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Sticker Shock: The Price You'll Really Pay When Employees Leave

Two months ago you hired Dave to work in sales. This morning he dropped the bomb: he's leaving your company to go to your...
October 18, 2005

by Sean Neumayer
The Omnia Group

Two months ago you hired Dave to work in sales. This morning he dropped the bomb: he's leaving your company to go to your closest competitor. Now what do you do? Could this have been prevented? What went wrong?

Contrary to popular belief, when an employee leaves the job soon after he or she starts, it is not the price of another "Help Wanted" ad that is your biggest financial burden. In fact, that is one of the least expensive costs! Statistics show that when a person vacates a job within 3 months of hire, you and your company will end up paying - in dollars and cents - about what you would have paid that person in one year! A hefty price for poor planning? The answer is a resounding "YES"!

Think about the far-reaching effects of turnover:

  • While a departing employee's days with you come to an end, his/her paperwork and ongoing tasks do not. It is often necessary to pay the remaining staff overtime to cover the workload in order to meet preset deadlines and satisfy the needs of busy clients. Budgeted funds that have been set aside for other projects must be reallocated, sorted out and dissected. If your staff are salaried you will not pay them additional dollars; however, your price will be the camaraderie lost among your employees as they become increasingly resentful of being overworked, pushed to their limits.
  • Incalculable financial opportunities are lost by your agency when your representative is no longer there to quickly quote prices for additional insurance products, deal with emergencies, answer questions, and resolve problems. Insureds often feel "out of the loop", abandoned, when the face or voice they were just starting to feel comfortable with is replaced. The sense of relief and well being that many clients feel when dealing with someone familiar to them diminishes and takes time to be regenerated.
  • A departing salesperson or CSR can negatively impact the morale of the entire team, especially if that person was admired or thought of as a friend. Cynical comments about working conditions or pay rates might be voiced loudly by exiting staff members. Some of the remaining employees may go through a period of sadness, while others might opportunistically decide to reassess their own likes and dislikes about the company and make new demands. The loss is generally felt in one way or another and usually takes at least a temporary toll on co-workers and upper management.
  • When a soon-to-terminate employee agrees to stay on and, thus, gives a standard "two week notice," a salary is paid for what usually turns out to be less than stellar work. While company supervisors scurry to choose a replacement, the now restless, disinterested staff member takes life easy for one last pay period, reaps a financial reward and often spends an inordinate amount of time telling co-workers that he or she is doing the company a favor by staying. In reality, as dollars and time tick by, nothing could be farther from the truth!
  • Your own time is money. Remember that the replacement of an outgoing employee requires you to pore over resumes, conduct interviews and sort through the positives and negatives of each job candidate. Hours that should be spent devising new plans, developing business strategies and attending to the needs of everyday business, are lost. You may feel like you're being pulled in a hundred directions simultaneously. And you are.

So how do you avoid frequent turnover, save money, time and aggravation? You learn to be more savvy when hiring your next employee!

When first-time clients plead with me to help them lower their turnover rate, I immediately ask if they're ready to implement and commit to an action plan. They almost all unequivocally shout, "Yes!" While I'd certainly like to believe this is because I have captured their attention and they are hanging on my every word, reason tells me their fervor is probably because they are so desperate to avoid another bad hire they will agree to almost anything. The sting from a recent nightmare employee can be long-lasting!

Now that we've weighed all the ill effects of frequent employee turnover, let's go ahead and find ways to cut down on it. Clear-cut plans should be in place and ready to spring into action once a slot opens within your company. It is imperative to streamline your hiring approach and avoid these 5 managerial pitfalls:

1. One of the most common mistakes hiring supervisors make is being inconsistent when evaluating and/or selecting applicants. For example, if you sit down and talk to Candidate "A" for 35 minutes, you need to do the same with Candidates "B", "C", "D" & "E." Doing or saying anything that might skew the results, giving one person an unfair advantage (or disadvantage) over another, serves no purpose for anyone! Be sure to ask each candidate the same questions and try to use the same tone and expressions whether you seem to be speaking to a lively, flamboyant go-getter or a demure, gentle introvert. Spend ample time with each candidate and do NOT go with your "gut feeling"…doing so may quickly prove to be a big and very costly mistake.

2. Too many companies fail to provide applicants with a complete and accurate job description of the position they are looking to fill. In some cases no job description is given, so candidates are unable to know for certain if they are truly interested in, and compatible with, the position. When an applicant knows the hiring company's name and the title of the open position but little else, expect trouble. The more precise you can be in your outline of the job, the more likely it is that you will find an employee to suit your needs.

