Blog – The Cost of Culture

As we reach the end of the year, and in fact the end of the decade, many of us will take the time to reflect back on the year that has passed and consider the changes we might want to make in our lives for the year ahead. These changes range from being more focused on our health, aiming to spend more time with our families and considering the next steps in our work and careers.

While the first category tends to be a boon for the fitness industry in particular, with a surge in new gym memberships, the last can present an expensive problem for employers. Estimates on the cost of replacing employees who decide to leave range from the direct 10-30% of the employee’s annual salary charged as commission by a recruiter through to more like 150% of salary for mid-level employees or 400% for senior or highly specialized roles once other costs such as lost productivity and training are taken into account (Alverina University 2016).

So, what can you do to try and ensure your people are not too tempted to walk out your door whilst daydreaming over their holiday BBQ? A 2018 survey by AHRI which asked their members a series of questions around turnover and retention suggests the top 5 reasons people report for leaving an organisation are:

– Lack of career progression
– Better pay elsewhere
– New career opportunity
– Poor relationship with their manager
– Lack of development opportunities

Given 3 of these 5 relate directly to the individual’s professional growth and development this suggests a key strategy is focusing on building an environment where your people can continue to grow and develop rather than feeling they need to go elsewhere to find those opportunities.

But how do you do that? You could try a compliance approach, ensuring all of your people have development plans in place and are being given access to ongoing training or development opportunities. This can be unwieldly however, particularly if the leaders and managers throughout your organisation are not on board. It could quickly come to be seen as a tick the box exercise that’s just creating more work for everyone rather than actually creating opportunities for people.

The better way to achieve this type of environment is through your organisation’s culture, working to develop a culture where there is a genuine emphasis on the importance of individual, team and organisational growth. A culture where there is a clear expectation that leaders and team members support each other in their development and help each other grow.

To explore this concept we’ve analysed a sample of 200 organisations who have measured their culture and also had their people respond to the item “you will probably look for a new job in the next year”. This isn’t a perfect proxy for turnover but we found that the average percentage of individuals who strongly agreed with this statement across the 200 organisations was 18.5%. This percentage closely matches the average turnover of 18% reported by the respondents to AHRI’s 2018 survey and suggests our proxy measure is a reasonable estimate of actual turnover within an organisation.

When comparing the 10% most constructive organisations within our sample with the 10% least constructive there was a clear difference between the two groups, with only 8% of people in the former reporting they were likely to look for a new job compared with 26% of those in the more defensive cultures.

So what does that mean for your bottom line? Well lets take an example organisation of 100 people, the middle cost estimate of 150% annual salary to replace staff and the Australian median full time salary of $85,000. Based on our analysis you’re likely to only lose 8 employees a year with a constructive culture compared to 26 with a defensive culture, leading to an estimated saving of $2,295,000 per year. If you are a 1,000 person organisation this would cost you $22M. How much is your culture worth in terms of turnover?

Beyond the dollar figures there is also a question of who you’re losing, within a defensive culture the people most likely to leave are your best performers, since they can more easily find other opportunities elsewhere.

How much could your current culture cost you in the new year?

We’d love your feedback as well as any suggestions for questions you’d like answered from our data. Email your feedback to


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