
How much does employee turnover really cost? - craigkerstiens
https://medium.com/latticehq/how-much-does-employee-turnover-really-cost-d61df5eed151#.p105nzhlz
======
dtnewman
Two thoughts:

* It's a good idea to try to quantify the cost of losing an employee. If you at least understand what basic costs you'll incur, such as cost of hiring, training, etc. it'll give you a basis for realizing the importance of minimizing turnover (perhaps you'll even conclude that turnover isn't a big deal in your case). But it's very hard to quantify some of the largest costs such as employee moral. I was once at a company where an entire (small) team slowly left after a single person departed. Perhaps any individual's departure could have been handled without too much of an issue, but the loss of entire team and all the institutional knowledge contained there was quite damaging to the company.

* The article mentions some tips for retaining employees and I think they are spot on. But I don't think it emphasizes the importance of salary enough. A lot of employees jump ship because of the higher salaries they can get when they move around. Meanwhile, the original company they left will likely have to pay market rate to get someone with similar experience (and none of the institutional knowledge), so they would have been much better off if they would have just bumped their employee's pay to market rate in the first place. By the time it gets to a counter-offer stage, it's often too late.

EDIT: The article briefly mentions the importance of paying market rate
salary, but I missed this sentence when I read it over the first time.
Updating my second bullet accordingly.

~~~
jedrek
I've been to management seminars where they downplay the importance of money,
saying that employees are mostly motivated by other factors. Then I talk to my
co-workers, the ones that are quitting, and about half of them leave because
they've been working for 2+ years without a raise.

I worked at a company where a company decided to introduce a new management
program (LEAN) into one department. That 16 person department saw 18 people
leave during my 6 months at the company, and only three of the original team
was there when I left. That is to say, five people started work after I showed
up and left, before I quit to be a WFH dad.

And yet, nobody blamed the brass or the people implementing the LEAN program.

~~~
_yosefk
I'm guessing few would book a management consultant simply telling to pay
people more money - consultants who want a job instead have to explain how to
motivate for free.

But the people who share a lot of the blame for this idiocy and who have no
good excuse are "heterodox economists" and TED talk presenters telling us how
money doesn't motivate people past a certain point, or how it actually makes
people less creative, all supposedly to criticize "capitalism" but in fact to
make the market work worse for employees who now actually have to argue with
management that yes, money does motivate them, with the manager replying "I
know it doesn't so tell me what's really bothering you" or what-not. I mean
it's not like companies seek less profit having seen the TED talk, instead
they learn that they can cut expenses by avoiding "needless" raises. Quite the
heterodoxy, that.

~~~
beat
Money doesn't motivate people past, oh, a half million or so a year, maybe.

~~~
milliondollar
Exactly yes. I used to make over a million a year as a big 3 partner in
management consulting. I dialed back to half time and am UNBELIEVABLY happy!

~~~
jimbokun
Is that because you saved enough making a million a year you can now afford to
work only half time and absorb the pay cut?

------
shanemhansen
I've often been shocked at how a theoretically rational profit seeking
business will happily throw millions down the drain rather than compensate an
individual based on value. Ultimately I've concluded that although they may be
greedy, most businesses don't make rational profit seeking decisions. They
make decisions that stroke their ego, and sometimes their ego can't accept the
value that certain employees bring to the table. They are just coders right?
/s

Nowhere was this more apparent than at my first big job. The company's first
full time engineer was still working there, and still extremely essential to
the operation of the business. (It was actually bad that he was so essential,
but that's another story). This company made several hundred million dollars a
year. Online. And almost daily this individual used their tribal and
historical knowledge to keep the site up. He left. I doubt he was paid a
million dollars, but I have no doubt that paying a million dollars to keep him
around would have been a cost saving measure.

~~~
sputknick
It's not about what salary that engineer deserved, but what they could
command. That engineer might have done $1 million worth of work a year, and
deserved a $1 million salary; but he couldn't go to another company and
proclaim he was worth $1 million. He could probably go elsewhere and get a
slightly above average salary, your company knew that, and that is why they
paid him that.

~~~
battlebot
You know what's even worse at trying to surface? When you _saved_ your company
millions of dollars! I'm not talking theoretical dollars here, I'm talking
about last year X cost $Million, and this year due to my finding out some
egregious mistakes and fixing them, that cost was measurably less by seven
figures, and no one bothers to tell that story to the higher ups! I just
wonder what these people do all day? Darn few managers I have ever worked with
seemed able to even tie their shoes properly.

Meanwhile, I had to sit through an all hands meeting where some dingy broad
got a 5 figure award for cooking up an Access database that some asshat
manager used for like a week!

Franz Kafka could not dream this up!

