---
title: The Real Cost of Employee Turnover in 2026
description: "Understand the Cost of Employee Turnover in 2026 with a transparent financial model: direct, indirect, and opportunity costs, a worked example, and a 90-day plan."
image: https://hi.sideup.com/hubfs/03_real_cost_employee_turnover_2026.png
---
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# The Real Cost of Employee Turnover in 2026
The **Cost of Employee Turnover** is not a single percentage of salary. It is the effect of an exit: replacement work, missing capacity, slower contribution, and sometimes value lost while a role is open. A useful model makes assumptions visible; a weak one hides them behind a headline number.
That distinction matters in 2026. In the United States, the Bureau of Labor Statistics (BLS) recorded 3.1 million quits in July 2026, a 1.9% quits rate. BLS describes quits as generally voluntary employee-initiated separations, so the metric signals workers' willingness or ability to leave; it does not tell an employer why a person left or what that departure cost \[1\].
The goal is not to price every person or eliminate healthy movement. The goal is to understand the costs attached to **avoidable loss of needed capability**, then use that view to improve management, workload, pay, growth, benefits, and employee listening.
> A credible turnover figure is an auditable range built from local inputs—not a universal multiplier applied to every resignation.
This guide sets out a transparent financial model that finance, HR, operations, and managers can edit together. It separates direct, indirect, and opportunity costs; shows what should not be counted; and turns the result into a 90-day action plan.
## Start by Classifying the Departure, Not Pricing It
A departure record should never be treated as a verdict on an employee or manager. It is a way to decide which events belong in the model and which deserve a different response. BLS separates quits, layoffs and discharges, and other separations; its "other" category includes retirements, deaths, disability, and transfers to another location of the same firm. Transfers within the sampled establishment are excluded from BLS separations \[2\].
Internal definitions can be more useful than a national series when they are written down and applied consistently.
| Departure or movement type | What it means for the model | Default treatment | Decision question |
| --- | --- | --- | --- |
| **Voluntary, regretted exit** | A person the organisation wanted and needed to retain chooses to leave. | Include when there is a real replacement, cover, or capacity effect. | What would it cost to restore the capability, and what conditions contributed? |
| **Voluntary, non-regretted exit** | The person leaves by choice, but the role, fit, or future workforce plan does not make replacement necessary in the same form. | Record separately; include only incremental transition or redesign costs. | Is this a planned redesign, a gap in role clarity, or a hiring lesson? |
| **Unavoidable or planned separation** | Retirement, end of a fixed-term assignment, relocation, death, disability, or a known organisational change. | Do not use as proof of a retention issue; model succession and transition costs where material. | Was knowledge transfer and workforce planning adequate? |
| **Involuntary separation** | The employer initiates the exit, including performance, misconduct, redundancy, or role elimination. | Analyse separately from voluntary turnover; include relevant transition and replacement costs only. | Did selection, performance management, job design, or workforce planning create avoidable cost? |
| **Internal movement** | A promotion, lateral move, project assignment, or transfer inside the organisation. | Do not count as external turnover; model backfill, handover, and gains in retained capability separately. | Does mobility keep valuable skills in the organisation, or merely move a vacancy? |
The "regretted" label requires discipline. It should be based on a documented, forward-looking capability judgement—not popularity, protected characteristics, or a manager's frustration after receiving notice. A cross-functional people review can decide whether the role is critical, how hard its skills are to replace, whether the work must continue, and whether the replacement is like-for-like or redesigned.
Internal movement deserves special treatment. It can create a temporary vacancy and a real handover cost, but it also keeps experience, relationships, and organisational knowledge inside the business. Counting a promotion as the same loss as an external resignation exaggerates the Cost of Employee Turnover and can lead leaders to block healthy career movement.
## Why Universal Replacement-Cost Percentages Fail
The familiar claim that every departure costs a fixed share of salary is tempting because it is easy to put on a slide. It is not a financial model. Cost changes with job scarcity, location, hiring channel, required certification, notice period, vacancy coverage, onboarding design, manager time, revenue dependency, and whether the organisation actually replaces the role.
Gallup does publish role-specific estimates: around 200% of salary for leaders and managers, 80% for technical professionals, and 40% for frontline employees. These are Gallup estimates, not an accounting standard or a rate that applies to every employer, exit, or role. Use them only as a prompt to inspect local inputs, never as a substitute for them \[3\].
