Recognizing the value of employees’ knowledge and skills highlights the true costs associated with excessive turnover. Experts estimate that, on average, the costs associated with replacing an employee (recruiting and hiring expenses, training costs, and the relative inefficiency of new employees as they learn how to do the job) are 1.5 times that of an employee’s annual salary. Thus, organizations that experience below industry-average turnover rates reap considerable cost savings compared to rivals with higher turnover rates. For example, consider two companies, each with 1,500 employees earning on average $40,000. One company experiences 20% annual turnover, the other only 5%. The company with 20%annual turnover would incur costs of %18 million (300employees times $60,000) to replace employees, compared to only $4.5 million for the company experiencing only 5% annual turnover. Of course, some turnover will always occur and may even be desirable. For example, professional consulting organizations have traditionally encouraged some level of turnover because they believe it provides an important source of new ideas. The key is to control and manage turnover rates so that they are not excessive.