Michael Cundall Jr.
The ridiculously high cost of disengagement, turnover and how humor can help
If you’re a business owner or in HR, or anyone who pays attention the radically widespread costs of employee disengagement and turnover, you know there is precious little funny in how they affect everyone from the employees to coworkers to customers. Plus, the dollar costs are staggering. According to research the cost of an actively disengaged employee is a whopping 34% of their salary. The median salary in the US is 54K. This makes that disengaged employee cost just over 11K per year. If you had an hourly employee making $10/hour that cost is just over $3300. But wait! There’s more bad news about the current state of our workforce. Turnover is expensive too. It can cost anywhere from 50%-75% of an individual’s salary when they leave a position. The overall length of time a position can remain vacant can reach nearly 3 months, and sure no salary is paid, but you’re missing that productivity. Turnover doesn’t just have effects on the bottom line through direct loss of productivity from an absent or short-time employee. Companies with high turnover find that the turnover has negative effects on the morale of the employees that remain, negatively influence internal and external communications, all of which harm the bottom line. But with recent demographic shifts, these situations may get even worse. And you thought this was a blog about humor.
More bad news comes from some recent data on Millennials. While I think Millennials are fine (I have a friend who’s a Millennial!), it’s almost a cliché to blame Millennials from the demise of everything from Applebee’s to the slow-down in the housing market. There are some trends with them as a whole that will create a perfect storm with the above findings.
Millennial’s average time at any position ranges from 18 months to two years. The average time to train a new employee is 18 months. Just as soon as they are really getting the skills needed to do the job, they’re heading for the door, or looking that way. Millennials also look to stay and work for companies that worry not only for the product or service that they offer, but that the companies have important ethical moorings and pay attention to issues of social justice. And since most people would gladly leave a job for one they would like better, retention should be on the forefront of everyone’s minds. A job is now seen as more than a paycheck, but something that has ethical value beyond the benefits. If you take the data just summarized, almost any company needs to find ways to deal with employee satisfaction and retention in some serious and effective ways.
So what are the costs of a disengaged, unenthused, turn-over prone workforce that’s going to be largely staffed with Millennials? It costs anywhere from 50%-75% of a person’s salary to replace them, and Millennials don’t often hang around for more than two years. It’s also likely that they’re in some meaningful way disengaged. This is not a pretty employment picture and that picture, if the data is to be believed, is fairly commonplace. Remember, nearly 70% of the workforce is disengaged and Millennials are pretty much the largest sector of the employed. If you own a business, the numbers say you will face the above problems.
Let’s use the averages as a baseline. The average income in the US is 56K which means every 18 months to two years a company is spending just under 30K to replace that person. And that’s not factoring in engagement. Since most employees are likely disengaged and, conservatively, costing the company and additional 20% of their salary this disengagement cost tacks on an additional 10.5K. This means that on that one person making the US average, your company is spending 4/5 of the salary, around 40K or more, due to engagement and turnover every 18-24 months. I’m no expert, but that seems wildly inefficient. It also seems wasteful. But more than that, this indicates that employment across the country is in a deep state of crisis. If you extended retention just another 18 months, you’ve saved 20k per person by simply having a culture and job someone wanted to remain a part of. Remember, more and more, people aren’t simply staying for raises. They’re staying for culture and meaning.
The costs and the high levels of turnover and disengagement we see are at levels I have trouble comprehending. I don't want to imagine what it would do to me to look around and see co-workers who'd largely checked out. What does it say about work in general that so many of us are disengaged and constantly looking for a different job? I’m not a sociologist or a business researcher, but this state doesn’t reflect well on work. But if we got ourselves into this situation, we can get ourselves out. And one way we can do that is to look at ways we can increase engagement, especially in the near term. If we can solve that, then we can make incremental changes that will start to chip away at that ridiculously high level of disengagement and turnover. Luckily we have a way to do that. A way that is enjoyable. Humor.
Humor is one of those invaluable cultural aspects that businesses simply don't much attend to. If you think about it, and some business insiders have, humor is seen as a valuable commodity in the workplace. Imagine someone you find funny. You want to be around that person more. CEO’s and employees similarly value a sense of humor. Humor has salutary effects that range from decreases in stress factors—literally changes to your body chemistry-- to uplifts in mood, and increased tolerance to frustration and pain. It even helps boost creativity. Yes, ‘Ha-ha’ often leads to ‘Ah-ha!’ In next week’s blog post I am going to run through many of the benefits and slide in a couple of suggestions on how to fold humor into your workday. Stay tuned.