Costs of Losing Long Term Employees: Walking Knowledge

Why do efficient, knowledgeable, long-term employees leave their jobs? Is it due to bad management, pay, policies or something else? These are great questions, but they are not in the scope of this article. If this article has caught your eye, you’ve probably read about these topics before.

Let’s talk about the major effects of losing a key employee. Keeping a long-term employee happy is up to mid-level and upper management, but the loss of a good employee affects everyone – from the CEO of the company to the summer interns.

When you read about turnover, do you ever wonder whether upper management knows what their organization really loses when a long-term employee finally hands in their resignation?

There are advantages and disadvantages to the loss of long-term employees, some are tangible and others less so. Decision makers should focus less on financial repercussions, and instead, engage in a deeper assessment process when accepting the resignation of a valuable employee.

Understanding the Drawbacks When Employees Leave

The obvious disadvantages of losing any employee are quite discernible. They can include a considerable immediate monetary loss due to flights, relocations, vacation payouts and additional costs from overtime that cover gaps left by departing team members. Departures create open positions that need to be filled, and resignations always carry the risk that the employee will move on to work with your direct competition. Departures take a toll not only on the payroll department but also on the team’s morale, causing unnecessary burnout when processes become drawn out.

An unfilled position can create unease among team members; Who will fill the position? Will the position be filled at all?

Today, many companies are in the process of downsizing and cutting costs due to economic recessions, bad business, and the introduction of integrated unmanned automation systems over the past decade. In most industries, including the entertainment industry, the biggest yearly monetary requirement is the payroll budget. This creates an obvious incentive to cut budgets by reducing the number of employees. It may seem that utilizing a company’s right to not fill an empty position is always the best way to reduce costs. However, this can only be successful if it is communicated properly. If it is not, it may lead to more resignations due to unhappy or fearful employees.

How Can You Maximize Benefits When Long Term Employees Depart?

The loss of a long-term employee usually creates the opportunity for movement and promotion. Movement within a team can actually boost productivity during the interview and decision process as potential candidates vying for a promotion, pick up the pace and strut their “A” game.  This increased motivation and morale can, even for the briefest of periods, overcast the departure of the long-term employee and all of the important attributes leaving with them. It can quickly lapse into a lull in activity once the final decision has been made. Those not chosen for the promotion are expected to remain positive, productive, and optimistic with their current position. This can be especially damaging when the chosen replacement is external. Don’t let this mirage fool you as it will almost surely not last forever, but for obvious reasons, use it for the advantage it is, while it lasts.

There can be advantages of losing a long-term employee. Monetarily, there is a good chance that the company will gain long-term from the resignation. Long-term employees create additional costs due to yearly salary increases and continuous increase in benefits. The benefits may range from stock options and health care plans to bonuses, housing allowances, and annual leave. Depending on the negotiations, this long-term financial gain can usually outweigh the short-term losses discussed in the disadvantages mentioned previously. A new employee, however, will come with a fresh slate of benefits and a new remuneration agreement – especially if the replacement for the position is hired externally. If the company does decide to hire within the company, then this would only be determined by the previous arrangement and additional implications of a new contract to the existing employee.

To Move Forward Effectively, Understand What You Lose When Long Term Employees Depart

With all of advantages and disadvantages of a long-term employee vacating their position, it is important to remember the most important losses are personal experience, methods, and knowledge.

Long-term experience usually outweighs knowledge. Take parenting for example – no matter how many books you read before you become a parent, nobody is an expert at the beginning. It takes time and experience before you know what makes your child tick. With time comes knowledge.  You learn how to get your child to eat, sleep, and stop crying. Eventually, you become an expert. When it comes to someone else’s child, however, you’re always going to be a novice. You can make a few educated guesses, but you’re never going to know the specifics.  This analogy can be applied to any organization.

Even an average employee will gain unmeasurable experience over time. This experience may range from being learning to autonomously complete daily office tasks to inspecting and fixing specialized equipment. However small or large the tasks are, every organization has daily requirements that must be completed. Otherwise, the systems begin to suffer inefficiency, longer down times, and even costly catastrophic failures. Employees with more experience will thrive and ensure that the day-to-day tasks are completed and lead by example. Over time as they will take the lead and become your key trainers to newer employees.

Organizations cannot operate if only one or two employees know the ropes. In this situation, a swift loss of one of these employees can bring a halt to the entire operation. When an employee walks out the door, the company is at the mercy of how much experience is walking out with it. This experience is purely the Intellectual Property (IP) of the employee and the employee only. Whatever exists only in the employee’s mind, is lost to the company. Of course, it seems obvious to have employees document everything prior to their departure. In fact, there are many documents and software that have been designed specifically for this but you would be naïve to think that absolutely everything can be documented.  Some things will not seem necessary until the knowledge has walked out of the door and the information becomes critical to the continuous operation of the organization. Trust me, it is never important until it is important. Experience comes with a high price to any organization, but it is invaluable when it is needed to work for the company, in the good times and the bad.

Knowledge is the infrastructure of any high-efficient, productive, long lasting company. Knowledge of the systems, standard operating procedures, organizational charts, budgets, individual skill sets, and otherwise unknown inner-workings of the organization are priceless to any company.  Letting that leave the building without a second thought is severely damaging to the day-to-day operations. Will the departure of any one employee cause the shutdown of a company? Absolutely not. Everyone is replaceable.  It is naïve to think otherwise. However, there could be some severe monetary setbacks and marketing implications.  Daily operations are always vulnerable. Even if it the only damage is through word of mouth, implications can be wide ranging affecting not only the image of the company but also internal employee morale.

Parting Thoughts and Final Advice on Effectively Managing Turnover

High turn-over in any company is damaging, but when the long-term employees head towards your toughest competitors, you need an action plan. Employees’ knowledge and expertise can be the most valuable piece of equipment in the building.  You must ensure that when employees leave that knowledge and expertise does not walk out with them. Good managers will ask departing employees why they are leaving. If that reason is your management, operations or relations, asking the right questions will give you an insight and opportunity to prevent further fallout, use it.

Also by Jay:

Troubleshooting Your Theatrical Systems, Part 1

Redundancy In Theatrical Systems

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