Automation

  • 7 min read

The Cost of Employee Turnover and its Impact on ITAM, SAM SaaSOps Teams

Ritish Reddy

22nd November, 2023

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People are quitting jobs faster than ever before. The cost of employee turnover has risen in conjunction with turnover rates. According to LinkedIn, the technology industry has the largest turnover of any industry, an average of 13.2%.

Increasing employee turnover is detrimental to businesses, not just in terms of money and time but also in terms of lower morale and productivity.

Employee turnover has a direct effect on the revenue and profitability of the business. Expenses with no return on investment are incurred if a severance package is provided. 

Consider the labor expenditures incurred by management in the placement of job ads, the evaluation of applications, the interviewing of candidates, and the training of new employees. Despite the fact that some businesses employ a job-placement agency, this is still an expense. Additional expenses are incurred as a result of decreased productivity or a reduced client base.

Employee morale and productivity can suffer as a result of a high turnover rate. This could be the result of overworked employees who have been given higher workloads and responsibilities as a result of a lack of an active or well-trained pool of employees. New employees are not exempt from this rule. It is possible that they, too, will suffer from low morale as they struggle to speed up mastering new job responsibilities and processes. 

The continuation of this type of work environment may result in the organization having greater difficulty attracting and retaining high-quality employees.

In the event of an employee departure, IT is entrusted with locking down all systems, changing passwords, and collecting the company's equipment. It's possible that employees may also have access to the company's client list. They may additionally be using BYOD (bring your own device) for performing tasks.

Because of the increasing reliance on technologies such as SaaS applications for work and data storage, as well as the complexities of remote working- IT professionals are tasked with managing employee onboarding and offboarding programs during turnovers.

It is impossible to know for sure that the departing employee will not hurt the company following their departure. No matter what you do, a vengeful ex-employee can still cause damage. By securing as many doors as possible, it is the responsibility of IT leaders to limit the harm that an individual might cause.

High turnover rates can be detrimental to a company and its employees in various ways. With the ongoing need to hire and train new employees, it is easy to lose sight of the organization's actual goal and vision.

Human resources (HR) are in charge of the offboarding process, but IT is one department that is involved in ensuring that the former employee isn't a walking security threat.

Let's understand employee turnover, its causes, and the responsibilities of IT leaders in ensuring smooth onboarding and offboarding.

What is Employee Turnover

Employee turnover is defined as the number of employees who quit or are asked to leave their jobs and are replaced by new employees in a given period of time.

A critical calculation for businesses to keep track of is employee turnover, which is the rate at which organizations lose and must replace employees. Examining the reasons for, the cost of, and the effect of any dissociation, whether voluntary or involuntary, is critical to understanding the cause of and lowering turnover rates.

Voluntary Vs. Involuntary Employee Turnover

Voluntary Turnover

Voluntary turnover takes place when an employee decides to leave on their own. The reasons could be a better job opportunity, internal transfer, or retirement. Voluntary turnovers are often more costly and negatively impact the company as it usually involves the loss of high-performing talent.

Involuntary Turnover

Involuntary turnovers take place when an employee is asked to leave. The workforce may either be laid off due to financial reasons or maybe terminated due to their work performance. As compared to voluntary turnovers, involuntary turnovers do not involve the loss of talent in a detrimental way.

Causes of Turnover

 Inability to advance 

• Unmet Desire for career progression in the company

• Internal Promotion or transfer 

• Overwork/ burnout

• Dislike for the boss or management 

• Toxic workplace 

• Family or life event

• Competitive offer

• Work-life imbalance 

• Involuntary departure

In general, 45% quit because there are no opportunities for advancement, 41% leave because of poor management, 36% because of the work culture, and 36% leave because they want to do more challenging work, as per LinkedIn.

How To Calculate Employee Turnover

Divide the total number of employees who leave in a certain amount of time (month, quarter, year, etc.) by the average number of employees who work in that time frame. Employee turnover rate: Multiply that number by 100 to figure out how many people have left the company. 

If you had 100 employees on average and 16 of them left at the end of the month, your employee turnover would be 16%.

The equation would look like this: (16/100)*100 = 16

Keep temporary hires and employees who go on temporary leave out of the equation. It will make your turnover rate go up if you include these kinds of short-term changes in your workforce number.

Cost of Turnover

An employee turnover cost is usually thought of as the cost to hire a new employee and train that new employee. It is not the cost to get a new employee on board to work but also how much it costs to get that person to work at the same level as the person who has left.

The costs associated with turnover can be divided into two categories: direct costs and indirect costs.

Direct Costs-  It’s easier to calculate the direct costs of employee turnover than the indirect costs. The cost of replacing a departing employee can be calculated in terms of time and resources.

Direct costs can be calculated in terms of recruiting cost, advertising cost for new positions, orientation and training cost, severance cost, time to interview new replacements, time to recruit and train new hires, and the costs incurred for the disruption of ongoing projects and client loss.

