New Cornell Study looks into Hidden Costs of Turnover

Exit interviews and careful selection may be two of the keys to reducing the expenses of turnover. An analysis by two Cornell University researchers of the many steps involved in turnover found that the cost of each step affects different hotels in different ways. The study, “Costs of Employee Turnover: When the Devil Is in the Details,” was conducted in an effort to determine and reduce the costs of turnover.

For their study, professors J. Bruce Tracey and Timothy Hinkin divided the costs of turnover into five categories, which are pre-departure, recruitment, selection, orientation and training, and productivity loss. “Several studies have found that productivity loss is the biggest cost of turnover,” said Tracey, “Most of the damage to productivity is caused by the inexperience of new employees.”

Tracey and Hinkin wanted to go beyond that knowledge to find clues to reduce the cost in each area of turnover. In the course of that analysis they saw that exit interviews and careful selection processes reduced costs for some hotels.

Using detailed information on turnover from a sample of hotels, Tracey and Hinkin compared turnover costs from their responding hotels according to several factors, for example, high-complexity jobs versus low-complexity jobs, chain hotels versus independent hotels, and large properties versus small properties.

In the course of making those comparisons, Tracey and Hinkin found that hotels that spend a higher percentage of their turnover costs on pre-departure activities, specifically exit interviews, had a relatively lower cost of turnover. Likewise, they discovered that hotels that involve a wider group of supervisors and peers in the selection process saw relatively lower turnover expenses.

Looking specifically at the relative cost of selecting new employees, Tracey and Hinkin made an unexpected finding. They found that selection costs for low-complexity jobs absorb a higher percentage of total turnover costs than do the selection costs for high-turnover positions. They believe that the source of this relatively high expense comes from the difficulty of developing a pool of qualified candidates for low-complexity positions.

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