Can Your Company Afford Not To Have A Coaching Program? – Part I

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

• Does your company offer executive coaching services?
• Don’t think that your company needs such services?
• What is your company’s employee turn over ratio like?
• If you don’t know then do you at least know how much it actually costs to replace an employee?

What follows is general checklist of items to include when calculating the cost of turnover in any organization. The list was prepared by William G. Bliss, President of Bliss & Associates Inc., a Wayne, NJ consulting firm providing advisory services to entrepreneurial companies.

Personnel Exit Costs

• Calculate the cost of the person who fills in while the position is vacant.
• Calculate the cost of lost productivity at a minimum of 50% of the person’s compensation and benefits cost for each week the position is vacant, even if there are people performing the work. Calculate the lost productivity at 100% if the position is completely vacant for any period.
• Calculate the cost of conducting an exit interview as well as administrative costs of stopping payroll, benefit deductions, benefit enrollments, and the cost of the various forms needed to process a resigning employee.
• Calculate the cost of the manager who has to understand what work remains, and how to cover that work until a replacement is found.
• Calculate the cost of the manager who conducts his or her own version of the employee exit interview.
• Calculate the cost of training your company has invested in this employee who is leaving. Include internal training, external programs and external academic education. Include licenses or certifications the company has helped the employee obtain to do their job effectively.
• Calculate the impact on departmental productivity because the person is leaving.
• Calculate the cost of severance and benefits continuation provided to employees who are leaving that are eligible for coverage under these programs.
• Calculate the cost of lost knowledge, skills and contacts that the person who is leaving is taking with them out of your door. Use a formula of 50% of the person’s annual salary for one year of service, increasing each year of service by 10%.
• Calculate the cost impact of unemployment insurance premiums as well as the time spent to prepare for an unemployment hearing, or the cost paid to a third party to handle the unemployment claim process on your behalf.
• Calculate the cost of loosing customers that the employee is going to take with them, or the amount it will cost you to retain the customers of the sales person, or customer service representative who leaves.
• Subtract the cost of the person who is leaving for the amount of time the position is vacant.

Personnel Recruitment Costs

• Advertising costs.
• The cost of the internal recruiter’s time to understand the position requirements, develop and implement a sourcing strategy, review candidates backgrounds, prepare for interviews, conduct interviews, prepare candidate assessments, conduct reference checks, make the employment offer and notify unsuccessful candidates. This can range from a minimum of 30 hours to over 100 hours per position.
• Calculate the cost of a recruiter’s assistant who will spend 20 or more hours in basic level review of resumes, developing candidate interview schedules and making any travel arrangements for out of town candidates.
• The cost of the hiring department’s time to review and explain position requirements, review candidates background, conduct interviews, discuss their assessments and select a finalist.
• Calculate the administrative cost of handling, processing and responding to the average number of resumes considered for each opening at $1.50 per resume.
• Calculate the number of hours spent by the internal recruiter interviewing internal candidates along with the cost of those internal candidates to be away from their jobs while interviewing.
• Calculate the cost of drug screens, educational and criminal background checks and other reference checks, especially if these tasks are outsourced.
• Calculate the cost of the various candidate pre-employment tests to help assess candidates’ skills, abilities, aptitude, attitude, values and behaviors.

Years of studies have demonstrated that providing executive, leadership and organizational coaching to your key personnel will reduce turnover. If this was the only benefit from offering the support, the return on investment would be impressive. But you also get higher productivity, lower internal friction, higher employee enthusiasm and dedication, lower levels of absenteeism – and much more. Have you started to think yet about the cost benefits of hiring an Executive Coach for your business? Read Part II for more of the costs and Part III for the benefits.

© Dr. Earl R. Smith II

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Related Articles:

• Corporate Talent – Coaching and Retaining the Best
• The Cost and Benefits Executive Coaching
• Seven Steps to a Successful Executive Coaching Program
• Benefits of Executive Employee Coaching to a Business

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