~~~
ajmurmann
Because of stories like this I am generally against publicly praising
individual employees. Whenever you do that there is gonna be somebody who did
something great you don't know about and aren't praising. There might even be
people who think that what the person you are praising did something bad. I
remember a all-hands meeting where somebody got praised for working all
weekend. Later in private several people were disgruntled and claimed the
person only had to do so because they had messed it up before despite being
told to use a different approach repeatedly.

Just praise people in private, actually trust them and listen to them and
reward them accordingly comes compensation time.

~~~
pavel_lishin
I don't think I agree; I think that your examples show that it's important to
know your employees' accomplishments, and to praise people accurately. Public
praise matters; I like it when my managers and coworkers acknowledge good work
I do, and it's nice hearing that my coworkers are doing good work, too. Why
should we all labor in the shadow? Why should we be afraid of praise?

~~~
ajmurmann
I don't think that this means that we have to labor in the shadows. Typically
people notice pretty well who is competent, who puts in effort and who
actually gets work done. In a healthy organization that also will get
acknowledged organically in all kinds of ways. High performers will be asked
for help by others, people insist that they will be invited to meetings or
that their opinion will be asked on certain matters. We shouldn't be afraid of
praise but of awkwardly praising a subset of people in a all hands meeting
where we might miss people who did good work and now will feel that their work
isn't acknowledged. This also easily gets political. You have one manager who
judges their employees wrong and their reports who did questionable work get
praised at the all hands. Maybe they were recommended for praise although
there manager knew they didn't really deserve it but needed done if their
reports to also be mentioned. It frequently also leads to a hero coder
culture. Someone who stays up all night and implements a feature that
management wants really badly in a hard to maintain and buggy fashion will get
praised at all hands. People who end up fixing the mess won't. Very
frustrating for people who fixed it. Obviously this will kick off a feedback
cycle leading to more and more all nighters producing crappy code.

------
makecheck
Software development has some “special” traits that are not necessarily
covered by this analysis.

For one thing, you can’t just measure what a developer has _done_ ; you need
some sense of how easy maintenance is _going_ to be. Given two brilliant
solutions that required an extraordinary developer to create, one may be an
indecipherable mess and the other may have been built in a way that makes
typical maintenance tasks very straightforward. From the outside they may look
the same but the cost difference is huge.

Some people are really good at writing solid code, and replacing them may mean
_introducing_ headaches that you didn’t have before. Also, a particularly
weird bug may cost your team tremendous amounts of time (and possibly more),
and you may not have the right people to deal with that quickly.

Also, “cost of hiring” probably isn’t referring to the cost of having a really
bad hiring staff. If those people are not doing a good job of filtering
résumés or otherwise finding the right people, or if they leave good
candidates dying on the vine due to slow response times, _there is a big
cost_. It is extremely important for companies to look good _from the outside_
to attract candidates.

~~~
Bartweiss
Maintenance (and maintainability) are definitely key questions for software
development.

The first point, about keeping people who write maintainable code, I agree
with 100%.

The second one, about keeping codebase expertise, seems complicated.

On one hand, we all know there are weird bugs and edge cases best handled by
knowing the code intimately. What's 20 hours of QA and engineering for an
unfamiliar team can be a 5 minute tweak for the guy who wrote the method, even
with clear code and good tests. Weird bugs do happen, and just knowing that
what it _isn 't_ can help with finding some awful probabilistic issue.

On the other hand, I wonder if this is a "controlled burn" kind of issue.
Everyone's heard of systems that work fine for 20 years and then explode as
soon as the expert leaves. Normally that's a design and maintainability issue,
but at some level we're talking about bus factor here. You're definitely
trading fewer crises for worse crises, but I don't know the rate on the
tradeoff.

Obviously unplanned turnover is still a huge issue, but I do wonder what the
right balance is on "just knows how to fix it" versus "institutional knowledge
is safer than personal".

~~~
humanrebar
It's possible to write bug or enhancement requests against the system if it
takes too long for new contributors to come up to speed. I do this from time
to time.

