How much does employee turnover cost your business? A typical business spends over $3000 in direct costs to replace an entry-level employee who was working for $10/hour. Direct costs include advertising a job opening, review applications, interviewing, screening, hiring, on-boarding, and training.

At the high end, it can cost two times an annual salary, or more, to replace a top executive.


There are also many indirect costs, not easily measured in dollars, associated with employee turnover that add up to bad news for any business:

  • Decreased productivity: It often takes months or even years for a new employee to become as productive as the person he/she replaced.
  • Damage to employee culture: High turnover rates cause many employees, even the best ones, to get nervous and start looking for another job.
  • Decreased quality of service: New employees are far more likely to make mistakes and far less adept at addressing customer concerns than experienced employees.
  • Opportunity costs: Employees who spend time poring over applications, interviewing applicants, filling out forms, providing orientation and training for new employees, are not doing the actual productive work of the business.


Some industries wrestle with employee turnover rates of 200%, 300%, 400%, or more. The problem is that turnover costs are not the same as productive operating costs. Unlike the costs of research and development, capital investments in new equipment, or expanding a workforce to serve more customers, the costs of employee turnover are money, time, and attention a business spends merely to tread water and maintain the status quo.

Reducing turnover, therefore, sparks business growth in multiple ways. Lower turnover costs translate into bigger profits, more competitive wages/salaries for higher quality employees, as well as higher customer satisfaction, an expanding customer base, and a larger market share.

The good news is that reducing turnover can begin with a tool available to every business owner: the interview process.

The main purpose of the interview process is to reveal the best among a pool of applicants. But why not improve that pool? Interviews can be opportunities to teach and inspire applicants before they’re hired. Employees who gain an appreciation for the most important things about your business, before they even accept a job offer, are less likely to become turnover statistics.

All jobs share certain fundamental qualities because all businesses do. Every business creates wealth by producing something others want, need, appreciate, or otherwise value. And every employee at every business can create more wealth for him/herself by producing more value for customers, coworkers, and the business owner.


For business owners, the idea that wealth can and must be created is obvious. But it’s not obvious to many applicants looking to become employees. According to numerous studies, a large majority of recent high school and college graduates—more than two-thirds—don’t understand the most basic elements of economics.

Many Americans today, especially younger ones, assume that wealth simply exists “out there,” somewhere. And they’re angry that so little is “distributed” to them while others, especially the business owner for whom they work, seem to have been “given” so much more. This line of thinking fuels feelings of entitlement, corrupts employee culture within a business, and contributes greatly to high turnover rates.

Business owners can counter entitlement attitudes by teaching applicants, before they’re offered a job, that the way an employee earns more wealth is by producing more value for the business. That might mean learning additional skills, increasing efficiency, or putting more smiles on the faces of more customers.

Teaching applicants, rather than merely screening them, leads to a better employee culture. It reinforces the principle that the interest of each employee, the customers, and the business are intrinsically connected to one another. Teaching applicants results in employees who appreciate their job as an opportunity to create wealth for themselves by serving others. And appreciative employees typically don’t want to become turnovers.