If possible, allow your applicant to sit with an existing employee who performs a job that is like, or somewhat similar to, the one you are trying to fill. This way, a first hand look at the work environment and responsibilities can be obtained, and the applicant may have a clearer understanding of whether or not the workplace, co-workers and duties seem like a good fit. Playing guessing games is fun at parties - not on the job!

3. If a person is quite simply incapable of carrying out the functions of his or her role, he/she has what is known as "vocational incompatibility." To avoid this, it becomes necessary to secure not only a clear understanding of every aspect of the position but also definitive information in regards to your applicants' innate traits. Asking a shy, standoffish person to make cold calls, approach strangers, sell anything, is sure to lead to bitter disappointment and unrelenting failure. Do everything you can to be certain the person you are considering for the job is truly able to perform well and not just mouthing words you want to hear. Speak to references, call former employers, verify experience, perform background checks, or utilize one or more of several personality-assessment tools that are currently available.

4. Environmental incompatibility occurs frequently and causes stress, low morale and resentment in the workplace. It differs from vocational incompatibility in that it occurs when a person is, in fact, capable of doing the job, but unable to mesh in the work environment.

Example: Let's say you're a manager who likes to keep a close eye on your staff; you make yourself available to answer questions, keep tabs on precarious situations and don't mind it one bit when someone refers to you as a micro-manager. Remember Dave, your soon-to-be-gone salesperson? Did we ever establish why he was leaving? It could be that while he exhibited the traits of a typical entrepreneur, performed well and clearly had the drive, determination, personality and great sense of self-confidence needed for sales, he felt too stifled by your firm management. He wanted freedom while you wanted control. You each needed something from the other that neither of you was willing or able to give - this is environmental incompatibility.

It's important to know the work habits and expectations of people BEFORE you hire them. ASK A LOT OF QUESTIONS! More time and money are wasted when two people, both excellent in their respective positions, have work approaches, communication styles and/or time expectations that are so different they clash. Disagreements, confrontations and/or sudden departures are inevitable.

5. Failing to set expectations and share them with your applicant will cause confusion, miscommunication and disappointment. For example, you might be looking to hire someone who can be fully trained, up and running, proficient at many tasks within 3 months; however, your applicant may be the type who needs more time, likes to learn one task thoroughly before moving on and hates being rushed or pushed. To decrease the risk of mutually frazzled nerves and strong indignation after being hired, be sure to make your requirements and timetables clear during the interview. I often hear prospective clients say things like: "If I had only known before how far behind she'd be at this point, I would have…" or, " I thought we'd end up on the same page, but, oh boy, was I ever wrong!"

The lesson here is that if expectations are realistic and mutually agreed upon at the outset, an applicant can better determine whether he or she might meet your needs comfortably, must make work approach modifications, or should simply keep looking for another job.

To help avoid saddling yourself with another misfit employee, first take the time to know who and what you're looking for. As you sort through the stacks of applications, cover letters and letters of recommendation, keep in mind that these are only small pieces of a much bigger puzzle. Stay focused on your objective to find the right person for the job, and remind yourself that spending a little extra time talking to applicants, scheduling multiple interviews and implementing hiring plans should pay off in the long run.

While there will certainly be times when turnover is beyond your control - as employees can leave jobs purely on a whim or due to very extenuating personal circumstances - following the aforementioned strategies should limit it. Professional behavioral assessments can also help and are widely available to hiring managers who are looking to reduce turnover, improve their agency's morale or learn new ways to enhance the performances of existing, but perhaps not so productive, employees.

When filling an open slot at your agency, remember to:

  • Define your vocational and environmental needs.
  • Find applicants with resumes/backgrounds that seem to fill those needs.
  • Ask plenty of questions during the interviews.
  • Look for additional resources (references, behavioral assessments, personal recommendations) to substantiate an applicant's claims.

You're busy, overworked, juggling several projects simultaneously, and are sure to have better things to do with your time than circling through a revolving door of ever-changing insurance employees!

About the author: Sean Neumayer helps clients screen job applicants and motivate existing employees by assessing behavioral tendencies. He represents The Omnia Group, a company that offers The Omnia Profile® as a hiring and management tool. To learn more, call Sean at 800-525-7117 x 242 or email him at and let him know you're a PIA member.