Real Cost of Exits
Was discussing with a young family business CEO (mentee), the Cost of Exits in a Co. Whilst he was generally tracking basic Exit data of his Co benchmarked with industry etc , clearly, he had not understood the real implications of the total cost stack-up of Exits.
So we began listing on White-Board, all the heads of direct & indirect expenses triggered by a good performer exiting the system
1.Attraction /Recruitment Cost 2.Gap - Time Wasted cost 3.Selection Cost 4.Pre-employment Costs 5.Pre-employment Training Costs 6.Employment Costs 7.Compensation differentials 8.Orientation/Socialization Costs 9.Initial Training Costs 10.OJT - Learning/Development Costs 11. Cost of Cultural Re- Engagement 12.Cost of Re- Connection with Strategy 13. Performance Optimisation Costs 14. Maintenance Costs 15. Performance Decline Costs 16. Departure / Exit Costs
No business leader would indeed take employee exits lightly & would try to value talent only if he realised the humongous overt & covert 'total cost build-up' that impacted, each time a good performer quits the system.
My conservative calculation indicates that such costs is 3 times the CTC of the person who leaves.
AJ , my CEO mentee was about to faint !!