It's important to remember that specify specific exit criteria, like "it
should take one command instead of fifteen to add a new request to the XYZ
endpoint."

------
georgeecollins
Here is a strange thing I have seen: Turnover is bad for a company overall,
but good for H.R. HR teams are more important the more there is a need for
recruitment. I have seen them be the part of the company that says "we are a
team like a sports team, not a family," implying churn is OK. That is good for
their productivity, particularly if their workload is on boarding and
"culture" as well as recruiting.

~~~
abraae
Turnover is not always bad by any means. Often a company accumulates (bad
hires, acquisition, good apples going stale) people who would be better off
gone for everyone's sake.

There's good turnover and bad turnover.

~~~
flukus
But when turnover is high the good ones are much more likely to be leaving.

~~~
ArkyBeagle
"Good" and "bad" mean different things at different times to the same company.

~~~
flukus
True, but how often is the guy producing awful, half working, over complicated
code "good" for the company? That person is typically the last to leave. And
we've all seen management reward the firefighter that is also the arsonist,
they are never "good" for the company, but the company thinks they are.

------
nullnilvoid
Many managers have the mindset that they can find replacements easily. If you
don't do the job, there are 5 people lining up for this position. They don't
realize the cost of turnover, partially because it is hard to quantify the
cost. In the good old days, IBM and other blue chips would spend lots of money
and send employees back to school and train them well. Nowadays, everyone is
considered to be replaceable.

~~~
mevile
In my experience, this is not true in San Francisco. I've never worked
anywhere in the bay area where engineers were thought of as easily
replaceable. Everyone knows how hard it is to hire competent engineers around
here. Even if people were lined up to replace a lost employee, just the
interview process for hiring people is expensive as it takes multiple people
out of their role to sit and interview someone for a day. When you lose
someone, you end up with an empty position for at least a month, as even if
you do hire someone right away they have to quit their current job and leave
notice.

~~~
Arizhel
There could be a disconnect between hiring managers and HR and upper
management. The hiring managers you know probably do understand the cost of
replacing a lost employee and how hard it is to hire. The HR department that's
actually in control of this, and of salaries, doesn't, or just doesn't care.

I have a theory that a lot of the terrible mismanagement we see with modern
American corporations comes directly from HR. Didn't W. Edwards Deming say
that companies would be better off just eliminating their HR departments
altogether?

~~~
battlebot
It would help considerably if every business school in the nation wasn't
following the exact same idiotic playbook.

------
shawn-furyan
If a 'mission that matters' is important enough to spend 3 paragraphs on, but
salary only deserves a single dismissive paragraph, then why exactly do we
never have enough teachers?

If people really had such a great preference for mission over compensation,
then the public sector, and non-profits could be 'selective'. I mean, the
public and non-profit sector usually don't even have to do bullshit PR vanity
projects (cough __Microsoft-Google-Facebook-Amazon-Exxon-GE-BP __) to convince
people that they are not evil on balance. Still, it 's the massively
profitable companies that have the luxury of selectivity, not the ones with
the best missions.

Like so much in 'management methodology' literature, there is such a
willingness in this article to prefer anything (like small ungeneralizeable
psychology studies[1]) that confirm clearly absurd magical beliefs (e.g. there
are easy cheap scalable alternatives to compensation for retaining employees)
that it is impossible to take the advice therein remotely seriously.

[1] that are being misinterpreted, to boot

[edit: added the footnote, grammar]

------
skylark
I feel like the tighter your developers are with each other, the higher the
impact of turnover. I personally know from experience that when my high
performing friends move onto bigger and better things, they constantly
encourage me to go with them or find something new myself. Entire teams can
end up leaving through a sort of snowball effect.

------
ChuckMcM
The article goes out of its way to mention 'regrettable employee turnover'
which is a polite way to identify the group "people who left you wanted to
stay" vs "people who left and you are happy with it." However, that requires
that you also understand the impact of an employee on the organization.

There are people who have been "let go" because their manager had no idea what
they actually did, and that caused a huge impact on the organization overall.
There are people who have been "retained" because their manager felt they were
key to the success of the group/project but didn't realize the toxic impact
they were having on the organization.

These are the "inverted" cases where you really need to keep the person having
high impact and manage out or move the person who is creating stress on the
rest of the team.

------
vermontdevil
Not hard to see the obvious.

Look at Costco compared with Sam's Club. You can see the difference since
Costco employees tend to stay longer there.

[https://hbr.org/2006/12/the-high-cost-of-low-
wages](https://hbr.org/2006/12/the-high-cost-of-low-wages)

~~~
kornish
Another example in this vein is Henry Ford's $5 work day – wages dramatically
above then-market rates prompted outrageous enthusiasm and loyalty from
workers.

