Tuesday, October 9, 2007

The cost of poor leadership

Often times fortune 500 companies spend close to an average of $2000 to $8000 or more per non managerial employee for on boarding. Then depending on the position, there a "ramp up" period before the employee actually becomes profitable for a company. I would argue, no matter how much money you spend on an individual, if the company or even office culture is not equal to the standards of talent resides in those desks, you will not keep your talent. From financial incentives, benefits, training and daily operational costs, its no wonder why companies spend in the millions of dollars to maintain their human capital. Employee turnover, especially before you recoup the investment is a huge problem. The direct costs to your bottom line of employee turnover can cripple your business. Think of what it costs you to recruit, train, and get a new employee up to speed. Although the actual cost may vary depending on the job or industry, the cost per new hire can average $2000 to $8000. Even if you only turnover 10 employees per year, that is $20,000 to $80,000 off of your annual profits. This doesn't even take into consideration the indirect costs listed below. Turnover adds to indirect costs as well. It effects employee's morale, on the job injuries due to lack of personnel or lack of experience, customer relationships, productivity of other employees and increased theft.

Corporations answer to the increasing problem of turnover? Let's hire a consultant, let's fire the bottom feeders, let's spend more money on leads, basically, let's through money at it and the problem will go away. That no better works for my four year old than it works for my employees. The true solution is to take a good look at our company culture and ask the question to the management team, "Is Leadership important?" I would like to know from you... remember, I chose you to learn from this group... your input is valuable...