Employee turnover: The costs are staggering

By David Essex, ITworld.com |  Career

Any IT recruiter or hiring manager who's half on the ball probably has a plan for
reducing turnover. You don't have to be a management expert or an economist to
understand that if you're spending thousands of dollars and hours of your time to
replace employees who have left, preventing the brain drain in the first place might
have saved some of those resources.

What you might not know is how serious the problem is in the IT industry, and how
pernicious its effects can be throughout an organization. There are plenty of
consultants who stand ready, for a fee, to prove how bad turnover can be, and to show
you ways to reduce it.

One such management consultant, Sibson & Co., a subsidiary of Nextera Enterprises
based in Princeton, N.J., specializes in improving return on human capital, and last
month released a study showing a 25 percent average turnover rate in the IT industry at
large in 1999. The American Management Association (AMA; New York, N.Y.) confirms that
rate in its mid-2000 annual job survey, according to Eric Rolfe Greenberg, the AMA's
director of management studies. The AMA, which includes IT in the broader category of
business and professional services, found a 21.8 percent turnover -- the highest rate
outside wholesale and retail, at 32.6 percent. The rate for all industries was 16.9
percent in the survey, which polled 1,192 respondents.

Why is IT turnover so high? It's that old bugbear, the insanely tight labor market.
Besides emboldening job seekers, it's driving companies to step up their recruiting
efforts, providing still more incentive for people to leave their current employers,
says Jim Kochanski, a Sibson principal involved in the turnover study.

If you think, as I did, that the springtime crash of the NASDAQ took a lot of wind
out of job-hoppers' sails, think again. Though it probably took some corporate players
off the talent market, the catastrophic drop in many companies' stock prices did at
least as much to encourage turnover. "When your options are underwater, they aren't
worth as much to you right now, so they don't have any retention value," says Sibson
principal Seymour Burchman. While he couldn't cite hard evidence, Burchman says he
has "a sense that there's been a little less movement."

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