The True Cost of IT Employee Turnover to Your Business

Digital transformation often times takes longer than anyone expects. Let’s face it, transformation of your enterprise and your technology platforms requires a significant effort. One element that does get overlooked in the transformation effort, which often means taking longer than expected, is employee turnover. Your job as a tech CIO is to get stuff done—to see your solutions implemented and your market satisfied. However, when your competition decides to undergo a digital transformation themselves, and learns all the ways you’ve invested in your employees, they often swoop in and offer a more competitive package to some of your key technology experts. The next thing you know, some of your best talent is now working for them.

Often, employee turnover costs are only focused on in the HR view, but not from the project or opportunity cost. Yet, this type of hit can derail progress, impact solution deliverability, potentially hand over valuable insights to your competitors, and even lower brand trust (both inside and outside the company). Let’s take a closer look at the true cost of IT employee turnover and how your company can combat it.

Employee Investment

Taking on a new employee has its costs, as well as those associated with investing in their talent. So, while we do need to look at the human resources impact, it’s not the full story. Let’s review some of the well-known employee investment costs.

  • Hiring process – The process of hiring doesn’t come cheap. There are ads, interviews, and other associated costs that vary from company to company. Every employee you need to replace costs money.
  • Onboarding – As talented as an IT developer might be, they still need to be caught up to speed with what’s expected of them as an employee, learn your company strategy, and know how they fit into the overall scheme.
  • Training – Training an employee on the way you do business, the systems you expect them to use, and the workflows associated, takes time and energy away from project work. In particular, the time and focus of your experienced staff members as they train new members, instead of working on their projects. This results in delays or burnout of staff members trying to do both.
  • Time to peak performance – Depending on the environment, it can take months, or even over a year for an employee to be up to full speed and able to do their job at peak performance. Until this happens, assigned work takes longer and other team members often are required to provide help to bridge the experience gap.
  • Employee engagement & individual IP – From the moment a new employee is brought into the mix, they are beginning their accumulation of business insights, valuable intellectual property, and much more. When they leave, you lose not only their engagement and insights, but you also lose the knowledge investment you have made with them that you will need to repeat with another.

Company Impact

Now, the harder aspects to nail down for turnover include all the ways it impacts the company on a larger scale. Many of these are variables and your company might fall on a spectrum, but they are still things to consider none-the-less. Let’s look at them.

  • Business risk – One of the most critical impacts of employee turnover is the negative impact to mission-critical projects for your business. As a technology leader, your primary job is to build and maintain a team capable of developing (and sustaining) technology solutions to propel your business forward. Employee turnover directly impacts your ability to deliver for the business. Turnover leading to project delays, solution gaps because of experience gaps, and quality errors can directly impact your business bottom line.
  • Solutions taking longer to get completed – Imagine your transformation project just lost a key technology employee who was integral to the strategy and designs of transformation. This loss removes a key subject matter expert who could be a bridge between business needs and the technologies enabling the transformation. With this loss your project is set back in schedule (and often capability), as others work to step into that role.
  • Solutions not meeting the needs of the business – As mentioned above, loss of staff members to turnover decreases your team’s through-put directly through energy loss. In addition, employee turnover often removes critical experience from your team, typically resulting in the remaining team lacking the experience to define and develop solutions that work with the nuances of your business.
  • Higher error rates – When an employee leaves, it opens a hole not only in their role, but in development and production efforts the employee was part of. The synergy with fellow team members is lost and as such, work quality can suffer until replacement team members can gain experience.
  • Cost of time with unfilled role / overworked employees – One area which may be easy to calculate is the cost of time when a role is unfilled. However, it also needs to be looked at in relationship to the overworking of other valuable employees. If another employee is having to cover capacity and knowledge gaps created by the departed employee and doesn’t get relief, it can mean more turnover on your hands, sooner rather than later.

What Can Your Company Do?

As you can see, there are a lot more factors into the true cost of IT employee turnover than the first you might think. So, what can you do from the CIO perspective? First and foremost, you’ll likely want to be proactive when it comes to your compensation model. If you’re investing in quality talent – keep them happy by offering competitive pay and compensation packages.

However, there is more to consider. Let’s face it, the technology talent space is extremely competitive today. You can be doing everything right and you will still experience turnover.  Your role as a senior technology leader is to build development and support capacity to support business needs, in spite of turnover. No one within the business gives you a “pass” because everyone experiences turnover. In this environment, we believe you need to create solutions that help inoculate your company against the inevitable turnover that will occur.  To do this, we believe this means investing in talent through a partnership with a firm known for its stable technology teams and long-term strategic focus. For example, when you hire one of our tech teams to partner with you, you are not just hiring a single employee, you are hiring a TEAM, which creates tremendous resiliency in our ability to retain critical “how to do this” knowledge, maintain performance, and sustain solution delivery velocity over time. This means keeping your IT software development projects on track, while still investing in incredible talent.

If you’re looking for new ways to offset your turnover costs, consider reaching out to us. We’d love to sit down with you to talk about your company’s goals and how we can partner with you to make them happen. Give us a call today at (218) 454-7711. We can show you how our Lakeshore model can help your firm strategically address the costs and business risks of staff turnover.