, agency culture and oh yeah, the bottom line…

Posted on Wed, November 15, 2017
by NetSuite filed under

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The NetSuite Blog

Everything You’ve Wanted To Know About Employee Turnover

The topic of employee turnover should be taken seriously by all companies, because there are both direct and residual effects of a high turnover rate.

A little bit of turnover is unavoidable. No one can stick around forever, and sometimes what you thought was a good fit turns out to not be. A low rate of turnover is ok – you’ll survive. And there’s something invigorating about newcomers and new minds coming on board.

On the other hand, a company with a high turnover rate might need to take a closer look at what the underlying problem is.

Before we look at how to calculate turnover and ways you can reduce the problem in your company…

Definition of employee turnover

Employee turnover refers to the number or percentage of workers who leave an organization and are then replaced by new employees.

Essentially, it’s the number of employees that leave your company in a certain amount of time and need to be replaced.

The opposite of turnover is retention, which refers to the rate at which companies keep their employees.

We want to help you understand what turnover really means for an organization, and then offer tips on how to avoid it.

Employee turnover statistics

Employee turnover is incredibly costly, which is why HR departments and managers need to work toward keeping their team intact.

Bonusly offers some interesting statistics on turnover in the workforce:

infographic turnover Everything You’ve Wanted To Know About Employee Turnover
In our own real-time report on the international State Of Employee Engagement, data reveals that universally, 15% of employees do not see themselves working at their company one year from now. Even scarier, according to Gallup, 51% of workers are looking to leave their current jobs. Yikes!

The question is, how expensive is turnover really?

Employee turnover costs

Unfortunately, this issue isn’t so black and white; there are many ways to evaluate the cost of turnover. And in addition to dollars and cents, there are other less tangible costs to consider.

These costs include:

  • Costs associated with hiring (job posts, interviews, technical tests, etc.)
  • Onboarding costs (employees aren’t “valuable” for at least 3 months)
  • Training costs
  • Lost time from other employees helping out with questions

This graph by Josh Bersin demonstrates it well.

graph cost employee Everything You’ve Wanted To Know About Employee Turnover

For more specialized positions that take longer to fill, the cost of turnover is higher. For jobs that inherently have high turnover (retail, call centers, etc.) turnover costs will be lower.

To keep it simple, let’s look at a mid-range position. The cost to replace a manager making $ 40,000 a year would be $ 8,000, suggesting that employee turnover costs 20% of an employee’s annual salary.

Employee turnover rate calculation

Use the following formula to calculate turnover rate:

equation turnover Everything You’ve Wanted To Know About Employee Turnover

Not a math person? That’s ok. We’ll break it down for you. Suppose you have a company with 200 employees, and 30 of them leave throughout the year. That would leave with you 170 employees, but of course, to fill the holes you bring new employees in (in this case, 25). This gives you a turnover rate of 15%.

Artboard 12 copy Everything You’ve Wanted To Know About Employee Turnover

Is that good? Is that bad?

There is not a definitive answer on this because the truth is that it doesn’t only matter how many people leave, but who is leaving. If 15% of your top talent and execs are leaving, then yes, that is a problem. However, if 15% of your bottom-performing employees are leaving, you might even consider this exodus to be a positive thing, as it leaves room for new talent to come in.

According to Gallup, 10% would be the ideal rate, and that 10 % would ideally also be bottom performers.

Causes of employee turnover

There are many causes of employee turnover, but lumped together you might simply call it employee disengagement. Two of the biggest factors of turnover are problems at the hiring stage, and bad management.


According to the RainMaker Group, hiring problems account for 80% of employee turnover.

This is why it’s so important to make sure you have an amazing hiring process that is up-to-date with the latest technologies, and that considers things such as cultural fit and company alignment in addition to the experience.

Bad managers

Another significant cause of turnover is bad management.

The truth is that most people don’t quit their jobs; they quit their bosses, which is quite sad because they might love their job and be really good at it.

At a previous job, five people quit over the course of two months. Each one announced an obscure reason for leaving, like focusing on other passions, moving to freelance, etc. All five left without having secured a new job, which seemed reckless, until it became clear, after a sixth person left, that their reason for leaving was unmentioned but unanimous: the boss. After the first employee mustered the courage to leave, it triggered a domino effect.

Can you imagine the stress that losing six team members caused for the remaining employees who had to pick up the slack; for the HR reps, who had to hire quickly but strategically; and for the manager, who had to train a slew of new employees? It’s a huge, time-consuming, discouraging setback.

How to reduce employee turnover

Focusing on employee engagement and personal growth for your employees will pay huge dividends for your team.

