CIMA and Vox Pop Consulting Ltd’s work suggests that the real impact on a business of losing staff can only be found by measuring the cost of replacing talent, as well as losing it. And that means understanding employee opportunity costs.

The Cost of Replacing Talent© (CORT©) model factors in employee opportunity cost - employers estimates of ‘the number of weeks it takes each level of staff to become fully effective’. The table below shows the very significant impact this effectiveness lag has; a senior manager for example, is estimated to take nearly seven months to become fully effective in a new role.

These weightings are offered as normative data only. They were derived from the CIMA Global Employer Study 2010 representing 450 employers drawn equally from North and South America, Asia and EMEA, across all major sectors.

Employee opportunity cost is one of three costs factored into the CORT© model. Acquisition cost and the Cost of Losing Talent derived earlier in a separate CIMA model are the other two.  In the UK, CIPD, among others, suggest that true acquisition cost is the total of vacancy cover, redundancy, recruitment & selection, training and education costs combined.

Measuring staff attrition rates is important but reveals relatively little. Even measuring the cost of losing talent only gets one so far and many companies, for a variety of reasons, struggle to do even that. CIMA’s work suggests that the real impact of losing staff on the business can only be found by measuring the cost of replacing talent, as well as losing it.

Total costs for one staff member alone are often surprising. Multiplied by typical attrition rates they are staggeringly large, come straight off the bottom line and yet, remain largely unknown.

The COLT© and CORT© models are a good example of how CIMA people and management accounting tools and techniques help companies look beyond the numbers to actively driving performance and sustainable success. If anyone has any comments or suggestions please leave them here or get in touch.

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This is the third in a three-part series of blog posts on the cost of losing and retaining talent.

Read the previous posts:
Measuring the cost of losing talent
How much are you worth?