Retention has long been a critical issue for Irish firms particularly in the financial services sector. Long hours, competitive salaries and highly pressurised environments have all contributed to high staff turnover. Given figures released this week highlighting the increasing numbers of vacancies in the Irish marketplace employers can no longer turn a blind eye to staff turnover and must up their game in order to retain existing talent.

Most firms accept that high turnover is the norm today and turn their attention to recruiting the next big hire. But what are the hidden costs of staff attrition, and what can firms do to reduce the number of employees leaving? When an employee leaves a firm, the most obvious financial damage is caused by having to pay to hire a new person to fill the role, both in the form of extra salary and recruitment fees and the time and energy of Managers to interview and assess potential candidates. The induction and training of a new starter also take their toll for the same reasons. Indeed, the time spent bringing the new person up to speed, whilst an investment, is at a cost to the firm’s profit.

However, firms tend to forget that the financial impact of losing an employee takes many forms. Another, more evident cost, concerns billing. If there is a role within the firm standing empty, there is clearly no-one generating chargeable hours in that role. If a junior team member leaves, a more senior fee earner may have to pick up the workload of the leaver, which could not only be less stimulating but also is less profitable for the firm.

Often when an employee leaves, there is much talk in the pub or the tea room. If it is a Senior Manager, employees may discuss the impact this has on the firm’s future direction and profitability, and this departure may well impact on staff morale. A senior team member could also poach junior team members for his/her new team. Moreover, over-worked employees can become de-motivated as they pick up the “slack” of the missing team member.

Firms often trip up by not realising the financial ramifications of client “leakage”. Client expectations must be carefully managed when an employee leaves. Clearly, if clients become unhappy with the service they receive, they will take their business elsewhere.

To help firms quantify the real potential impact of staff turnover, companies should look at recruitment costs (both direct and interview costs), training costs (looking at both direct orientation and associated salary costs) and productivity costs (comparing a new employee versus an experienced employee). There is no greater incentive to retaining staff than management seeing the hard financial facts in black and white.

So, what can businesses do to stem the tide and aid retention? It is critical to take a holistic view and not offer simplistic solutions based on broad assumptions.

The firm should take a careful look at the major causes. First, firms must understand what sort of profiles they need within their staff. Often overlooked is the culture of their firm and the extent to which potential employees are likely to fit. The degree of fit has a proven major impact on the intent to stay as well as their productivity. It is important to evaluate potential employees to ensure they will fit with this cultural style.

Firms should consider all aspects of their employee value proposition. What motivates their employees, and what type of reward or recognition are they looking for? Financial remuneration remains an important factor for employees, but they are increasingly concerned with the quality of the firm’s leadership, their career prospects, and with the level of responsibility, flexibility and autonomy they are given. Long hours are typical today – not many professionals expect a cushy ‘9 to 5’ job - but the daily grind can get to employees, and employers should recognise this malcontent can result in employee burnout and reduced job satisfaction.

Failure to recognise talent and endeavour can result in disgruntled employees heading for pastures new. Businesses may want to consider introducing other roles for the promotion of talented employees. Identify other career paths for those employees who do not want to or will not make partnership, such as consultants or directors. In the current talent short market, firms should also make sure they know who within their firm will be the lifeblood for the firm’s future, and could therefore be developed. Writing and implementing a succession plan will ensure firms invest time and energy into the employees who fit with that plan rather than the ones who may “sparkle brightly” in the short-term.

Surveying staff on a regular basis to assess employee engagement is important, as are exit interviews with departing staff. Only when firms realise why people are leaving can they realistically implement solutions to retain and develop talent already within the firm, or entice talented employees to the firm.

Businesses need to work hard to attract and retain talent, as high staff turnover can be costly, both financially and in terms of reputation. Research has shown that the cost to the firm of a poor hire is likely to be up to ten times the employee’s annualised compensation, with three out of ten hiring decisions ending up as mistakes. In a skills-short market, employees can be more demanding than ever before, and companies need to adapt to accommodate their needs.

If you manage to keep your staff your business will be more profitable. With an ever increasing job pool it really is a candidate market and it could take much longer than expected to fill those empty roles.