The Cost of Losing an Employee and Their Tribal Knowledge

Rachel Alexander
Rachel Alexander
2 mins
cost of losing employee

To gain a competitive advantage, businesses are putting significant effort into finding and retaining the best employees possible. However, no matter what your company does to nurture your top talent, sometimes they leave your organization. And the cost of losing an employee might be greater than you think.

Turnover can have a negative impact on employee morale and productivity, but the longer-term impact is on company revenue. Recruiting and training new team members requires time and money, and this expense is even greater when you don’t have an effective knowledge sharing tool in place to retain company information.

The Hard Costs Of Losing An Employee

Studies have found that the average expense to replace an entry-level employee can be up to 50% of that employee’s salary. For a supervisory role, that replacement cost could go as high as 150% of the annual salary.

Many factors contribute to this high cost, including the recruitment fee paid to recruiters, the time it takes to interview and hire, and the possibility of a demand of increased salary (the University of Pennsylvania has found that external hires demand 18-20% more in salary than internal hires).

And if these direct, hard costs are intimidating, what about the indirect costs that result after losing an employee and the company knowledge they have?

The Indirect Costs Of Employee Turnover

It can take 8-12 weeks to replace a knowledge worker when they leave your company. And once a new person joins the team, you will be faced with another four to eight weeks (at a minimum) before your new hire is fully trained, comfortable, and productive in their new role.

As an example, if the lost employee is a salesperson who typically brought in $100,000 in annual revenue, your company will incur a $25,000 revenue decrease for every three months without a fully-trained replacement (and given the maximum time stated above, it may take five months to reach full capacity).

During those first one to two months of onboarding a new team member, one of your best people will typically be tasked with training. Tasking top talent with training may ensure excellent results from your new hire, but you’ll also encounter hidden labor costs that can quickly add up to tens of thousands of dollars.

The Cost of Lost Knowledge

What makes your existing team so good at their jobs is the unique skills and knowledge that they have cultivated in their positions. During their time at your company, they have developed relationships internally as well as with customers, gathering insights that are beneficial to the ongoing success of the organization. When an employee leaves your company, they theoretically take that knowledge with them.

When you’ve had the same employee in a position for years, their job is easy for them — they probably don’t consult process guidelines and have developed shortcuts to make their tasks quick and efficient. Although these employees are working at their peak productivity levels, these processes and efficiencies don’t live anywhere but in their mind.

To avoid losing all of this information, make knowledge sharing a priority. Implement a knowledge sharing platform that is intuitive and easy to use. Consider making documentation and process updates part of employees’ job descriptions. Foster an environment that encourages collaboration, coworking, and cross-training to facilitate the transfer of knowledge more seamlessly.

With the amount of knowledge a long-time employee accumulates, the industry expertise and understanding of the organization that leaves with them is invaluable. That makes the investment in a knowledge sharing platform and strategy worth every penny.

December 1, 2017

Harness The Power Of Knowledge Sharing With Digital Transformation

Companies that grasp what the digital workplace is really all about are willing to change the ways people and applications connect across their organizations. By fostering a digitally driven culture of collaboration, they break down silos, share knowledge more effectively and compete more successfully.

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