Often when there is a recession, management looks for ways to reduce the company's costs. Unfortunately, this may entail laying off employees and hiring new ones when the economy picks up. This, however, is not always the best strategy.
- When companies must look outside of the company to fill positions, it is expensive and time-consuming, so retaining current employees is a cheaper alternative than placing help wanted ads, reviewing resumes, interviewing candidates, conducting background checks, and verifying references.
- Training costs may be more expensive for retained employees than for training new employees. The reason is that it often takes several training attempts for a retained employee to relearn behaviors.
- When performing the same on the job tasks repeatedly, retained employees have a higher learning curve than new employees. This learning curve reduces errors and increases productivity, making the retained employee more cost effective than the new employee.
- Retaining employees help keep morale high and is cheaper than hiring new employees, because once morale breaks down, it is very difficult and expensive to replace.
- New employee salary can be lower than that of retained employees, making new employees a cheaper replacement.
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