Gallup's underlying turnover research also explains why a model should distinguish voluntary exits from all separations. In its nationally representative study of U.S. adults who had voluntarily left an employer in the preceding year, 42% said their manager or organisation could have done something to prevent the departure. That is a leaver perspective, not proof that 42% of every company's exits can be prevented \[3\].
The same research found that, among leavers who considered their exit preventable, 30% named compensation or benefits as a potential action, while 70% identified actions more closely linked to daily management, including interactions with a manager, organisational frustrations, career opportunity, and staffing or workload \[3\]. The implication is financial as well as human: a cost model should identify the condition behind the cost before it approves a response.
A defensible model therefore answers four questions before it produces a total:
1. **Which population is in scope?** For example, regretted voluntary external exits in revenue, operations, and hard-to-fill technical roles.
2. **Which costs are incremental?** Count costs created by the departure, not expenses that would have occurred anyway.
3. **Who owns each input?** Finance owns labour rates; talent acquisition owns channel costs; operations owns capacity assumptions; HR owns classification and employee-experience evidence.
4. **How uncertain is the input?** Use a low, expected, and high value when the evidence is incomplete.
## Build a Transparent Cost of Employee Turnover Model
Begin with the simplest calculation that can be reviewed:
> Cost of employee turnover = direct costs + indirect costs + validated opportunity costs − genuine savings or recoveries
This is not a claim that every line will be relevant. It is a checklist for deciding which line is relevant to *your* exit. BLS's Employer Costs for Employee Compensation release provides a useful reminder that wage alone is not an employer's full labour cost \[4\].
Use your company's loaded labour rate where permitted: salary or hourly wage plus employer-paid benefits, payroll taxes, and other employment costs that finance recognises. Do not simply add an employee's full annual salary to the cost of an exit. If a replacement is hired, that salary is normally a continuing cost of operating the role, not a cost caused by the departure. The incremental cost is the vacancy, transition, recruitment, and ramp effect.
| Model input | How to collect it | Owner | Guardrail against overstatement |
| --- | --- | --- | --- |
| Role and exit classification | HRIS exit record, business review, role-criticality criteria | HR and business leader | Separate voluntary, regretted, involuntary, planned, and internal movement. |
| Fully loaded hourly rate | Finance-approved cost rate by role or job family | Finance | Use a consistent rate; do not apply a national average when an internal rate exists. |
| Vacancy duration | Requisition date to accepted start date, plus actual start date | Talent acquisition | Use actual historical medians by role family where available, not a target time-to-fill. |
| Recruitment spend | Agency invoices, advertising, assessment, travel, referral, pre-employment costs | Talent acquisition and finance | Include only spending tied to the replacement. |
| Time spent hiring and onboarding | Interview calendars, recruiter time, manager and peer estimates | Hiring manager and HR | Convert time at loaded rates; avoid double-counting a vendor fee and internal recruiter time. |
| Coverage and ramp | Overtime, contingent cover, delayed work, peer coaching, expected contribution gap | Operations and manager | Use explicit time windows and assumptions; exclude ordinary team work that would happen anyway. |
| Opportunity effect | Missed margin, delayed launch, quality rework, lost customer capacity, or foregone improvement | Finance and operations | Count only a causal, documented marginal effect; otherwise keep as a narrative risk. |
### Direct costs: the invoices and time you can see
Direct costs are usually the easiest part of the model to validate. They include exit administration and handover; external search and advertising; agency fees; recruiter, interviewer, and hiring-manager time; assessments and pre-employment checks; travel; sign-on or relocation support where applicable; and formal onboarding or initial training.
The key is to calculate time rather than guess it. If a panel of five people spends one hour in an interview, the cost is five hours at the relevant loaded rate, not one generic "interview cost." If recruitment is handled by an internal team, measure its time even when no vendor invoice exists. If a role is not replaced, remove recruitment and onboarding from the model but retain any real redesign, transition, or remaining-team coverage cost.
### Indirect costs: the capacity effect that needs an assumption
Indirect costs are real but less visible because they often appear as delayed priorities rather than invoices. They include overtime or temporary cover, a manager's added coordination time, peer support, rework, lower quality during the ramp period, and the difference between expected and actual contribution while the role is vacant or newly filled.
