Evaluating The Hidden Costs Of A Poor Culture

A poor culture is associated with

- higher levels of staff turnover

- higher levels of rework

- higher levels of wasted work

- higher levels of stress

(using figures from William Conway, AHRI and Medibank to analyse impact on payroll)

Staff turnover calculation - this calculation is based upon

i) estimated staff turnover rate is around 18.5%

ii) cost estimates vary from 75% to 150% of annual salary depending on

- external recruitment (20% of annual salary)

- time it takes new person to settle in and be productive (can be up to 9 months)

- time spent by other staff helping the person to settle in and be productive.

Thus the range in impact on the payroll is from 13.8% (75% of 18.5%) to 27.7% (150% of 18.5%)

Rework calculation (rework is defined as work that is required only because something was not done properly the first time and includes making errors, finding errors, fixing errors, increasing complexities, interruptions, inspections, customer complaints, etc). This calculation is based upon estimates up to 30% of staff's time spent on rework

Thus the impact on payroll is up to 30 percent of payroll

Wasted work - this calculation is based upon

- unnecessary work (it is defined as work that does not and add value and is not necessary for the successful operation of the organisation and includes preparing reports that are not used, doing superfluous tasks, attending meetings and reading reports that do not add value, working on the wrong things, etc)

- not working but being paid (it includes holidays, vacations, breaks, waiting time, idle time, etc)

This calculation is based upon

i) unnecessary work up to 10%

ii) not working up to 25%

Thus impact on payroll is up to 35 percent of payroll


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