[http://www.henryford150.com/5-a-day/](http://www.henryford150.com/5-a-day/)

~~~
mywittyname
There's a lot more to it than that.

>The $5-a-day rate was about half pay and half bonus. The bonus came with
character requirements and was enforced by the Socialization Organization.
This was a committee that would visit the employees' homes to ensure that they
were doing things the "American way." They were supposed to avoid social ills
such as gambling and drinking. They were to learn English, and many (primarily
the recent immigrants) had to attend classes to become "Americanized." Women
were not eligible for the bonus unless they were single and supporting the
family. Also, men were not eligible if their wives worked outside the home.

[http://www.forbes.com/sites/timworstall/2012/03/04/the-
story...](http://www.forbes.com/sites/timworstall/2012/03/04/the-story-of-
henry-fords-5-a-day-wages-its-not-what-you-think/#3acd0e971c96)

~~~
kornish
I didn't know that – thanks for sharing!

------
euphoria83
This article missed the fact that the cost to the company in trying to keep
the employees who will leave every year might be greater than the cost of
losing them. For e.g., in the example given in the article, the company loses
1.57 million due to employee turnover. However, who knows how much the company
might have to spend to keep those employees from leaving. The cost would be
high because the effort spent on employee retention is spread over all
employees, even those who won't leave. Hence, even a small expense per
employee, might end up costing more than the cost of losing certain percent of
them.

~~~
jackaltman
That's a valid point, that it could potentially be more expensive than it's
worth. In other words, it is possible to spend too much on trying to make your
employees happier.

I wasn't trying to argue that the optimal amount to spend on employee turnover
is infinite, but I do think most companies dedicate less than the
rational/optimal amount of effort on it.

~~~
euphoria83
I totally got your point. I am playing Devil's Advocate to those who are
recommending going to the other extreme and spending enormous amount of money
for employee retention, including a significant increase in per employee
salary.

------
mr_tristan
While yes, it's important to quantify, I'm not sure the article is that
actionable for most startups, or even businesses that don't have large HR
departments. Most software development managers I know would just pull
estimated values out of their ass, instead of actually creating a formal model
for tracking things like "cost of onboarding and training".

It sure would be nice to have some case studies, perhaps? Has anyone worked at
a place that tried to calculate required onboarding costs for high-skill,
salaried positions? I've only ever seen places just create random budgets for
online programs like Linda.com, but these programs never seemed relevant to
the positions that, well, were the most significant to the company, to put it
nicely.

I just suspect unless you had a quant in an HR department, this sort of thing
just will never get calculated correctly.

~~~
mooreds
I commented above, but I don't think you need to get this perfect. What you
want is a baseline number, even if it is low. If that number is $X to replace
this person (fully, including estimates of rampup time and lost productivity),
and they want a raise of $Y, and $Y < $X, the rational employer will give the
raise. Heck, the rational employer would give $X-1.

Now, is the world full of rational employers? Nope.

------
mtkd
employee turnover is why enterprises rarely build any useful software and have
to buy startups to more forward

projects or operations with fragmented continuity because of turnover
contribute near zero additional value and existing value decays quickly over
time - each time a role is replaced more knowledge is lost - to the point the
project is permanently on life support

paying people more and more to stay isn't enough - you also have to remove all
the oxygen stealing layers of bureaucracy to create a bearable working
environment - but that isn't usually possible in an enterprise as everyone
senior tries to avoid being responsible for anything which almost always leads
to more management and compliance layers until someone soils the bed over cost

I take my hat off to Microsoft over the last couple of years - what those guys
(Scott Guthrie?) have done with .NET, SQL etc. appears, from the outside, to
have reversed that trend

------
Inthenameofmine
It's funny. The smart companies I know are all moving away from hiring full-
time devs. They want a very small core team of highly skilled devs, all with
relatively high equity, combined with tons of freelancers/consultants on a
call-list.

By far the biggest cost to software companies is employee turnover because the
second greatest cost is employee education and training. We've measured
developer productivity in multiple ways and time to full productivity within
any new team/project generally is 3-6 months. Average empployment time at any
single company in the tech industry is now 18-24 months. It makes more sense
to pay 3-4x for most work, rather than have to deal with HR, education, and
retention overhead.

