Why employee retention is much more effective that replacement

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Employee Retention

The debate between talent retention and talent replacement has been going on forever. Let’s explore this a little further by breaking it down into benefits and try to explain why TALENT RETENTION is always a better option.

Here are the key reasons talent retaining is better than replacement:


One of the most obvious considerations to consider when deciding whether to keep an employee or to replace her is expense. When employees stay with you for many years, they expect annual raises and benefits that can eventually exceed the value of their positions. A new hire with more recent education and training might provide more productivity at a lower price. To replace an existing employee, you incur the cost of a job search, background checks, interviews, severance for the departing employee, training for the new hire and lost productivity during the transition. The Center for American Progress estimates the average cost of replacing an employee is approximately 21 percent of his salary.

Employee grooming:

When you hire a new employee, if she’s younger, she might have more relevant college coursework than an older worker, needing less training regarding computers, software, social media and the latest methods and procedures of a particular profession or industry. New employees might need on-the-job or seminar training to get up to speed with their predecessors. Calculate the cost of training an existing worker vs. hiring a new worker to determine the cost/benefit ratio for each.

Increased Productivity:

When you hire a new employee, you might experience a temporary lag in performance if a position sits empty for several weeks and while a new hire gets up to speed. In key positions, such as sales, this can lead to a permanent loss of business. A new employee might bring new skills and more experience, bringing more productivity not only to his position, but also to his staff as he improves his team’s workflow. Departing employees cost you institutional memory that can be hard or impossible to replace, especially if the employee has been with you for many years. Departing employees can also sever important relationships with customers, vendors and the media.


Keeping unpopular managers or unproductive staff workers on your payroll out of loyalty or to save money by avoiding a new hire can damage the morale of your remaining employees. This can lead to decreased productivity, less loyalty and higher staff turnover. When assessing employees, if you know you wouldn’t hire them again if you had the chance to do it over, you might be better off terminating them, no matter the short-term cost.


Need an HRMS to retain your employees? We can help you at HRM Labs

references: http://work.chron.com/retention-vs-replacement-employees-22865.html


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