The Cost of Turnover in Fortune 500 Companies: How Employing the Wrong People May Be Killing Your Bottom Line
When we talk to our Fortune 500 clients about their biggest talent challenges, many of them report trouble in two areas: finding candidates with the right skillset to fulfill their latest IT or telecommunications projects, and retaining talent for a significant period of time in order to achieve results and build strong teams.
Fail to find talent with the right skills and your organization’s projects never get off the ground. Fail to retain talent and you’re too busy constantly recruiting to achieve any measurable success. In either case, high employee turnover kills productivity, morale, customer service, and company revenue.
In this article, we dive into turnover rates and average employee tenure within Fortune 500 companies spanning several industries, and explain exactly how much unfit hires cost your company. Additionally, we explain how to connect with the right candidates who possess the skillsets to succeed within your workplace, based on more than a decade of experience helping Fortune 500 clients connect with the IT and telecommunications talent needed to achieve their business objectives.
The State of Turnover in Fortune 500 Organizations
Does your HR, recruiting, or talent acquisition department finds itself filling the same positions over and over? You are not alone. According to PayScale’s survey of employee loyalty among Fortune 500 companies, even the most prestigious organizations struggle to retain top talent—in fact, they may struggle more than average companies.
Amazon and Google both made the top 10 list of companies with the highest worker turnover, with a median employee tenure of 1.0 years and 1.1 years, respectively. Other notable organizations with low employee tenure include:
- Advanced Engineering Solutions (AES), Inc.: 1.8 years
- MetroPCS Communications: 1.9 years
- Gilead Sciences, Inc.: 1.9 years
- Dish Network Corporation: 1.9 years
- Qualcomm Inc.: 2.0 years
As the study indicates, many of median employee tenure doesn’t necessarily reflect poor workplace engagement—it is possible that a high percentage of employees are engaged within these companies. In fact, 71% of employees at Amazon report job satisfaction while 84% are satisfied at Google. Rather, the high turnover within these Fortune 500 companies could be due to an intensely competitive market where dozens of industry-leading organizations seek to woo the same small pool of in-demand IT and telecommunications specialists.
Nevertheless, turnover is turnover and it costs Fortune 500 organizations—from Google to Dish Network Corporation—time, money, and resources. How much?
Replacing Employees is More Expensive Than You Think
The Society for Human Resource Management (SHRM) estimates that replacing a salaried employee costs 6 to 9 months’ salary on average. The organization reports that these costs can be exponentially higher when it comes to Millennial employees—unwelcome news for IT and telecommunications companies or departments seeking to recruit and retain the youngest wave of skilled candidates.
The Center for American Progress determined that, for an employee earning less than $50,000 per year, it costs approximately 20% of the worker’s annual salary to find a replacement. These expenses increase as the salary rises, meaning that organizations could end up paying tens of thousands of dollars replacing well-compensated IT and communications experts within their teams and projects. Looking to hire an IT executive such as a CTO? Expect to pay up to 213% of the employee’s salary.
Lastly, CareerBuilder reports that among the U.S. employers who admitted to hiring an unfit employee, nearly 30% of them said that the bad hire cost more than $50,000. Organizations among the other 9 top world economies (including China, U.K., India, Germany, and France, among others) reported similar findings.
What Makes Turnover So Costly
As sticker shock sets in, it is normal to wonder why unfit hires end up being so costly. It turns out that there are three types of expenses: first, the recruiting fees such as advertising an open position, reaching out to candidates, interviewing, and then onboarding and training a new employee. Considering that it takes an average of 42 days to fill a position, per SHRM, these costs add up quickly.
There are also other considerations such as disrupted productivity, potential lost customers, and a damaged employer brand. According to GoConqr, it can take up to two years for a new employee to reach similar productivity levels as an existing team member—and in the meantime, your organization may be losing clients to competitors with faster and more efficient service.
The third layer of costs involving an unfit hire centers around damaged employee morale and company culture. Gallup estimates that disengaged workers cost U.S. companies between $450 billion and $550 billion every year, and that each actively disengaged employee (an employee who doesn’t like their job and vocalizes this negativity to others) costs their company $3,400 for every $10,000 of salary, or 34% of their salary.
These factors result in a maelstrom of turnover-related costs that can irreparably damage a company’s reputation and easily eat into—or completely wipe out—profits.
How to Prevent Unfit Hires
They say that offense is the best defense, and nowhere is this more applicable than in hiring the right talent and preventing turnover. At Link Consulting Services, we work with clients to help them not only find and retain the best candidates, but also implement processes that enable Fortune 500 organizations to do this more quickly, easily, and at a lower cost. Some of our most effective strategies include:
Balancing speed with quality
According to CareerBuilder, 43% of hiring managers admitted to hiring the wrong person because they needed to fill the job quickly. While it is tempting to snatch up the first candidate who seems to fit your job description, especially when a vacancy is holding up progress or causing balls to drop, hiring an unfit candidate can actually waste much more time in the long run.
Link Consulting Services’ proprietary 49-step placement process is a rapid-response solution that prioritizes both candidate quality and quick time-to-fill. We thoroughly assess every candidate using this system in order to quickly and reliably deliver quality talent that fits our clients’ needs.
We can help you fill your vacancies quickly, with the right talent.
In addition to utilizing our proprietary placement process, we also help clients craft and standardize effective job descriptions to ensure that they are appealing to the right talent, and home in on hiring roadblocks or bureaucratic inefficiencies that slow down the hiring process.
Leveraging a global talent network
Hiring employees with the right skills starts with reaching candidates that possess the skillsets you need. In a technological and ever-more-connected world, this means combing local talent pools as well as looking outward at the rest of the world. Throughout the past 10+ years, Link Consulting Services has built a global network of talented candidates from Latin America, the Middle East, Asia, Europe, and beyond.
We leverage this network to pair clients and talent all around the world, even managing travel arrangements and visa paperwork to ensure that IT and telecommunications specialists arrive where they need to be, ready to hit the ground running.
The result? Our clients never have to settle for less-than-qualified candidates. With a global network, millions of talented candidates are now “local” and available for cutting-edge IT and telecommunications projects.
Don’t Let Unfit Hires Sabotage Your Project Success
Employee turnover can affect even the best and biggest organizations—but it doesn’t have to poison your organization. If you consistently find unfit hires failing to achieve business goals, stalling projects, or even harming company culture, it’s time to reach out to an experienced recruitment consultant and staffing services partner that can help you find the right talent now.
Ask about Link Consulting Services’ proprietary 49-step placement process that connects skilled candidates with Fortune 500 companies, and the unique ways in which we help our clients streamline their hiring processes for faster time-to-fill and lower costs. We pride ourselves in developing customized solutions that address each client’s unique recruiting needs.