~~~
qaq
Do freelancers/consultants magically need no onboarding and become fully
productive on day 1?

~~~
whyileft
With freelancers you can just stop paying them after day 1 if they don't and
try another. In some verticals of software development there is a ton of
supply.

~~~
st3v3r
That tends to get you a reputation, which makes it harder to find more
freelancers.

------
mightybyte
Years ago I left a great job that I loved working at a Fortune 200 company
because I had to make a family-related move. The company I worked for also had
a significant presence in the city I was moving to. My boss gave me a referral
to someone there with the logic that I was already known to be a reliable
contributor, and at the very least it would be lower risk for the company to
move me there rather than hire a new unknown person.

I got several job offers in the new city including one from the same company.
Problem was...the company was 20% lower than the best of my other offers!
Apparently there was a company policy limiting how much of a raise could be
given, so they straight-up couldn't compete. I got the distinct impression
that I could have taken a job with another company, then come back 6-12 months
later and gotten a much higher offer. Basically mandated turnover. Talk about
an awful policy.

~~~
collyw
One place I worked couldn't possibly give me the pay rise I asked for, yet
they are now using 1 and a half employees to do my job (one full time, one
part time).

------
JustSomeNobody
Managers, here me now.

1) Money is a factor because my job is difficult.

2) Up to date technology is important because I want to build interesting
products.

As a developer, these are my motivations.

~~~
overcast
Money I'll give you, but the vast majority of software is not going to be
"interesting" or progressive. There are tons of major corporations doing
"boring" work.

~~~
Aeolun
Money works perfectly fine as compensation for boring work :)

------
Axiverse
I wonder if taking such a view can be short-sighted. While it is true that
employee turn-over can be costly, perhaps that is also one of the ingredients
that make tech successful. The valuable employees that you hire have gained
their skills at a number of other companies and the employees that have left
are contributing to other companies. While this isn't on your balance sheet,
it is contributing to the tech community as well. I wonder how you would go
about quantifying this.

From my experiences, those in tech for the most part have come from the tech
community and stayed in the tech community. Employee mobility is creates a
mixture of ideas and also lets individuals to be trained in certain
disciplines by those that are most capable at it. In return, companies get
employees that were well trained by other companies thus increasing the value
of tech companies as a whole. I wonder if this becomes a trend and companies
try to close their borders tighter (somewhat reminiscent of U.S. politics
right now, huh?) that companies will see short term gains, while the entire
industry would suffer in the long run.

------
michaelfeathers
The cost of not having employee turnover can be substantial also.

It would've been interesting to see this addressed. In some particularly bad
cases, organizations atrophy and lose the ability to respond well.

------
Zigurd
I've never heard of a manager being reprimanded for high turnover. I would
guess that this metric has to bubble up to the level of investors' analytics
to make a difference in management performance assessment. Perhaps Glassdoor
sees a market for such a product. The stakes are high enough that it would
move the needle at an organization like YC.

------
cj
> "Instead, focus on growth, impact, and care"

Since a lot of tech companies employ young talent (relative to other
industries), this video by Simon Sinek on "Millennials in the Workplace" can
be enlightening:

[https://www.youtube.com/watch?v=hER0Qp6QJNU](https://www.youtube.com/watch?v=hER0Qp6QJNU)

Forewarning, he goes off the deep end on a few points, but IMO the general
ideas are valid.

~~~
2xlbuds
I've seen this talk before, and he makes a ton of assertions mostly backed by
often-repeated cliches rather than data (e.g. participation trophies). This is
a really good talk I've seen posted in response to this very video before, so
I'll post it again.

[https://www.youtube.com/watch?v=-HFwok9SlQQ](https://www.youtube.com/watch?v=-HFwok9SlQQ)

------
rorski
What is the cost to companies of letting demoralized employees stick around to
wait for options/RSU/bonuses to vest? I'm in the process of leaving a company
now where I've been watching this happen for the better part of two years, and
I keep wondering how much more productive and successful we could have been if
those people had been let go and filled with some new, motivated recruits.

