We’re going to get a bit esoteric to start this one.
Esoteric? About Cost of Turnover?
This is from an article on The New Yorker’s website, published a little bit after the 2016 Presidential election. It’s by Om Malik, the founder of GigaOM, and it’s titled “Silicon Valley Has An Empathy Problem.” This part, in particular, stands out:
It’s hard to think about the human consequences of technology as a founder of a startup racing to prove itself or as a chief executive who is worried about achieving the incessant growth that keeps investors happy. Against the immediate numerical pressures of increasing users and sales, and the corporate pressures of hiring the right (but not too expensive) employees to execute your vision, the displacement of people you don’t know can get lost.
This is an essential paragraph to understand the modern business environment.
The Vocabulary of Decision-Making
See, for as much as we discuss culture or engagement or mission or values — and don’t get us wrong, those concepts are important and should be discussed — the way companies are structured doesn’t really allow for the most important people (the “stakeholders”) to actually care much about them. They can only exist at a lip service level.
As you rise up in a company, the vocabulary — Acronym Volleyball! — is all about finances. You better be able to quote that CAGR, or bring up EBIT over coffee. What you care about has to change. It’s not necessarily a bad thing. It’s actually logical that it would happen this way.
So, for example, when we try to sell Tenacity to organizations and decision-makers, initially we wanted to frame it up around “employee motivation” or “workforce optimization” or social coping strategies. We still do that.
But over time, we had to adapt. Because executives care about the bottom line above all; to some, it probably has the same resonance as their first-born child.
What you need to know, then: cost of turnover is throat-punching your bottom line. Yes, throat-punching it.
The Cost of Turnover Issue
Turnover costs trigger dozens of other costs, from recruitment to training to nesting to (less tangible to capture on a spreadsheet) knowledge loss in the call center. All this leads to inconsistent behavior by agents, which also increases customer churn.
And if you’re the rare organization that can successfully link cost of turnover to customer churn, BOY HOWDY. The executives will be up in arms and demand a plan in two hours. (You can call us.)
See, executives have been programmed for years to believe that losing a customer is a mortal sin. They don’t want to do that. (It might affect their bonus, after all.)
But even though losing dozens of agents typically leads to customer loss, that connection often isn’t seen. Why? Lots of reasons, primarily that HR tends to own cost of turnover statistics, and executives don’t let HR into the bigwig money-discussion meetings.
What Can be Done to Help the Bottom Line?
Reduce turnover, reduce costs associated with turnover, retain customers. It’s simple to say/type but harder in execution.
It begins from this place: get a hold on your cost of turnover. Don’t pull the number out of thin air. Carefully measure it. (Or let us help you)
Then think about solutions to reduce turnover. We can help there.
Once you have a hold on some of these concepts (and the decision-makers are legitimately invested, hopefully), you can begin the process of both retaining customers and lowering customer acquisition costs.
But it all — all — begins from a place of understanding cost of turnover and its impact (the throat punch) on your bottom line.