Not-so-Hidden Costs of Employee Turnover

Source:  Workstyle 

We all know that employee turnover can be very expensive.  Searching for, hiring, onboarding, and training new employees proves to be a costly endeavor for most firms.  If turnover increases, these costs can become quite burdensome.  A new study documents another significant cost of employee turnover - the decrease in product quality that can result from that loss of experienced and knowledgeable employees.  The paper is titled, "The Hidden Cost of Worker Turnover: Attributing Product Reliability to the Turnover of Factory Workers" by Ken Moon, Prashant Loyalka, Patrick Bergemann, and Joshua Cohen.  

The scholars studied the failure rates of 50 million cellphones produced by a major Chinese manufacturer and tracked the performance of those phones over four years of customer use.   Here's an excerpt from Knowledge@Wharton documenting the findings: 

• Each percentage-point increase in the weekly turnover rate for workers increased product failure by 0.74% to 0.79%.
• Failure was 10.2% more common for devices produced in the high-turnover weeks following payday, which was once a month, than for devices produced during the lowest-turnover weeks immediately before payday.
• In other weeks, the assembly lines experiencing higher turnover produced an estimated 2% to 3% more field failures on average.
• The associated costs amounted to hundreds of millions of dollars.