Here are a few ideas you can use to reduce your turnover:

  1. Improve the hiring process

    The hiring process is where it all begins, so it needs to happen properly. Make sure new hires are a good cultural fit and that they are aligned with the company’s mission and values in addition to considering their skill set and past experience in the field. It might take a bit more time to do the hiring process right, but it’s better to get it right the first time then have to do it over and over.

  2. Improve the onboarding process

    20% of employee turnover happens in the first 45 days, and a big part of that is due to improper onboarding. Be sure to set proper expectations, make them feel welcome, collect feedback, and touch base with them often.

  3. Train managers

    When you hire a manager or promote an employee to a managerial position, it’s important to consider more than just their skill set. There is an element of personality and psychology to leadership that is just as important to consider. Offering training for managers is one of the best ways to ensure that they can lead a team successfully. Things like emotional intelligence and empathy cannot necessarily be taught, but they should be considered during the hiring process.

  4. Give opportunity for growth

    What employees really want, as famously taught by Dan Pink, is autonomy, mastery, and purpose. You can easily fulfill their need for mastery by letting them improve whatever skills they have for their job. It’s a win-win, because if they’re better at what they do, they’ll be more productive and feel encouraged to keep learning and improving.

    Offering your employees professional development opportunities shows them that you are invested in their future at the company, which will in turn inspire them to stay in the organization.

  5. Recognize employees

    Companies that scored in the top 20% for building a “recognition-rich culture” actually had 31% lower voluntary turnover rates, according to research by Josh Bersin.

    The research shows that it’s more important to receive recognition from peers than from top managers, so set up a way for employees to praise and recognize each other.

  6. Promote work-life balance

    Work-life balance is one of the most important parts of keeping your employees happy, healthy, and productive. Organizations are finally starting to understand to the importance of helping employees maintain a proper work-life balance to reduce stress and maintain a positive outlook when they go to work in the morning. Being mindful not to overwork your team and avoiding contacting them outside office hours is a great start, but you can also offer benefits such as gym memberships, proving that you care about both their mental and physical health.

  7. Collect frequent feedback

    Some companies still survey their employees only once a year, but employees need to be able to express themselves and offer feedback on a more frequent and regular basis. Employees want to be listened to and feel that their opinion matters. Collecting frequent feedback allows managers to act instantly on problems.

For more insight on employee retention, see 8 Employee Retention Facts That’ll Keep You Up At Night.


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Digitalist Magazine

17 Shocking Truths About High Employee Turnover [INFOGRAPHIC]

The September issue of the Harvard Business Review features a cover story on design thinking’s coming of age. We have been applying design thinking within SAP for the past 10 years, and I’ve witnessed the growth of this human-centered approach to innovation first hand.

Design thinking is, as the HBR piece points out, “the best tool we have for … developing a responsive, flexible organizational culture.”

This means businesses are doing more to learn about their customers by interacting directly with them. We’re seeing this change in our work on d.forum — a community of design thinking champions and “disruptors” from across industries.

Meanwhile, technology is making it possible to know exponentially more about a customer. Businesses can now make increasingly accurate predictions about customers’ needs well into the future. The businesses best able to access and pull insights from this growing volume of data will win. That requires a fundamental change for our own industry; it necessitates a digital transformation.

So, how do we design this digital transformation?

It starts with the customer and an application of design thinking throughout an organization – blending business, technology and human values to generate innovation. Business is already incorporating design thinking, as the HBR cover story shows. We in technology need to do the same.

SCN+SY 17 Shocking Truths About High Employee Turnover [INFOGRAPHIC]

Design thinking plays an important role because it helps articulate what the end customer’s experience is going to be like. It helps focus all aspects of the business on understanding and articulating that future experience.

Once an organization is able to do that, the insights from that consumer experience need to be drawn down into the business, with the central question becoming: What does this future customer experience mean for us as an organization? What barriers do we need to remove? Do we need to organize ourselves differently? Does our process need to change – if it does, how? What kind of new technology do we need?

Then an organization must look carefully at roles within itself. What does this knowledge of the end customer’s future experience mean for an individual in human resources, for example, or finance? Those roles can then be viewed as end experiences unto themselves, with organizations applying design thinking to learn about the needs inherent to those roles. They can then change roles to better meet the end customer’s future needs. This end customer-centered approach is what drives change.

This also means design thinking is more important than ever for IT organizations.

We, in the IT industry, have been charged with being responsive to business, using technology to solve the problems business presents. Unfortunately, business sometimes views IT as the organization keeping the lights on. If we make the analogy of a store: business is responsible for the front office, focused on growing the business where consumers directly interact with products and marketing; while the perception is that IT focuses on the back office, keeping servers running and the distribution system humming. The key is to have business and IT align to meet the needs of the front office together.