Build these lines from operational evidence. A practical calculation is:
> Ramp cost = expected contribution gap × loaded cost or validated contribution value × number of ramp periods
The phrase "expected contribution gap" must be defined. For example, a team may agree that a new analyst needs 12 weeks of supervised work before performing a specified task set independently. That is better evidence than declaring that every new hire is "50% productive" for an arbitrary number of months. If the team cannot support a contribution assumption, show it as a scenario range or leave it out of the financial total.
### Opportunity costs: important, but not an excuse for invented numbers
Opportunity cost is the value of a better outcome that did not happen because capability was absent, delayed, or diverted. It may be a postponed product release, a delayed customer renewal conversation, avoidable quality failure, lost pipeline coverage, missed process improvement, or an understaffed manager who cannot coach the remaining team.
This category is often the most consequential and the easiest to misuse. Do not count a whole customer's lifetime value because one employee left. Do not assign a percentage of revenue to every open role. Do not add the same delivery delay to both an individual role calculation and a department-level calculation.
Instead, use a threshold. Include an opportunity amount only when an accountable operational owner can identify the event, time period, counterfactual, and incremental margin or avoidable cost. Otherwise, record the issue in a qualitative risk register.
## Cost of Employee Turnover: an Editable Worked Example
The example below is intentionally fictional. It shows how to calculate a range for one regretted voluntary exit in a specialist role; it is not a benchmark and should not be copied into a business case. The organisation has approved a loaded annual labour cost of $100,000 for the role, expects a 12-week ramp, and can identify only some incremental costs with confidence.
| Component | Low case | Expected case | High case | Local assumption to test |
| --- | --- | --- | --- | --- |
| Exit and handover time | $600 | $900 | $1,400 | Departing employee and manager hours are incremental handover work. |
| Search, assessment, and pre-employment spend | $3,000 | $6,000 | $10,000 | Hiring channel and actual invoices vary. |
| Recruiter, manager, and interview time | $2,000 | $3,400 | $5,000 | Time is valued at approved loaded rates. |
| Onboarding and initial training | $2,500 | $4,000 | $6,000 | Include only training or set-up created by the hire. |
| Vacancy coverage | $2,500 | $5,000 | $9,000 | Overtime, temporary cover, or contracted work is documented. |
| New-hire ramp and peer coaching | $4,000 | $7,000 | $12,000 | Contribution gap and coaching window are agreed by operations. |
| **Subtotal before validated opportunity effects** | **$14,600** | **$26,300** | **$43,400** | A range communicates uncertainty better than a single "true" number. |
The expected case is $26,300, or 26.3% of the fictional role's loaded annual cost. It should not be translated into "specialist turnover costs 26.3% of salary." It merely reflects the inputs chosen for this scenario. A different role might require no agency fee but months of supervised training; another might be backfilled internally with minimal search spend but create a costly downstream vacancy.
The example also excludes unvalidated opportunity effects. If the departing person owned a customer renewal and finance can show a specific, incremental margin impact from a delayed renewal, add that amount once. If the business cannot distinguish the exit from market conditions, pricing, product quality, or other causes, do not convert the concern into a false number.
## Make the Model Auditable Before Making It Ambitious
A model is ready for leadership use when someone outside HR can trace each major number to an invoice, time record, operational measure, or named assumption. Add a short "assumption note" to every case: source, owner, date, confidence level, and whether the item is direct, indirect, or opportunity cost.
Use three disciplines to prevent false precision:
- **Report ranges and a confidence label.** A $20,000–$35,000 expected range is more honest than $27,483 when the ramp assumption is uncertain.
- **Separate cash spend from capacity cost.** Agency fees and temporary cover may affect cash. Manager and peer time affect capacity even when no new invoice appears. Both matter, but they should not be blurred.
- **Remove savings only when they are realised.** A vacant role may create short-term salary savings. Offset costs only if the organisation actually retains that saving and does not shift the work into overtime, temporary labour, burnout, or delayed delivery.
At portfolio level, calculate the model by job family, business unit, location, and exit type. Do not multiply a company-wide average by all leavers. A small number of hard-to-replace or customer-critical exits can drive the economic exposure, while some departures may be planned and low-cost.
