All costs, both tangible and intangible, need to be quantified in your strategic human resources planning. Replacement costs beg the question “What is it going to cost you to refill a position in terms of interviewing and recruiting fees, relocation expenses and training costs associated with bringing that new employee fully up to speed?”

Work with your finance organization to put some numbers next to these costs, both hidden and open. For example with termination cost or turnover cost in strategic human resources planning, the first cost is the actual separation cost for the administrative function, any severance pay, and any unemployment compensation.

Group costs together based on functional activity in strategic human resources planning

After you group costs based on functional activity, you want to break each of the individual costs down saying, how long do each of these items take to complete? What is the number of labor hours that we would be paying for with this functional activity at some kind of an average pay rate?

For example look at an average cost situation with exit interviews, you have the employee's time, you have separation cost, vacancy cost, any additional overtime. But you also have wages and benefits saved during that time period that that person is not there.

So here we have assumed that they're out, that the position is vacant for three weeks, so 120 hours. You have to look both at the cost as well as the savings when you put together these numbers.

Then look at replacement cost. And here, we've identified some of those costs. And these are the things that you look at based upon your previous experience, depending upon the total salary, what would be a recruiter fee associated with that, taking a look at average travel and moving expenses from other positions that you've filled. The training cost, what does it cost to bring that person up to speed? And some kind of a performance differential, how long does it take for that person to become highly skilled at the position?

The performance differential  in strategic human resources planning is an example of a major hidden cost. If someone leaves, how long is it going to take that new person to get up to speed? And what's going to happen while that position is vacant? Are people going to be paid overtime or do you run the risk if the position is not filled of having people burn out? And those would be some of the vacancy cost.

Remember, look at your own company to get the final cost numbers, but also take a look at what information is available publicly out there from various sources.

Data sources for your strategic human resources planning

The Society for Human Resource Management (SHRM) has great databases of numbers that you can look at. The Saratoga Institute located in Denver, CO. has a lot of research that you can take advantage of not just for turnover but for all kinds of metrics related to employee performance and associated costs