The High Cost of Pilot Turnover
Lately, a lot of us are talking about aviation retention strategies—especially with the critical shortage of qualified talent.
So, the question is: why should an aviation director take heed?
For starters, most flight departments are already operating with a lean staff. But the biggest reason we should put the issue of retention strategies on the front burner is because of the significantly high cost of pilot turnover.
Gone in the Blink of an Eye
One of the major problems with turnover is that the departure of a corporate pilot can leave your organization high and dry. Often when you’re least expecting it.
Maybe they left for higher wages at an airline or another flight department. Or maybe it was a quality of life issue, and they wanted a better schedule or to move closer to family. Or maybe it’s because you let someone go within the first year because they weren’t a great fit.
Add to all of those possibilities the normal attrition any organization must face when someone retires, and the situation becomes one that’s risky.
Losing talent is never easy, and, especially in business aviation, it’s not cheap.
Here’s why the cost is such an increasingly significant factor:
- Turnover costs to organizations are appreciably higher for positions of high complexity, such as a corporate pilot with 4,000+ flight hours.
- Hiring costs can be higher when pilots are in high demand, especially during a talent shortage.
What Would Cigna Do?
Because this topic of high costs is so top-of-mind right now, I reached a well-known director of aviation at Cigna, Mitch Vuernick. In the past, I’ve talked with Mitch and how his department goes about tracking and measuring the cost of training.
So I gave him a ring and asked him to update me on what they’re doing at Cigna.
“When we started looking to replace a pilot who left for another flight department, we found that people essentially had their hands out. But it was difficult to hire quality people at the salary range we were offering.”
Mitch told me that his team set out to compare Cigna’s existing compensation package against similar departments. They also use the NBAA salary survey as a benchmark. And, interestingly, they look internally at the “lifetime value” of their pilots.
“We looked into such issues as how much time and money another company has potentially invested in them (before they got to us),” Mitch explained.
“If, for example, we had a pilot who’d been here flying with us for 15 years, we estimated that there had been more than $1 million of aviation training already invested in his/her career.”
So Mitch went to talk with HR to discuss whether they could risk losing a valuable employee for the difference of, say, $10K in salary.
The answer decidedly was “no.”
Next, Mitch said that his team investigated how much it costs them to get someone productive and up-to-speed. Among other considerations, they looked at how much they were willing to spend to move them.
In Cigna’s case, they base their decision on what the candidate brings to the table. Does he or she have excellent experience, but need a type-rating?
“We weigh their experience,” Mitch said.
He shared with me that recently, after looking at several individuals who were typed-rated but wanted $40K more, his company extended an offer to a more junior-level, local pilot.
“Based on fit and potential, we decided to hire a younger person and train on the aircraft type,” Mitch said.
Tracking the Cost of Pilot Turnover
Here’s a rule of thumb to live by: almost always, a Part 91 hiring process will be complex. Anticipating all costs is difficult.
We do know that it will require multiple interviews with the aviation leadership team, dispatch, maintenance and more. And, for pilots, it will most likely include a simulator evaluation ride at the closest training center.
For many flight departments, their simulator training is located several hours away from their aviation facility. And, depending on your location or type of aircraft, you may end up having to fly there.
The challenge with tracking all of these costs isn’t easy. It’s not a black-and-white situation.
But even more systemic, for most employers, it’s difficult to track turnover costs because they don’t have the right systems in place.
Accurate tracking requires a cross-functional team effort between the flight department, human resources, finance and operations. Whew!
Here’s a comprehensive list of turnover-related expenses that you ought to consider in the mix of assigning a cost for replacing a high-level employee:
- Exit costs – Including payout sick leave or vacation for the departing employee.
- Preliminary hiring costs – Including advertising, HR/recruiter salary, travel expenses and recruiter fees.
- Interviewing costs – Interviews by managers and staff, background checks, drug tests, travel and training expenses for a sim evaluation.
- Relocation – A moving stipend or relocation package.
- Company orientation and training – Most companies offer new hires a program of one-day to one-week onboarding training, which will require him or her to be away from the aviation facility.
- Hiring costs – Interviews by managers and staff, background check, drug test, travel to sim evaluation (car rental, airline, salaries of one-two employees and simulator fee)
- Wages – Some employers may need to increase their annual compensation in order to attract the same level of quality talent during this talent shortage.
- Department onboarding costs – Including training and management time.
- Pilot training – Initial type-rating pilot training, sim instructor time and up to 50 hours of in-aircraft co-pilot training.
- Training costs – Over two to three years, a business likely invests 10 to 20 percent or more of an employee’s salary in training. As we know, technical training is MUCH higher for pilots.
- Lost productivity costs – Interviewing by managers whose primary job is not interviewing and training by pilots and staff whose primary job is not to training.
- Contract pilot costs – Depending on how long it takes you to find the perfect fit, you will likely need to rely on substitute contract pilots.
- Lack of expertise costs – It can take up to two years to reach the productivity and level of expertise of an existing employee.
- Potential customer dissatisfaction – An aircraft owner or company executive may have trust issues or certain perceptions of a new hire that can cause disruption.
- Loss of business – Add additional costs if there are flights for executives that cannot be supported.
- Administrative costs – HR, accounting and operations will have costs associated with exit interviews, new hire interviews, payroll, training.
- Lost engagement costs – Staffers who experience high turnover tend to disengage and be less productive.
- Service and errors costs – New hires often take longer to solve problems.
- Cultural impact costs – Whenever someone leaves, other employees worry about why and take the time to ask.
- Ancillary on-the-job training costs – Training with staff and vendors and eLearning. Includes domestic and international flight planning services, electronic flight bag usage, Safety Management System training, upset training, Emergency procedures, international training, medical/first-aid training, security training, OSHA and hangar safety training.
So a couple of important questions to ask yourself are:
- How can you use these factors during budgeting?
- How can you effectively communicate the high cost of hiring to Human Resources?
Sure, an aviation director can always budget for pilot salaries and benefits. But it’s more difficult to budget for costs to replace pilots lost to voluntary attrition and other factors.
Types of turnover costs can vary widely, according to Embry Riddle Professor Kristine Kiernan, PhD. As she notes: “Most include costs for recruiting, hiring, training and job vacancy. Some go further to include costs such as loss of organizational knowledge and negative effects on the work environment.”
Unfortunately, as Professor Kiernan explained in a presentation last August, there are many pilot turnover costs that are not readily visible or easy to quantify. As a result, employers tend to underestimate the costs of turnover.
When discussing turnover, she said costs “. . . can be between 90-200 percent of the employee’s annual salary.”
So just what are those costs associated with losing a valuable employee? Kiernan suggests using these formulas:
Total turnover costs per pilot:
Hiring and Training cost
Lost Productivity cost
Total turnover costs:
(Total turnover cost per pilot)
(Total number of pilots who left in past calendar year)
Finally, here’s a factoid to ponder: According to the Society for Human Resources Management, the cost to replace a “bad hire” can be as much as five times their annual salary. And, that’s for the average employee—not a highly trained pilot.
With this in mind, I encourage you to allow sufficient time for your candidate search to ensure that you get it right the first time.
It’s a lesson worth remembering!