------
nodefortytwo
In my business I do try to minimise turnover for almost purely emotional/moral
reasons. It's good to have a team that as close to friends as possible. The
technical cost of staff turnover is minimal because systems and processes
should be designed in a way that anyone can leave without impact to the
business for obvious reasons (illness, relocation, family circumstances)

------
vinceguidry
In my studies of history, I'm finding this current thrust of individuals as
stores of wealth over firms and nations to be quite interesting. Back in the
colonial period, everything revolved around national wealth. The crown alone
sanctioned and funded expeditions, chartered corporations, and fought wars.

Over the last few centuries, power gradually shifted to the firm, then to
markets, and now finally to individuals. Used to be, you had to pick the right
parents, pick the right industry, and hope the political winds don't shift
against you to earn a decent, livable life.

Now, all you need is intelligence and mental fluidity to weather hardships. No
longer is a job loss catastrophic. Just about anyone born in a Western nation
can, if he decides to, gain an education and make his way up the social
ladder.

This is completely unprecedented from a historical perspective. The ability of
the not-well-off to earn and enjoy the benefits of education was far and away
only the province of the extremely gifted, the John Rockefellers of the world.
It's easier than ever for someone born dirt-poor to become a CEO or
politician.

Soon the world will turn completely on merit. It'll be fascinating to watch
the way our societies go next. Certainly affluence will continue to push out
into the developing world. But how will modern Western societies evolve? Will
we conquer aging and produce scions of unimaginable ability? Death is the
ultimate limiter of the power of individuals.

~~~
krapp
>Now, all you need is intelligence and mental fluidity to weather hardships.
No longer is a job loss catastrophic. Just about anyone born in a Western
nation can, if he decides to, gain an education and make his way up the social
ladder.

What Western nation do you live in?

Because in the Western nation I live in, both job loss _and_ education can be
catastrophic for many people.

~~~
camelNotation
If it's catastrophic, you're probably not taking advantage of the resources
available. I know many people who feel pigeon-holed or trapped simply because
they are unaware of how insanely easy it is to drop what you're doing, go to
school, and get hired elsewhere. There are so many resources and options out
there if you're willing to weather the change. Most people are just too scared
to consider it and they misinterpret that as a problem with the market itself.

~~~
bubblesocks
Exactly! I switched careers by doing nothing more than studying in my local
library, and then applying for jobs once I felt I was ready to interview.

~~~
burkaman
Now imagine you work two jobs to pay for food and shelter, you don't have a
car or a library within walking distance, you couldn't afford any education
beyond high school, and employers are statistically much more likely to ignore
your resume because your name sounds black.

~~~
camelNotation
I admit that this sort of individual is particularly hard hit. There are
programs that can help with different aspects of that situation, but no
guarantee all will work with enough synchronicity to facilitate a full college
education. That said, people who have it that rough also have nothing to lose.
That's exactly the sort of person who could tolerate temporary homelessness if
it means a better future. If the baseline goal is to improve their financial
station, they should be going after trade skills, not full college. Trade
skills could get them a stable career, a car, and solid resume. After that,
they can consider going further, but there is definitely a path.

~~~
burkaman
Of course there's a path, but it's a very difficult, not at all guaranteed
path. Compare this path to a guy with money in the bank, a college degree, a
decent resume, and 60 hours of spare time a week saying "just study a little
and start applying to jobs, anyone can do it", and you can see why this thread
seems so condescending. And imagine saying "you've got nothing to lose" to
someone like this with a kid. This isn't a contrived scenario, there's
millions of people like this in America. You might say it's irresponsible to
have kids in this situation, but it's not quite that simple.

There's no doubt that we live in a better world than the past, but I don't
think it's helpful to spread this idea that anyone can succeed if they just
try hard enough. That's the goal, not the reality, and it will never be the
case that everyone has an equal chance to succeed.

~~~
JoeAltmaier
Depends on the kid, the family and the market. Willing to move for the job?
No? Why not? Willing to work in a related field until you can get into your
first choice? Why not? Willing to switch jobs 3 times in the first 5 years?
Why not?

Folks have unequal chances for sure. But a significant fraction of the
differences are, what they're willing to do.

~~~
burkaman
These questions are still from the perspective of someone with money,
education, and options. Imagine you're talking to someone below the poverty
line, not your friend with a comfortable but unsatisfying job.

> Willing to move for the job?

Sure, how? What if I have no money and no credit? You're asking me to come up
with a down payment on an apartment, transportation to another city, some kind
of rental van or moving service, and a landlord who will take someone like me.