## Turn the Financial Model Into a Better Decision
The model should not be used to demand that managers stop every resignation. It should tell leaders where a retention investment has a plausible economic case and where role redesign, succession planning, or faster hiring is the more appropriate answer.
| Pattern observed | What the cost model may show | Evidence to examine next | First action to consider |
| --- | --- | --- | --- |
| Repeated regretted exits under one manager | Manager time, coverage, and ramp costs cluster in one team | Confidential listening, workload, career conversations, team-level outcomes | Equip and support the manager; reset capacity or decision rights where evidence supports it. |
| Long vacancy and ramp in a scarce skill | Search, coaching, and delayed delivery dominate | Hiring funnel, time-to-fill, skill inventory, succession depth | Build internal capability, succession options, and more realistic workforce plans. |
| Early-tenure voluntary exits | Recruitment and onboarding spend repeats before contribution is established | Candidate expectations, onboarding experience, manager contact, role clarity | Improve job realism, onboarding milestones, and early manager support. |
| Pay or benefit concerns appear with exit data | Cost may be high, but cause needs checking before spend is approved | Pay positioning, fairness, benefits awareness and access, employee feedback | Test a targeted pay, benefits, or communication response alongside workload and growth evidence. |
| High internal movement with stable external retention | Backfill cost exists, but external loss may be low | Mobility paths, talent demand, knowledge transfer, manager support | Protect internal movement and strengthen handover rather than treating mobility as failure. |
The available evidence supports examining several of these conditions together. OECD analysis across six countries found the quit rate was about 50% higher in firms in the bottom fifth of firm wage premia than in the top fifth, and it concludes that flexibility and working conditions can reduce turnover while supporting wellbeing and productivity. This is an association across the study setting, not a formula for what a particular pay rise or benefit will achieve \[5\].
SHRM's global workplace-culture study reported that workers in positive cultures were almost four times more likely to stay with their employer; a majority of workers rating culture poorly said they were actively or soon looking for another job. The report identifies management, fair treatment, meaningful opportunity, open communication, and empathy as important culture elements. These findings should direct questions, not replace an organisation's own evidence \[6\].
Use listening alongside the cost model. Ask employees about workload, clarity, manager support, career prospects, fairness of pay, and whether benefits are understandable and accessible. Then compare aggregated themes with exits, mobility, time-to-fill, ramp, and coverage costs. Do not use an employee survey to label an individual as a flight risk. The purpose is to find work conditions that leaders can improve.
A financially sound retention business case has three parts:
1. **Baseline exposure:** number of in-scope exits multiplied by a validated role-family cost range.
2. **Proposed action cost:** the incremental cost of manager development, staffing change, pay adjustment, benefits change, career pathway, or listening follow-through.
3. **Plausible outcome range:** a conservative estimate of exits or vacancy days that might be avoided, explicitly marked as a forecast rather than a guaranteed saving.
If a proposed change prevents only one high-cost regretted exit, it may be worthwhile. If it has no credible link to the identified experience problem, a large forecasted saving is not credible. The best decisions combine financial discipline with a clear account of what employees are experiencing.
## A 90-Day Decision Plan for the Cost of Employee Turnover
The first quarter should establish a usable baseline and deliver a limited number of visible improvements. Do not wait for perfect data; document uncertainty and improve inputs as decisions are made.
| Timing | Financial-model work | Employee-experience work | Decision output |
| --- | --- | --- | --- |
| **Days 1–30: define and baseline** | Agree exit taxonomy, scope, owners, cost categories, and finance-approved labour rates. Build 6–12 months of cases by role family. | Review aggregated exit themes, employee feedback, workload indicators, benefits engagement, and internal movement. | A baseline with documented exclusions, a confidence rating, and 2–3 priority patterns. |
| **Days 31–60: validate and choose** | Test inputs against invoices, hiring data, coverage records, and manager time samples. Build low, expected, and high ranges for priority roles. | Hold structured stay and manager conversations; check whether pay, workload, growth, benefits, or management evidence aligns with the pattern. | A short list of causes to address, a selected intervention, named owners, and an expected investment range. |
| **Days 61–90: act and review** | Create a monthly view of in-scope exits, vacancy days, direct spend, and range of capacity cost. Record assumptions that changed. | Deliver the chosen change, such as capacity reset, manager support, clearer pay communication, internal-mobility access, or benefits guidance; report back what was heard and changed. | A board-ready decision note: action taken, early signals, remaining uncertainty, and next review date. |
Review at the role-family level before acting at company scale. A pay issue may be concentrated in one market. A workload issue may follow a particular workflow. A manager-quality gap may require both manager support and a more realistic span of control. A benefits problem may be awareness or access rather than the absence of another offering. The model should make those differences harder to ignore.
