What is job lag?

Written by Tim Baker on 22 October 2014

Job lag is a new term. I define it as the total cost of suboptimal employee productivity from employee turnover. It commences from the time an employee voluntarily or involuntarily gives or receives notice of the termination of their current employment to the time a replacement employee reaches optimal productivity in the same job.

The concept of job lag has important implications for L&D professionals.

Job lag is a significant and inevitable hidden cost to business leading up to a replacement employee reaching optimal productivity.

I define optimal productivity as the point of which an employee is fully contributing the level of output that is expected of an established worker in that role. This cost is factored into most calculations of the financial burden of employee turnover.

However, most of the writing on the indirect costs of employee turnover doesn't take into account the exiting employee's inevitable decline in their productivity once they have given or received notice of termination. The suboptimal productivity of the exiting and replacement employee combines to calculate the costs of job lag.

The obvious answer to resolving this financial burden on business, whichever way it is conceptualise, is for organisations to reduce their employee turnover by retaining and developing their employees. Employee turnover is highest within the first 90 days of employment.

Job lag costs can also be minimised substantially by addressing factors related to this inevitable period of reduced productivity. In financial terms, the costs of suboptimal productivity are two-fold. First, organisations need to absorb the cost of paying wages to a worker who is working below the expected level of performance. Second, the additional costs associated with suboptimal performance are related to the costs to capital income. While job lag to some degree is unavoidable, it can be managed to the extent that it significantly reduced the costs to the business.

Apart from the new recruits' background, the critical variables around the cost of job lag are the industry and the size of the organisation. Beside the reasons for termination of the previous employee, the industry, employees' background and the size of the organisation, the capabilities of the individual and their aptitude to learn on-the-job, the level of support the new employee receives from the organisation, the nature of the work itself, and the size of the organisation are additional factors influencing optimal productivity and more broadly, job lag.

To off-set the high levels of vulnerability of a new employee during the first few weeks of their new job, superior induction training is critical. Poor induction training can increase the risk of turnover of employees.

In a nutshell, an equation to calculate the factors involved in job lag can be summed up this way:

The period of time from notice of termination to actual termination + the time it takes to replace the terminated employee + the origins of the replacement employee + the time it takes for the new employee to reach optimal productivity = job lag.

I have estimated the annual financial burden on organisations and the economy in general in Australia to be at least $6.5 billion per annum.  It would inevitably be higher in the UK.

The hidden costs of job lag amplify the importance and value of induction training. 

 

About the author
Dr Tim Baker is an international consultant and regular contributor to TJ http://www.winnersatwork.com.au

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