> Willing to work in a related field until you can get into your first choice?

Related field? I can't get anything above a minimum wage job. My "first
choice" would be literally any job with predictable pay and hours.

> Willing to switch jobs 3 times in the first 5 years?

I'm working three jobs right now so my family can eat.

Again, this is not a contrived example. Millions of people live like this.

~~~
JoeAltmaier
My buddy from down south moved to Silicon Valley, with his wife and newborn
baby. They camped in the State Park in a tent while he interviewed. It took
moving, taking an entry-level job and doing whatever was asked for him to
succeed.

~~~
burkaman
That's great, but you're essentially describing the last steps of a successful
transformation. How did he get the skills and experience to qualify for entry
level jobs in Silicon Valley? How long was he interviewing, and how did he pay
for food during this time? Did he have any savings or fallback plan in case he
couldn't get a job? If so, how did he prepare that? How much did it cost to
get his family to the valley, and where did that money come from?

~~~
JoeAltmaier
No plan; no fallback; crummy $100 car; cheap gas at the time.

Its good to plan things; but sometimes the friction prevents action. That's
all I'm getting at.

~~~
burkaman
I really feel like you're ignoring the substance of most of my comments.
Friction is often a factor for people who have the means to do this, but do
you understand that many people don't have the means? At the absolute minimum,
your friend needed several hundred dollars in the bank, and a resume that
included more than high school and minimum wage jobs. I think you're taking
this for granted, but it's nearly insurmountable for, again, millions of
people in America.

------
torpfactory
Some other perspectives:

\- Salary is VERY important for most engineers - most of us are making incomes
where making a little more money might be important. That said, consider the
incentives that drive the decision makers (managers) who decide on salaries.
The managers who say "Yes we can keep these people but no we don't have to pay
them more" are much more likely to succeed than the ones who say "I need more
money for the same headcount". Unless you've put serious institutional capital
in the bank in the form of previous success, you won't win this argument with
higher management. (By the way, I agree with the general premise that turnover
is really expensive and most companies, including their upper management,
don't take it seriously).

\- I think that this is another example of the "Hard to measure, easy to
measure" divide in otherwise scientific management that defines most companies
today. It is easy to measure salary. In fact, you are usually required to
report it in most accounting schemes. Measuring cost of employee acquisition
is easy for some parts only. On-boarding and training costs can be relatively
well quantified. But what about lost productivity? What about lost innovation?
Trying to measure "what isn't there" has never been easy. Managers will make
decisions based on the hard data at hand. There is almost never enough hard
data to justify greatly increasing their salary, and most managers won't go
out on a limb (lacking hard data) to try and justify this. I can't say I'd do
differently in their situation...

------
farberjd
It depends on a lot of factors including but not limited to: age of company,
industry, how much tribal knowledge this person possesses and estimated ramp
time. As an example: a 2 year old tech company, an employee that's been around
since inception and possesses a lot of quirks and random information in their
head, it's going to cost the company a shit load of money.

~~~
pixl97
That's a business documentation problem. No different than if they get hit by
a bus.

------
rbcgerard
The problem is that these costs don't explicitly show up anywhere or get
improperly allocated. It's not like HR comes in and says to someone that has a
P/L "we're allocating a whole bunch of expenses to you because of turnover"

------
jack9
Notice the article starts by talking about the mythical "superstar" instead of
the more common "sub-performer" or "redundancy". Employee turnover FUD is all
over, when existing dysfunction is ignored. I interview and hire in 3 days. I
run through tens (if not hundreds) of interviews and the commensurately large
resume pool. 1-2 hours every day, is barely a chore for the ability to hire
someone smart and interesting to work with day to day who has the skillset we
need. Employee turnover is expensive in tech, but not replacing specialized
workers that are no longer useful, is worse for both sides.

~~~
jackaltman
I agree completely with this. I was writing about turnover of high performing
employees, which is crazy expensive. Turning over low performers is valuable
and important for companies to do.

------
mruniverse
What are the ramifications if we learn that employee turnover is very cheap?

~~~
pixl97
Lower wages

------
protomyth
This is one of those areas that would be amazing for academic study, but I
doubt any company that would tell an interesting story would allow it. I would
love for someone who had started with studies of tribes with an oral tradition
to go into a software company and study how they work. I get the feeling that
several similarities will show through even in a company that expects good
documentation.

