Attrition could be eating into your bottom line in hidden ways. Check out how it could impact efficiency, employee experience, your client expectations, and your brand at large.
The Great Resignation, the Great Reshuffle, the Great Renegotiation – these catchphrases have been echoing through the business world and reveal a major inflection point for talent. And there are unique implications for verticals like IT services, consulting, accounting, engineering, and law firms that walk the tight rope of managing their people, budgets, and schedules to deliver projects successfully (such businesses, that depend on billable hours and offer services on a project-basis are often clubbed together as the Professional Services vertical).
For them, talent attrition has been a huge roadblock that prevents growth and the delivery of exceptional client experiences. Let’s put the problem into perspective with a paramount stat: The Professional Services vertical has the highest turnover of 13.4% as per LinkedIn data 1. There are two types of attrition – voluntary and involuntary – and while both have far-reaching effects, the former involves the loss of highly skilled employees, which project-based businesses depend on. Here, we will arm you with key information on risks to consider so you can empower your people and business by taking proactive steps to curb voluntary attrition.
How does turnover impact the bottom line?
Often, due to the lack of information, project-based businesses can’t map the effects of churn into tangible outcomes. First, let us take stock of the big picture involving the turnover problem – that is the impact on your bottom line. SPI Research’s 2022 Professional Services Maturity™ Benchmark estimates that it takes a staggering 124.1 workdays, on average to find, recruit, hire, and ramp up new consultants. 2. This translates into several risks.
A large proportion of replacement hiring happens because of voluntary attrition, putting a lot of additional pressure on HR and functional teams. It further leads to additional costs related to training and onboarding. What’s more, while the hiring is still in process, businesses face a well-known stumbling block; lost project opportunities due to resource shortage.
“With unchecked voluntary attrition hampering project progress and business growth, there is a spill over effect outside the organization as well – the loss of confidence in the company sparked in existing clients and prospects.”
Let’s dive a little deeper to examine these not-so obvious impacts.
Taking stock of the hidden costs of turnover
- Productivity loss as recruiters and managers scramble to backfill departing employees
A sudden surge in the voluntary attrition of talent is a familiar horror story for businesses. To deal with this unpredictable turn of events, Operations, HR, and Finance teams must balance budgets and identify talent that can be quickly hired for projects – besides the hiring costs, there is also a lot of time, effort, and energy of the teams that is redirected towards course correction rather than growth. All of this burden on HR, Operations, and Finance could lead to a loss in business efficiency.
- Pressure on other team members to sustain operations and mentor leads to inefficiencies and burnout
If a significant number of valuable employees leave a business at around the same time, the entire workflow plan for projects is upended. Now, their team members have to take up this additional share of work to complete the project within stipulated timelines. Project managers and senior consultants will need to mentor and/or help onboard the replacement hires. When they have to overextend themselves, there’s bound to also be a drop in quality, work-life balance, and client satisfaction.
- Employee morale takes a downturn, impacting hiring too
Aside from the mounting pressure, the dynamics between employees is also naturally impacted by resignations, leading to a drop in morale. When the number of demotivated employees rise, it’s likely that businesses would yet again have to deal with more resignations and uncertainties. Moreover, it’s natural to also see an impact on hiring as well since the brand equity is affected.
- The loss of specialized skills and knowledge
When consultants and specialists work at a company over a period of time, they accumulate specialized skills – the nuances and depth of this knowledge cannot be captured through a knowledge transfer process at their time of exit. Although the goal is always for HR to ensure that employees are replaced with candidates that have comparable experiences and expertise, new hires may need some time to acquire this niche knowledge – this could result in a drop in quality of project delivery and diminish the client experience.
- Culture and employer brand take a hit
The most insidious impact of high voluntary turnover is a long-term change that creeps into the culture and perception of a company. Talent will cease to see value in staying for extended periods of time at the organization and the focus on excellence or innovation will waver. And when the brand perception changes, there are ripple effects in how clients, prospects, and the competition view/work with a business.
Inaction is not an option
Given all of these factors, it’s no surprise that the real cost to replace a valuable consultant is estimated to be a staggering $150,000, by SPI Research, heavily denting bottom-line profits and making it hard to increase revenue and margins. As organizations deal with the impact of the great resignation, quiet quitting, and the shortage of skilled talent, they must re-evaluate their end-to-end talent strategy – the focus should be on striking a balance between profitability, customer satisfaction, and the employee experience. Curbing the wave of resignations and the trail of panic and economic impact it leaves in its wake requires company-wide efforts.
“Technology can level the playing field, and the right software stack can help businesses turn the tide and minimize attrition.”
Besides helping their people manage their workflows, it can boost engagement, and forecast avenues at which HR should step in to address discontent.
If you are dealing with the talent crunch, dive deeper into how you can address this in our blog on minimizing turnover. You can also explore more about related topics here:
- Talent crunch time
- The quest for productivity
- You know that saying, people buy people
- Turn your vision into reality through workforce planning