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1、Copyright i4 pty lty ACN 096 484 416 www.i4- i4-talent costing attrition white paper i4 pty ltd january 2002 version 1.00 Copyright i4 pty ltd ACN 096 484 416 02 table of contents TABLE OF CONTENTS 2 EXECUTIVE SUMMARY 3 COSTS OF TURNOVER 4 ADMINISTRATION & SOURCING COSTS 4 COST OF NEW HIRE 6 PRODUCT
2、IVITY LOSSES 7 EXCLUDED COSTS 8 EMPLOYEE DEMORALISATION 8 IMPAIRED QUALITY OF SERVICE 8 TURNOVER REASON & COST IMPACT 9 FUNCTIONAL AND DYSFUNCTIONAL TURNOVER 9 AVOIDABLE AND UNAVOIDABLE 10 CONCLUSION 11 SYMPTOMS VERSUS CAUSES 11 REFERENCES 12 Copyright i4 pty ltd ACN 096 484 416 03 executive summary
3、 The impact of employee turnover on company performance is often understated by organizations. This paper describes how the cost of turnover is can be calculated using some basic organisational parameters. The purpose of this document is to provide users of the i4-talent cost of turnover calculator
4、with insight into how costs are calculated and the reasons why certain costs were include or excluded form the calculator. The calculator should only be used as a guide in understanding the impact of turnover on a company. If the desire is to understand the true cost of turnover then it is suggested
5、 that a greater degree of analytical work is undertaken. The key areas used in the calculation of turnover are: Administration and sourcing costs. These include the administration of the termination and recruitment functions together with the costs associated with interviewing, testing and attractin
6、g applicants. New Hire costs. Once a person has been employed an organization generally spends significant resources in the induction and administration of bringing them into the organization. Lost productivity. The hidden costs associated with lost productivity of employees prior to leaving the org
7、anization and new less skilled employees is one the largest components of the total cost associated with turnover. Dysfunctional and avoidable turnover. Determining the level of dysfunctional and avoidable attrition provides a perspective on the scope of control that a company has to manage their tu
8、rnover costs. Determining the cost of turnover is the first step in the process of developing a management plan. To deal with an attrition issue effectively the reasons for turnover, and an understanding of the demographics of turnover need to be understood. The mechanisms to do so are outside the s
9、cope of this paper. Copyright i4 pty ltd ACN 096 484 416 04 costs of turnover Undoubtably, the financial costs of turnover have attracted the attention of academics and practitioners alike. Besides the more familiar costs associated with the administration of terminated employees the economic costs
10、such as productivity losses need to be included in any calculation. In particular, departure of employees - especially experienced or talented ones - may threaten overall firm productivity or client retention. Furthermore, personnel losses may endanger the firms future opportunities in the marketpla
11、ce or the morale of their remaining work force. Human resource accounting experts Cascio, Hom and Griffeth define exit expenses as having two main components - direct and indirect costs. A company incurs both direct and indirect costs that result in losses in production dollars and overall productio
12、n volume, as well as increased administrative costs. Direct Costs are actual dollars spent each time an employer has to attract, select, and induct a replacement for an employee who leaves the organisation. Indirect costs are those expenditures attributable to turnovers affects on production - that
13、is costs for incomplete or disrupted work, loss of quality, etc. The cost of turnover can be calculated by measuring the time taken to administer each activity plus the direct costs such as advertising costs. The turnover costs calculated using the calculator represent dollars spent. The potential l
14、oss of revenue if these dollars were invested elsewhere or through lost productivity is not calculated. Therefore, the figures are an indication of the minimum costs that the organisation is subjected to when an individual leaves the company. Administration & Sourcing costs The most visible cost of
15、turnover is incurred by organisations in the area of recruitment administration and sourcing. The time associated with processing terminated employees and recruits places a burden on organisations where staff turnover is excessively high. The assumption is that this is largely an administrative task
16、 conducted by people at 80% of the average company salary. In addition the direct costs to a company for recruitment agency and advertising costs are highly transparent. Copyright i4 pty ltd ACN 096 484 416 05 Process Administration Resignation Administration The time taken to administer a resignation will include activities such as: conducting exit interviews & processing of administrative tasks. The time taken to perform th