Determine what you need to learn from an exit interview, and figure out how best to obtain that information.

Most finance leaders would agree the cost of a bad hire can be detrimental to an organization's bottom line, but opinions vary when it comes to the key factors that go into the actual calculation. It can be difficult to predict the specific cost of losing an employee because of all the undocumented costs and intangible expenses associated with turnover (e.g., time spent searching for and interviewing candidates, lost productivity and engagement resulting from unfilled positions, the ramp-up time and training required to onboard new employees).

Despite this variability, the broader goal for any business is to retain the workers it wants to keep. People are an organization's greatest asset, but also its single largest expense. That's why it's critical for finance and HR teams to work together to better understand what makes an employee leave. One of the best ways to do this, however, is through an HR tool that often goes unnoticed by members of senior leadership: the exit interview.

In Defense of the Exit Interview

Finance leaders, in particular, tend to put so much focus on the actual cost of losing an employee that they can miss out on valuable insights about why the individual is leaving in the first place. According to a Gallup's State of the American Workplace report last year, a record 51 percent of U.S. employees say they are actively searching for new jobs or keeping an eye on openings. The study also found that more than one in three employees changed jobs within the last three years.

The rising number of workers on the job hunt has many organizations re-prioritizing exit interviews as a way to understand key trends that are driving employee turnover. With this information in tow, finance leaders are better positioned to make business decisions that can boost retention, enhance performance and improve the bottom line.

A good exit interview should tell you what your employees are thinking, help you uncover challenges or opportunities and offer insights into the competitive landscape. Here are a few strategies to help you get the information you need from exiting employees to better understand the true cost of a bad hire.

Determine What You Need to Know

  • Ask questions that give you a line of sight into the leadership style and overall effectiveness of managers. If you've invested a lot of resources into leadership development and learn that 70 percent of your employees cite "problems with my manager" as their primary reason for leaving, you may want to re-evaluate the effectiveness of your program. This example could suggest too much value is being placed on technical skills among managers, and the program might benefit from offering more opportunities for managers to enhance soft skills, like communication, critical thinking and motivating others.
  • Account for important HR benchmarks (e.g., benefits, compensation, development opportunities) at competing organizations. Find out who's getting the talent you're losing and understand why. Just be sure to prioritize your top performers Ñ especially if you have limited resources to conduct exit interviews. All-star employees tend to be more knowledgeable about the business and are also more likely to have valuable information about competing employers.

Figure Out How You're Going to Get It

  • Consider multiple touchpoints and different methods to collect data. You may find that you get better results by scheduling several different touchpoints (e.g., face-to-face interview, electronic survey, informal phone call) before and after the employee leaves the organization. Different people are going to feel comfortable giving feedback in different ways and at different times. Having more than one option will increase the likelihood that you get honest, candid information.
  • Balance standardization with flexibility. Sticking to standardized questions can make it easier to identify turnover trends, but it can compromise your ability to probe for further details when you encounter surprising responses. Combining the two approaches typically yields rich feedback that the organization can act on.

Share What You Learn with Others

  • Never underestimate the importance of sharing what you learn from exit interviews with the people in your organization who will need to act on it. That monthly report isn't doing anyone any good just sitting on a shelf in HR.
  • Prepare frontline managers for success by giving them the information they need to effectively lead their teams. Continue to work closely with your HR function to monitor turnover trends and identify the most effective way to allocate resources and adjust financial investments in order to support retention.

Tags: Recruiting and Hiring Change Management Performance Management Research & Insights Articles HR Midsize Business Large Business