Notes on “The Hidden Cost of Turnover” from “Peopleware: Productivity Projects and Teams”
Notes about employee retention from Peopleware by Tom DeMarco & Timothy Lister and The Best Software Writing I by Joel Spolsky.
In the mid 80’s DeMarco and Lister found that the “average employee longevity [was] from fifteen to thirty-six months”, that’s about one to three years, and that the “total cost of replacing each person is the equivalent to four-and-a-half to five months”. Joel Spolsky in The Best Software Writing I, mentions that “Recruiting and training a new employee is usually estimated to cost 12 months’ salary, total.” Joel goes on to say that the industry standard for turnover is somewhere around 5%. So accordingly, if you worked at a company with 100 people you’d normally expect to loose 5 employees every year. Anything above 5% and you’re probably working in an environment with high turnover.
DeMarco and Lister point out that, companies with low employee retention rates often enter into a cycle with negative financial implications and “an ugly invisible cost”, because “turnover [produces] turnover”.
This “ugly invisible cost” often manifests itself as:
- Short-term viewpoints, a passing through mentality, degraded moral
- Inexperienced management, early promotion, a top heavy organizational structure
- A feeling of disposability, workers are treated as interchangeable parts, a degraded sense of loyalty
- An undesirable work environment
- A low employee retention rate
- And the cycle continues