## How SideUp Helps
SideUp is a **flexible benefits and HR data platform** that connects benefits engagement, employee listening, and workforce insight. Its eNPS capability can gather aggregated employee feedback and help teams observe sentiment over time, while its flexible benefits experience can help employees understand and engage with support that fits different needs \[7\] \[8\].
For a turnover-cost review, the platform can support the evidence around the model rather than replace the model. HR teams can consider benefits engagement and employee-listening themes beside exit patterns, mobility, workload, and manager feedback. That can help them distinguish a benefit-access or awareness issue from a wider problem with pay, capacity, growth, or management. Financial assumptions, causal judgements, and investment decisions remain the organisation's responsibility.
[Start your free initial eNPS survey with SideUp.](https://hi.sideup.com/home)
## Frequently Asked Questions
### What is the Cost of Employee Turnover?
The Cost of Employee Turnover is the incremental cost created when an employee leaves and the organisation must transition, cover, replace, or redesign the work. A transparent model separates direct spending, capacity and ramp effects, and only those opportunity effects that can be validated.
### Is employee turnover always a cost to reduce?
No. Planned retirements, contract endings, role redesigns, and some voluntary departures are not evidence of a retention failure. The priority is to understand regretted voluntary external loss, capability risk, and the cost of restoring work that the organisation still needs.
### Are 40%, 80%, and 200% of salary reliable turnover-cost benchmarks?
They are Gallup's role-specific estimates for frontline employees, technical professionals, and leaders or managers, respectively. They are not universal replacement-cost rates and should not replace an organisation's own model of recruitment, coverage, ramp, and opportunity effects.
### Should an employee's full salary be included in turnover cost?
Usually not when the role is replaced. The replacement's continuing salary is normally a cost of operating the role, not an incremental cost caused by the exit. Use loaded labour rates to value incremental hiring, coverage, onboarding, and ramp time, and document any actual vacancy saving separately.
### How should internal mobility be counted?
Count an internal move separately from an external exit. It may create backfill and handover costs, but it keeps skills and experience within the organisation. A strong model shows both the temporary capacity effect and the retained capability.
### Which costs belong in opportunity cost?
Include a missed or delayed outcome only when an operational owner can identify the event, timing, counterfactual, and marginal value or avoidable cost. Examples may include a documented delayed release or lost customer capacity. If that evidence is absent, record the risk without inventing a financial amount.
### How can managers use turnover-cost data without blaming people?
Managers should use aggregated role and team patterns to ask better questions about workload, clarity, career opportunity, pay, benefits access, and support. The data should guide improvements to work conditions, not rank individuals or assume that a survey response predicts a person's decision to leave.
