Recruitment Insights

Staff churn has devastating effect on profitability – that’s a fact!

March 2, 2017
staff churn 2016|sales per person trend

How staffing and recruiting agencies can avoid the fall out of losing up to one employee a month.

Staffing industry businesses of between 21 to 40 employees are replacing almost half of their team every year.

That’s a rate of one new employee a month, data announced by RIBreport and APositive shows.

Losing any team member can have a significant financial impact on lost time and productivity. What’s more, the loss is felt a lot harder and faster when a good performing consultant walks.

Before this happens to you, stop to consider the immediate and short-term financial hits your business can be exposed to:

Staff Churn HIT #1

You will be up for payment of any outstanding entitlements to the departing employee – your cash flow can take a particularly big hit from Long Service Leave pay-outs.

Staff Churn HIT #2

It’s no secret that good recruiters are hard to find, so you’ll most likely need to pay a professional Rec2Rec to sort through your shortlist of candidates to refill the position.

Staff Churn HIT #3:

Decision makers and other team members often take on additional work to plug the gap before a newbie starts. This means they often lose pace and shift focus from their own tasks while supporting the induction, training and settling in period for each new team member. The result can be lower productivity across the entire team. Put simply, staff churn can be deflating for the existing team members, who have their own goals and budgets to meet. In fact, it’s often the reason for a cascading effect leading to more staff departures and an increase in staff churn rates.

Unfortunately, the financial hits keep coming with the impact often witnessed as an incremental erosion to the bottom line over many months.

2016 Staff Churn Rates

This graph shows staff churn increases each step of the way until you hit 40 or more employees. Team sizes of one to 10 are the most stable, while teams of 21 to 40 are by far the least stable.

staff churn 2016

2015-2016 Profitability Findings

This graph shows smaller firms with 20 team members or less recorded good growth in sales per person in 2016, averaging 15 to 20 per cent growth. The top 10 per cent achieved 40 per cent or more.

However, the vast majority of firms with a headcount of 21 to 40 recorded a decline.

sales per person trend

How to Avoid High Staff Churn Levels

To stop the churn and bring positive change, firms caught in this revolving door need to face reality and understand what’s not working in the three key areas of their internal processes:

  1. Recruitment – Why join your team? Are you walking the talk?
  2. Training – How do you build and manage careers?
  3. Retention – What’s keeping your team engaged and what’s not?

One way to help understand these key factors is to issue regular, periodical staff surveys to identify and fix the gaps. Another option to help avoid staff churn is to stop recruiting until you stabilise your team.

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