~~~
HarryHirsch
Karen Ho went to Wall Street for her dissertation:
[https://www.amazon.com/-/dp/0822345994](https://www.amazon.com/-/dp/0822345994)

Anthropologists don't commonly live in mud huts, that's just a prejudice.

~~~
protomyth
> Anthropologists don't commonly live in mud huts, that's just a prejudice.

Where the heck did that come from. I'm well aware of cultural anthropology and
have worked with a couple on academic grants. I just think those more familiar
with oral tradition of tribes would have an amazing time in a software
company.

Also, just for your information, not all tribes live in mud huts, that's just
a prejudice.

~~~
HarryHirsch
The mud hut was intended as a sideswipe at the fairly large HN faction that
believes that only the hard sciences are a worthwhile pursuit and that the
arts and humanities are for penniless losers. Also, Nigel Barley's _Notes from
a Mud Hut_. (Yes, now I realize how the previous comment can be misunderstood,
sardonic groans don't translate into written text.)

~~~
protomyth
I probably wouldn't have taken quite the offense if I wasn't actually typing
this from a reservation in the US. My first vision of tribal is a bit
different.

------
kitwalker12
> _When a capable person on your team wants a role bigger than her past
> experience, do you give her a shot or do you simply hire someone with more
> experience?_

This spoke to me the most as I've seen this happen at multiple places. lack of
growth seems to be the most common reasons for employees leaving (apart from
stagnating salaries) and that's something a company can easily invest in

------
mythrwy
IDK. I've been at a few organizations where the cost of employee turnover
almost certainly would have been negative.

------
solatic
Reading this made me think - maybe the work to live / live to work personality
divide isn't actually real. Maybe people are divided more into two categories
of those who are pessimistic that work will help them achieve self-
actualization, and those who are optimistic about achieving self-actualization
at work, or perhaps have already found it at work.

Does a work-to-live kind of person become a live-to-work kind of person if his
workplace is genuinely happy? Does he forgo attempting to find happiness at
work because he doesn't have the expectation of finding it, thus being more
likely to accept poor work conditions in exchange for higher salary?

Interesting questions.

------
dpweb
There should be some further study in this area. I'm skeptical of the quoted
costs of replacing employees and missed productivity ie.. 213%. Not to mention
replacing poor performers can often be a value gain not loss. About cost,
we're talking managers' time - but maybe hiring is most valuable thing they
can be spending time on, other than directly generating revenue.

~~~
jackaltman
I agree with you -- I wrote this with regrettable turnover in mind. Parting
ways with a low performer is definitely a valuable thing to do!

~~~
dpweb
I see now - we're talking only regrettable employee losses. Thanks.

------
aluhut
Would love to post this internally so HR sees it, but I'm afraid to appear on
their radar ;)

------
patsplat
Estimate the floor for replacement cost based on the average recruiting fee
for the title.

~~~
patsplat
The ceiling will be significantly higher. But it's an interesting floor given
that most employers know and hate paying for recruiters.

------
IshKebab
Hard to believe a graph when its author can't even type $13,000,000.

------
sytelus
TLDR; Losing an employee has cost of 1.5X to 2.1X of his/her annual
compensation.

A surprise case study here should be Amazon which has turned this wisdom
upside down on its head. There have been rumors of 40% to as much as 70% churn
at Amazon and despite of that company thrives.

~~~
Zigurd
I have more than one data point about that. Amazon burns people out at a
furious pace. It seems like long term survivors strike a balance between not
caring and careful career management. People find a way to live in such
systems, and until they face a crisis, like attracting people after their
explosive growth phase, companies can hold on to bad practices for a long
time.

------
muninn_
Not a very informative article. The costs are high, so try to minimize
turnover. It's simple.

~~~
bsilvereagle
I think you missed the forest for the trees - the author clearly states that a
quantitative approach to understanding turnover is needed and that everyone
knows "The costs are high, so try to minimize turnover. It's simple." but it's
hard to take action on a qualitative indicator. He then presents what appears
to be a reasonable equation to estimate how much turnover costs a company.

~~~
muninn_
The "quantitative approach" here is hardly worth considering. Maybe I should
write for Medium. I could just as easily throw a bunch of crap together and
call it journalism and provide some random numbers and factors and call that
an equation!

~~~
tokenizerrr
> Maybe I should write for Medium

Considering this is a medium opinion piece, which are essentially blogs, you
very well could.