## References
[\[1\] U.S. Bureau of Labor Statistics — Job Openings and Labor Turnover Summary: July 2026](https://www.bls.gov/news.release/jolts.nr0.htm)
[\[2\] U.S. Bureau of Labor Statistics — Job Openings and Labor Turnover Survey Data Definitions](https://www.bls.gov/jlt/)
[\[3\] Gallup — 42% of Employee Turnover Is Preventable but Often Ignored](https://www.gallup.com/workplace/646538/employee-turnover-preventable-often-ignored.aspx)
[\[4\] U.S. Bureau of Labor Statistics — Employer Costs for Employee Compensation](https://www.bls.gov/ecec/publications-overview.htm)
[\[5\] OECD — Retaining Talent at All Ages: How Job Quality Affects Talent Retention](https://www.oecd.org/en/publications/retaining-talent-at-all-ages_00dbdd06-en/full-report/component-6.html)
[\[6\] SHRM — The State of Global Workplace Culture](https://www.shrm.org/executive-network/insights/shrm-report-workplace-culture-fosters-employee-retention)
[\[7\] SideUp — eNPS: Know How Your People Really Feel](https://hi.sideup.com/home)
[\[8\] SideUp — How to Manage Employee Benefits](https://hi.sideup.com/stayconomics/benefits-administration-hr-leaders-guide)
### Important Links:
[The Workplace Nobody Wants to Leave: How Employee Retention Is Built Every Day](https://hi.sideup.com/stayconomics/blog/employee-retention)
[Employee Retention Calculator: How Much is Turnover Costing Your Business in 2026?](https://hi.sideup.com/stayconomics/blog/employee-retention-calculator)
[Employee Recognition Checklist: A Practical Guide to Making Great Work Visible](https://hi.sideup.com/stayconomics/stayconomics/employee-recognition-checklist)
[Employee Retention](https://hi.sideup.com/stayconomics/tag/employee-retention) [Blog](https://hi.sideup.com/stayconomics/tag/blog) [Employee turnover](https://hi.sideup.com/stayconomics/tag/employee-turnover)
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"@type" : "ImageObject",
"url" : "https://hi.sideup.com/hubfs/logo.svg"
},
"name" : "SideUp"
}
}
```
```json
{
"@context" : "https://schema.org",
"@type" : "BlogPosting",
"author" : {
"@type" : "Person",
"name" : ""
},
"datePublished" : "2026-10-01T04:00:00",
"headline" : "The Real Cost of Employee Turnover in 2026",
"image" : "https://144715789.fs1.hubspotusercontent-eu1.net/hubfs/144715789/03_real_cost_employee_turnover_2026.png"
}
```
```json
{
"@context" : "https://schema.org",
"@type" : "FAQPage",
"mainEntity" : [ {
"@type" : "Question",
"acceptedAnswer" : {
"@type" : "Answer",
"text" : "The Cost of Employee Turnover is the incremental cost created when an employee leaves and the organisation must transition, cover, replace, or redesign the work. A transparent model separates direct spending, capacity and ramp effects, and only those opportunity effects that can be validated."
},
"name" : "What is the Cost of Employee Turnover?"
}, {
"@type" : "Question",
"acceptedAnswer" : {
"@type" : "Answer",
"text" : "No. Planned retirements, contract endings, role redesigns, and some voluntary departures are not evidence of a retention failure. The priority is to understand regretted voluntary external loss, capability risk, and the cost of restoring work that the organisation still needs."
},
"name" : "Is employee turnover always a cost to reduce?"
}, {
"@type" : "Question",
"acceptedAnswer" : {
"@type" : "Answer",
"text" : "They are Gallup's role-specific estimates for frontline employees, technical professionals, and leaders or managers, respectively. They are not universal replacement-cost rates and should not replace an organisation's own model of recruitment, coverage, ramp, and opportunity effects."
},
"name" : "Are 40%, 80%, and 200% of salary reliable turnover-cost benchmarks?"
}, {
"@type" : "Question",
"acceptedAnswer" : {
"@type" : "Answer",
"text" : "Usually not when the role is replaced. The replacement's continuing salary is normally a cost of operating the role, not an incremental cost caused by the exit. Use loaded labour rates to value incremental hiring, coverage, onboarding, and ramp time, and document any actual vacancy saving separately."
},
"name" : "Should an employee's full salary be included in turnover cost?"
}, {
"@type" : "Question",
"acceptedAnswer" : {
"@type" : "Answer",
"text" : "Count an internal move separately from an external exit. It may create backfill and handover costs, but it keeps skills and experience within the organisation. A strong model shows both the temporary capacity effect and the retained capability."
},
"name" : "How should internal mobility be counted?"
}, {
"@type" : "Question",
"acceptedAnswer" : {
"@type" : "Answer",
"text" : "Include a missed or delayed outcome only when an operational owner can identify the event, timing, counterfactual, and marginal value or avoidable cost. Examples may include a documented delayed release or lost customer capacity. If that evidence is absent, record the risk without inventing a financial amount."
},
"name" : "Which costs belong in opportunity cost?"
}, {
"@type" : "Question",
"acceptedAnswer" : {
"@type" : "Answer",
"text" : "Managers should use aggregated role and team patterns to ask better questions about workload, clarity, career opportunity, pay, benefits access, and support. The data should guide improvements to work conditions, not rank individuals or assume that a survey response predicts a person's decision to leave."
},
"name" : "How can managers use turnover-cost data without blaming people?"
} ]
}
```