New tools being developed by AICPA and CIMA have highlighted the urgent need for companies to measure the cost of losing and replacing talent.
These costs can be staggeringly large, come straight off the bottom line, and yet remain largely unknown. These tools will allow you to raise this key issue with senior management, and be amongst the first to get the HR and finance departments talking.
You will need your organisation’s EBITDA, the number of employees at operations, management, and senior management level, a figure for the number of weeks that these positions are typically vacant, and the cost of acquiring new people at each level. Visit www.cgma.org/talent to get started.
It’s completely anonymous, and you will be helping to validate the existing tools before their official launch on the CGMA website.
The Cost of Losing Talent© (COLT©) tool is based on calculating the EBITDA (earnings before interest, taxes, depreciation and amortisation) per employee. This figure is weighted to reflect the seniority of the employee at three distinct levels: operational staff, managerial level and senior management. This weighting is then divided by the number of weeks the role is vacant.
The Cost of Replacing Talent© (CORT©) tool 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.
The tools generate an absolute measure, allowing you to assess the cost of losing and replacing high, middle and low performing personnel at three seniority levels in the business. Combined, they facilitate collaboration between finance and HR colleagues, to generate powerful information to help develop your organisation’s talent management strategy.
But we do need your help to finalise these tools. Simply enter your top line financial and operational data to produce instant outputs and contribute to this invaluable project.