High Employee Turnover & Low Engagement are Costing You A Bundle!

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This year has taken its toll on all of us. For leaders of behavioral health organizations, everyday struggles with employee turnover and lack of engagement have been heightened during these challenging times. We all know that a low level of engagement and high turnover affects the ability of a provider organization to do its best work. While you have likely considered that it also affects your financial performance, do you know how significant that impact is?

Gallup has reported that only 21% of US employees are “fully engaged.” Most are meeting the minimum requirements or less and not putting in any discretionary effort. Gallup has calculated the cost of lost productivity for staff who are not fully engaged at $3,400 per $10,000 (34%) of salary.

Turnover is another big challenge for behavioral health providers. When someone leaves a job, the cost of recruiting, hiring, and training a new person is steep and lost productivity make the cost even greater. On average, losing and replacing an employee costs about 50% of the position’s base salary. As difficult as turnover and engagement has been, COVID-19 has likely made things even more challenging. Increased stress on staff appears to be amplifying engagement and retention difficulties.

What does this mean for a typical behavioral health provider? Assume that Company A has a total annual budget of $20 million and spends $10 million on direct wages. Let’s also assume that annual turnover is 25%. (If you think that 25% is too high, note that a 2019 Crain’s Detroit Business Health Summit estimated mental health provider turnover in Michigan at 37%.) Here is the economic cost of turnover and disengagement.

79% of staff not fully engaged:    $2,686,000 (34% of $7,900,000)

25% turnover:                                $1,250,000 (12.5% of $10,000,000)

Total Financial Cost:                     $3,936,000

In short, turnover and engagement problems may be costing Company A almost 20% of its total budget. If you think that 20% estimate is too high, reduce it by as much as 2/3 and the organization is still underperforming to the tune of $1.31 million or 6.6% of budget. What could you do for your staff and your clients with an extra million dollars?

Access our cost calculator to see the financial impact on your organization

As painful as the financial realities are, the cost to the quality of your organizations’ focus and mission may be greater. In a recent national survey by Predictive Index, executives reported that only 49% of their hires in the last year were good ones and that they had 47% turnover in their pool of best performers. This results in weak continuity of care, impaired customer service, greater team friction, lower morale, and weak understanding of the organization’s mission and operations. No wonder these executives reported spending 61% of their time on people problems! How could you improve services and the reach of your organization if you spent only half as much time on people problems?

Most providers have business strategy and analytics that track business results, but few have a clear people strategy focused on improving engagement and retention. It is a rare organization that has robust talent strategy that is aligned with their business strategy and metrics.

We want to hear from you. We all are looking for ways to serve our clients better and still achieve stronger financial performance. We want to hear about your experience and where you’re feeling challenged. Contact us and let’s explore ideas on how to make your company “healthy” using proven evidence-based tools.


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