Remember what I said about the growing availability of consumer data? The business best able to access and learn from that data will win. Those of us in IT organizations have the technology to make that win possible, but the way we are seen and our very nature needs to change if we want to remain relevant to business and participate in crafting the winning strategy.

We need to become more front office and less back office, proving to business that we are innovation partners in technology.

This means, in order to communicate with businesses today, we need to take a design thinking approach. We in IT need to show we have an understanding of the end consumer’s needs and experience, and we must align that knowledge and understanding with technological solutions. When this works — when the front office and back office come together in this way — it can lead to solutions that a company could otherwise never have realized.

There’s different qualities, of course, between front office and back office requirements. The back office is the foundation of a company and requires robustness, stability, and reliability. The front office, on the other hand, moves much more quickly. It is always changing with new product offerings and marketing campaigns. Technology must also show agility, flexibility, and speed. The business needs both functions to survive. This is a challenge for IT organizations, but it is not an impossible shift for us to make.

Here’s the breakdown of our challenge.

1. We need to better understand the real needs of the business.

This means learning more about the experience and needs of the end customer and then translating that information into technological solutions.

2. We need to be involved in more of the strategic discussions of the business.

Use the regular invitations to meetings with business as an opportunity to surface the deeper learning about the end consumer and the technology solutions that business may otherwise not know to ask for or how to implement.

The IT industry overall may not have a track record of operating in this way, but if we are not involved in the strategic direction of companies and shedding light on the future path, we risk not being considered innovation partners for the business.

We must collaborate with business, understand the strategic direction and highlight the technical challenges and opportunities. When we do, IT will become a hybrid organization – able to maintain the back office while capitalizing on the front office’s growing technical needs. We will highlight solutions that business could otherwise have missed, ushering in a digital transformation.

Digital transformation goes beyond just technology; it requires a mindset. See What It Really Means To Be A Digital Organization.

This story originally appeared on SAP Business Trends.

Top image via Shutterstock


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Digitalist Magazine

How High Employee Turnover Harms Your Performance

 How High Employee Turnover Harms Your PerformancePreviously I wrote about a study exploring the impact of high employee turnover on the sales and profitability of a business. It found that in offices with low employee turnover, profits were four times as high as those in offices with high employee turnover. The rationale was that employees built up relationships with customers that were lost or disrupted when they left the company.

Despite this, the research community remain mixed on whether high turnover impacts upon performance. There appears to be some contrasting hypothesis at play.

The first suggests that turnover naturally affects performance. Those that leave are often experienced staff, and it naturally takes time to replace that expertise. They also develop the internal networks required to do their jobs well, which again is difficult to replace in the short-term.

A second hypothesis is that companies with high staff turnover don’t suffer because they never get a chance to build up the experience and connections required for staff loss to affect them. It’s literally a case of them not missing what they don’t have. They also build up significant expertise at replacing staff, even if not so hot at keeping them.

A final theory is that turnover can be beneficial to an organisation because it weeds out the poor performers whilst also bringing in fresh ideas and perspectives from outside. This theory relies on turnover being relatively low, as once it reaches two high a point the costs exceed the benefits.

A meta study of over 250 pieces of research has been concluded recently that compared the various hypothesis towards employee turnover.

It found that employee turnover was generally speaking a negative thing, with an increase of turnover by 1 standard deviation contributing towards a 0.15 drop in performance. When turnover became higher, this decrease in productivity became stronger.

Not all instances of high turnover were equally disastrous however, and they found some interesting nuances to the phenomenon.

High turnover hits some metrics more than others

For instance, they found that employee turnover affects some performance measures much more than others.

  • Customer Satisfaction and Quality showed large effects
  • Weaker effects found for employee attitudes, productivity and financial performance
  • Generally the effects were greater when measuring performance soon after the turnover, rather than moderately far or far into future

Organization type

The kind of organization and the way that organization is structured also mattered a lot. They found for instance that the following types of organizations were particularly impacted

  • smaller companies
  • executive level samples
  • industries such as healthcare and hospitality, coded as ‘human-capital-centric’
  • those with so-called ‘primary employment systems’ that focus around delivery through committed employees (instead of a transactional, control-system)

So the picture is that if you’re in a knowledge critical business, high turnover is really bad news.  Here are three simple ways you can reduce employee turnover.

  1. Build strong relationships with your employees.  They aren’t there just to help you meet your numbers.
  2. Reward employees for good performance.  This could be as simple as saying thank you for a job well done.  Let them know they’re appreciated though.
  3. Provide constant feedback.  Let your staff know how their performance is on a frequent basis, and coach them to deliver better performance in future.

This post originally appeared on Work.com

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 How High Employee Turnover Harms Your Performance

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