Companies of every shape and size know that it hurts to lose an employee. In the staffing industry, it can be even more painful when you consider that account managers and recruiters are the face of your business, and in most cases are the primary relationship holders with prized clients and highly-sought-after talent.

But have you ever paused to think through the true dollar amount that employee turnover might be costing your firm? Being the data nerds that we are, the team at ClearlyRated has come up with a “back-of-the-napkin” estimate for quantifying what internal employee turnover will cost your business in 2020.

Factor #1: Out-of-pocket costs of turnover

We all know that there is a significant amount of time and money invested in hiring, onboarding, and training new employees. These costs are often the easiest to quantify, and you likely have access to hard numbers in your own organization for what the budget allocation of recruiting, interviewing, and training a new account manager or recruiter looks like. Work with your team to come up with an estimated out-of-pocket cost of a single turnover event so that you can build it into your calculation.

Out-of-pocket costs to consider:

  • Cost to the company to recruit for an open position
  • Cost to the company to interview for an open position
  • Cost to the company to train a new employee
Factor #2: Account manager and recruiter impact on revenue

Your front line is your revenue engine. Which means your ability to calculate the impact of employee turnover on your bottom line requires you to have some understanding of how account managers and recruiters contribute to revenue on an annual or monthly basis.

For the purposes of our “back-of-the-napkin” calculation, let’s assume that every recruiter and account manager contributes $75,000 per month in revenue. If you have the data available, please take a moment to “swap in” a number that more accurately reflects your business!

Factor #3: Productivity loss from turnover

Have you considered the fact that for every minute you have an unfilled position or new employee who is not fully ramped, your team’s productivity will be taking a hit? Here are some rough estimates about time that it takes to hire and fully onboard a new member of your field team:

  • 39 days = the time it takes to hire a new sales rep or recruiter to fill an open position left by a turnover event (source: Ideal).
  • 4.8 months = time required to fully ramp a new sales rep or recruiter to a fully operational / functioning producer (source: Salesloft)

Combining the time it takes to fill an open position (39 days) with the time required to fully ramp a new sales rep or recruiter (4.8 months), we can reasonably estimate that staffing firms suffer 6 months of partial or full productivity loss when they have a turnover event.

Factor #4: Revenue loss from turnover

If we were to factor in our assumption that each account manager and recruiter contributes $75,000 per month to the business’ top-line, we find some wildly compelling numbers:

  • Lost revenue while position is unfilled = $75,000 per month lost for a 39 day duration (1.3 months) = $97,500
  • Lost revenue while new employee is ramping to full productivity = $143,750 [see chart below]

For a position that contributes $75,000 of revenue to their employer’s top-line on a monthly basis, total lost revenue from a single turnover event can be estimated at $143,750 (difference in fully ramped employee vs. new employee) + $97,500 (lost revenue while position goes unfilled) = $241,250.

Whoa.

It gets scarier when you look at the likelihood of employee turnover in the staffing industry

The American Staffing Association finds the median annual turnover rate of account managers and recruiters to be 25%. That’s 1 in 4 employees who are leaving their staffing firm each year.

Median

Consider the total # of front-line employees at your firm – statistically speaking, it would be safe to assume that a quarter of them are at-risk of turnover next year.

Let’s add one-more assumption for our “back-of-the-napkin” calculation. Let’s say that our firm has 20 individual account managers and/or recruiters who each contribute $75,000 in company revenue per month. If 25% of them were to turnover in 2020, the staffing firm would be saddled with the out-of-pocket costs of to fill 5 open positions, and would have to make up for lost revenue coming from recruiting, hiring, onboarding, and ramping 5 new employees to fill those positions ($1,206,250)!

We expect there to be variation in these numbers from firm-to-firm. I highly encourage you to gather the appropriate data to build an estimate that most accurately quantifies the cost of internal employee turnover at your firm! It will be an immensely powerful resource as your team heads into 2020.

Want insights and best practices for limiting employee turnover at your staffing firm?

I don’t blame you! ClearlyRated will be hosting a webinar designed to address this topic specifically. Join me and Steven Cerny from CareerBuilder for a look at 2020 Turnover Trends in Staffing: Improving Retention & Engagement of Recruiters & Account Managers – January 16th, 2020.