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/JONA na341206-2 December 2, 2004 4:24
The Costs of Nurse Turnover
Part 1: An Economic Perspective
Cheryl Bland Jones, PhD, RN
Nurse turnover is costly for healthcare organiza-
tions. Administrators and nurse executives need a re-
liable estimate of nurse turnover costs and the origins
of those costs if they are to develop effective mea-
sures of reducing nurse turnover and its costs. How-
ever, determining how to best capture and quantify
nurse turnover costs can be challenging. Part 1 of
this series conceptualizes nurse turnover via human
capital theory and presents an update of a previ-
ously developed method for determining the costs
of nurse turnover, the Nursing Turnover Cost Cal-
culation Method. Part 2 (January 2005) presents a
recent application of the methodology in an acute
care hospital.
Turnover rates and the more obvious costs of nurse
turnover may be tracked in healthcare organizations
(HCOs), but rarely are data on the full scope of
turnover or its costs available and analyzed. This
lack of information makes it difficult for nurse and
healthcare executives to fully understand the true
consequences of turnover in HCOs, and may com-
plicate efforts to fill nurse vacancies and efficiently
allocate organizational resources. Consequently, the
identification of adverse organizational effects may
be impeded and the financial performance of HCOs
may suffer.1,2
Nurse Turnover and its Costs
Even under ideal circumstances, HCOs may expe-
rience some level of turnover, as nurses leave or
Author’s affiliation: Associate Professor and Health Care Sys-
tems Coordinator, School of Nursing; Investigator, Southeast Re-
gional Health Workforce Center, Cecil G Sheps Center; The Uni-
versity of North Carolina at Chapel Hill.
Correspondence: University of North Carolina at Chapel Hill,
CB #7460, Chapel Hill, NC 27599-7460 (cheryl jones@unc.edu).
562
JONA
Volume 34, Number 12, pp 562-570

C 2004, Lippincott Williams & Wilkins, Inc.
relocate for reasons that may not be responsive to in-
tervention. Under such conditions, nurse and health-
care executives may direct very little attention to-
ward reducing nurse turnover. However, when nurse
turnover occurs, there are several potential finan-
cial consequences for HCOs. First, there is loss of
future returns that would have accrued from past
investments in nurses. Second, there are short-term
productivity losses and instability in the workforce.
Third, there are financial losses incurred above and
beyond routine costs when supplemental or tempo-
rary registered nurse (RN) staff are employed, beds
are closed, patients are deferred, or employed nurses
are asked to work overtime to fill vacancies caused
by RN turnover. Fourth, investments must be made
to orient and train newly hired nurses, and losses are
incurred while newly hired RNs become fully pro-
ductive. Fifth, it may be difficult to acquire sufficient
numbers of RNs and patient-nurse ratios may in-
crease such that care delivery becomes unsafe, qual-
ity of care suffers, or nurses become overburdened
or burned out. In essence, nurse turnover consumes
resources that could be directed at core business ac-
tivities, such as quality improvement programs, and
staff development or nurse retention activities.
In today’s competitive healthcare environment,
administrators must recognize the impact that nurse
turnover has on the satisfaction and safety of nurses
and other clinicians, the satisfaction and retention
of healthcare customers, and customer perceptions
of quality of care. A recent survey3 examining em-
ployee turnover and customer satisfaction in 6 differ-
ent industries—banking, computing, retail, telecom-
munications, investment management, and property
and casualty insurance—reported a direct correla-
tion between customers’ perceptions of employee
turnover and customer satisfaction, which were,
in turn, linked to customer retention or defection.
JONA • Vol. 34, No. 12 • December 2004
Aspen Pub./JONA na341206-2 December 2, 2004 4:24
Consumers can “vote with their feet,” making the
effects of turnover reach well beyond the usual ex-
pectations of recruiting and hiring to fill vacancies.
This report notes that, “The negative effects of the
increase in employee turnover are no longer being
felt exclusively by human resource managers . . . It is
apparent that consumers are directly impacted by
turnover . . . as a result, turnover is now a principal
concern of chief executive officers (CEOs) because it
directly affects the bottom line.”3
A study by Press Ganey4 recently reported that
the nursing shortage affects patient satisfaction, and
that nurse-patient ratios and patient satisfaction are
positively correlated. Given this relationship, it is
reasonable to expect that nurse turnover may ad-
versely affect patient satisfaction. In spite of the re-
ality that healthcare consumer choice is somewhat
limited, patients do have some choice in where and
how they receive services. If healthcare consumers
perceive problems with nurse turnover or quality of
care, their perceptions may influence their behaviors.
Thus, RN turnover is not simply a human resource
issue, but can be costly in terms of dollars—human
capital losses, disruptions in the work environment,
customer loyalty, and organizational performance.
These costs make RN turnover a problem at the very
top levels of an HCO5 and affect the bottom line.3
Five previous estimates of turnover costs per
RN, presented in Table 1, vary considerably. For
example, studies published between 1990 and 2004
reported turnover costs ranging from approximately
$10,100 to $64,000.6–10 The most recent estimates
of RN turnover costs reported in 2003 and 2004
range from $21,5149 to $31,486,10 while the high-
est estimate of RN turnover costs, ranging from
$42,000 to $64,000, was made in 1999.8 The cal-
culation methods used to estimate turnover costs
vary, and some previous estimates are now dated,
which makes direct comparisons difficult. Methods
used in some of the previous studies captured pri-
marily visible costs, omitted some important but
less visible costs of nurse turnover, were local or re-
gional in nature, and did not adequately capture the
current costs associated with replacing nurses who
leave.
Table 1 also expresses per-RN turnover costs as
a fraction of RN salary, ranging from 0.3 to 1.6.
These results are generally consistent with rules of
thumb (turnover costs equal to 0.75 to 2.0 times de-
parting employee salary) noted by others.2,11 How-
ever, application of the rules of thumb or use of the
ratios in Table 1 at another HCO may be problem-
atic, given the wide range in possible turnover cost
estimates when these rates are applied. These ratios
may help an HCO to define a range of probable
JONA • Vol. 34, No. 12 • December 2004
turnover costs, but more accurate turnover cost es-
timates would require detailed study.
The lack of detailed nurse turnover data and
conflicting cost estimates have left some health-
care administrators and researchers scrambling to
quantify RN turnover and its costs. This informa-
tion would allow chief nurse executives (CNEs) and
HCO executives to better allocate resources aimed
at RN retention, and to make more informed de-
cisions about resource allocation. Further, knowl-
edge of the costs of turnover enables the CNE and
other executives to demonstrate potential organiza-
tion savings—or costs avoided—if retention invest-
ments are made.
RN turnover can be conceptualized within the
context of the economic theory of human capital.12
Human resource accounting methods,13 derived
from human capital theory, provide a way to
operationalize human capital theory. These meth-
ods recognize and value the contributions of
“knowledge-workers”14 within organizations, and
view employees as organizational assets that af-
fect organizational productivity and future financial
returns.15
Human Capital Theory
Economists refer to the knowledge, skills, and abil-
ities possessed by individuals as “human capital.”16
Human capital is acquired by making investments
to attain knowledge, skills, and abilities, such as
acquiring advanced education or specialized work
experience, or changing jobs for a higher-level po-
sition. The acquisition of human capital increases
individual and organizational productivity and pro-
duces returns on investments.16 Human capital the-
ory (HCT) recognizes that individuals and organiza-
tions invest in human capital in anticipation of gains
in the forms of increased productivity and financial
returns. Because the productivity of individuals is
difficult to measure and data on investment returns
are more readily available, these data are typically
used as indicators of productivity. For example, eco-
nomic studies guided by human capital theory often
use employee wages and other financial returns as
proxies for productivity. An assumption of HCT is
that higher wages and other return measures are in-
dicators of higher productivity and greater human
capital investments.16
Human Capital: According to Whom?
Human capital can be viewed from 2 perspectives:
the individual and the organization. Interestingly,
turnover may present individuals (or nurses) and or-
ganizations (or healthcare executives) with multiple
and often conflicting incentives and consequences.23
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Table 1. Previous Nursing Turnover Cost Studies

