Great managers are turbochargers for team and business performance. So, when good managers leave an organization, the impact is significant. Not only are the direct costs of hiring replacements expensive, but there are also costs associated with lost productivity while new managers are coming up to speed, as well as the lost revenue while a position is vacant.
In a growth economy where unemployment is low and employees tend to job-hop, high-performing managers—who can keep the organization running—are even more crucial. Designing initiatives to retain managers is paramount.
Just how expensive is it to lose a manager? The direct costs to hire an employee, which include standard recruiting, onboarding, and training expenses, can range from a couple thousand dollars for an individual contributor to tens of thousands of dollars for more experienced or sought-after talent.
According to industry expert Josh Bersin, the cost to onboard a new employee is at least 1 to 2 months’ salary, with higher ranges applying to managers. Add to this the cost of “losing a customer relationship or internal collaborator” or “having nobody in the job”: Bersin estimates these costs are at least 30%–50% of a year’s salary when you lose an employee, with the higher range being for a manager.
Michael Watkins, author of The First 90 Days: Critical Success Strategies for New Leaders at all Levels, found that it takes a manager an average of 6.2 months to reach a break-even point. At this point, a manager’s contribution to the organization begins to surpass the company’s costs of bringing him or her on board, such as hiring expenses, salary, and costs attributable to the person’s learning curve in the organization.
Over and above these hard costs, there are also extensive intangible values of managers, which are difficult to calculate, including:
Loss of knowledge. The loss of historical context to past projects and decisions, intellectual property, and technical knowledge—especially with key roles such as management staff—can hamper organizations and force them to repeat past mistakes.
Knowledge loss is inevitable because of turnover through retirements, but organizations with good talent practices that include leadership learning and development, mentor programs, and knowledge management systems can alleviate the impact of both retirements and manager attrition.
Workplace disruption. The loss of these managers can cause stalls, confusion, and general productivity loss that ripple into other contributor roles. While good documentation and teaming programs alleviate the impacts of turnover, these solutions are imperfect. Retaining retiring managers, perhaps in part-time or formal mentor roles, can be additional solutions.
Network disruption. Networks are also an area of impact. Some managers are individuals whom others seek out for specific skills or knowledge. Others direct inquiries to those tenured staff members who know “where everything is” in the organization.
These individuals are highly sought after because they help maintain collaboration within organizations and regulate and accelerate production cycles, information flows, and knowledge dissemination […]
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Source: HR Daily Advisor