Indirect Costs- It’s more difficult to calculate the indirect costs of losing an employee. Indirect costs can have a significant impact on the performance and delivery of projects.

Indirect costs can include knowledge loss, loss of productivity while a new employee is being trained, the cost associated with lack of motivation prior to leaving, and cost associated with loss of trade secrets.

How to Minimize Turnover

Turnovers can be very expensive to an organization, which is why it is important to develop retention plans to manage them.

• Build a Positive Work Environment: People are more productive and less likely to leave if they are not stressed, and their needs are met. Along with work-life balance and flexibility, employees crave rewards and recognition. Toxic co-workers and managers, on the other hand, can also be the reason why employees leave.

• Publicizing Opportunities to Move to New Roles: By publicizing new opportunities and making sure there are no adverse effects to applying for open positions within the company — the company can both minimize recruitment costs and aid with the retention of those employees who are looking for new opportunities.

• Work on your Onboarding Program: When it comes to attracting and keeping top talent, onboarding is an important part. This is why it should be seen as an activity that lasts more than a week.
  Poor onboarding is a major cause of employee turnover, which can cost a company 100-300% of the employee’s salary in total.
  Companies lose 17% of their new hires in the first three months, and 20% of all staff turnover happens in the first 45 days. This is because they don't do a good job of onboarding their new employees, as per SHRM.

• Successful Offboarding Is Just as Important: A good offboarding process leaves a good impression on the employee who is leaving. It also plays a significant role in improving the company's employer brand. You do not want your employees to leave a bad review about your company on the internet to deter others from joining you. It also makes it easier for people to come back to their jobs in the future.

• Conduct Exit Interviews: Employees who leave your company can give you a lot of useful information about how you recruit, onboard new employees, and train them. Where are you doing well, and where are you not doing as well as you should be. The data will help you assess why one department loses more people than others. It could be the nature of the positions within that team or that departing employees anticipate more communication and support from their managers.

The Impact of Employee Turnover on IT 

During turnovers, onboarding and offboarding tasks fall on the shoulders of the IT team as they have to manage this transition.

IT teams play a critical role in keeping the company safe. When an employee leaves, the IT department deletes passwords, removes accounts, and collects corporate assets (laptops, phones, company credit cards, thumb drives, etc.). They also have to disable the access ex-employees have to business resources like emails and SaaS tools. 

The IT teams also help new joiners understand IT policies, data management best practices, and their role in protecting sensitive data.

During high turnovers, the IT team is very busy. It has to be extra cautious of not leaving any loopholes while they are busy with offboarding and onboarding activities. 

What is even more challenging for the IT leaders is the offboarding of the remote workforce. Taking care of this transition while keeping the remote work environment safe is not an easier task to accomplish. It poses a security threat to organizations from intentional or accidental breaches.

How Zluri Can Help

With Zluri, IT teams can automate employee onboarding and offboard by taking complete control of their SaaS-based landscape. 

When new joiners need to wait for weeks to get access to the tools they need to do their job, it causes frustration and affects productivity. Moreover, it can also add to turnover rates. 

With Zluri, IT teams can provide a good employee experience by making sure employees have everything they need on day one itself.

Role Of  Zluri Helps in Successful Onboarding

Zluri allows access to applications with a few clicks and can help you execute a smooth onboarding process. 

Recommendations for Contextual Applications: Get suggestions depending on the department and position of the newly hired employee—and do away with generic templates altogether. 

In-app suggestions: Employees can be assigned to channels, groups, or projects on which they will be working based on intelligent recommendations. Zluri goes above and beyond app-level recommendations. 

Zluri offers high-accuracy apps that your new hire will require based on the apps that other users in their department have used in the past.

Provide custom training: IT teams can also find if employees are facing issues with tools and provide custom training on a requirement basis. Thus ensuring successful onboarding.

Role of Zluri in Employee Offboarding and De-provisioning

Zluri shows the way when it comes to de-provisioning at the time of employee offboarding. Here's how Zluri goes about the de-provisioning act. 

Removal of access to devices: Zluri revokes authentication for the user from all the devices. 

Data backup: Zluri transfers the data or takes a backup so that there is no data loss.  

Revoke the user's license:  Zluri removes the user from the application after the data backup has been taken. 

SSO Removal: Zluri removes the SSO. 

Zluri helps IT teams simplify, plan, secure, and get the most out of their SaaS application portfolio. With Zluri, you can take control of your cross-application stack and make employee offboarding a foolproof and pleasant experience.

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About the author

Ritish Reddy

Ritish is one of the co-founders of Zluri, the SaaS management tool for IT teams. He leads the Marketing and Partnerships as part of his role. Before Zluri, he was part of the founding team at KNOLSKAPE and Co-Founder at Cranium media. Ritish is an MBA graduate and is passionate about building, and scaling businesses ground up. He is an avid reader and loves exploring book stores and libraries in different parts of the world. He loves painting with his 4-year-old daughter.