RN Turnover Ratio of Turnover
Author, Date Sample Rate, % Cost Categories $/RN Turnover Nursing Salary Cost to Salary∗ Total RN Turnover Cost

Jones, 19906,23 4 hospitals 26.8 Direct $10,098 $27,000 0.37 $0.6–$1.6 million
December 2, 2004

• Advertising and recruiting

• Unfilled positions
• Hiring
4:24

Indirect
• Orientation and training
• Decreased productivity
• Termination
Wise, 19907 1 hospital 23 • Accession costs $11,740 $38,400 0.31 $0.55–$1.3 million
Advisory board, 19998 6 hospitals N/A† Visible $42,000–$64,000 $37,000–$41,000 1.1–1.6 N/A†
• Separation
• Vacancy
• Recruiting
• Hiring
• Orientation
Invisible
• Lost productivity
• Learning curve
Stone et al, 20039 4 units in each N/A† • Direct $21,514 N/A† N/A† N/A†
of 6 countries • Indirect
Waldman et al, 200410 1 hospital 29 • Selection $23,487–$31,486 $32,000∗ 0.7–1.0 $6.1 million–$8.2 million
• Hiring
• Training
• Termination
• Reduced productivity
∗
Estimated from numbers provided in report.
†
Not available in report.

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These differences become more apparent when hu-
man capital theory is considered.
From the individual perspective, human capital
reflects the knowledge and skills embodied within
a person that result from prior investments in edu-
cation, training, experience, and previous jobs, all
of which, theoretically, make the person more pro-
ductive and able to command higher wages than
others without the same complement of human
capital.12,16–18 Individuals make decisions about
their own human capital investments based on their
perceptions of themselves relative to the market, ie,
the knowledge and skills they can offer in the mar-
ket, the knowledge and skills they could offer with
additional investments, and the amount the market
is willing to pay for their complement of human
capital.
Individuals invest in human capital in various
ways. For example, they make outlays of time and
money to pay tuition for additional schooling, or to
gain experience in a new area of specialization, and
they change jobs and/or relocate, all in anticipation
of future returns in excess of the returns expected if
they made no additional investments. Returns may
accrue to the individual in the form of higher wages,
the potential for long-term wage increases or lifetime
earnings, increased benefits, and future job growth
and opportunities. Individual investments also ben-
efit the organizations where nurses work as well as
society, which gain from nurses’ unique contribu-
tions in the form of nursing knowledge, skills, and
services.
From an organizational perspective, human cap-
ital contributes to collective or group knowledge,
skills, and abilities of employees, including their ed-
ucational backgrounds, expertise, and relationships
that make the organization more productive and in-
crease financial performance. This aggregate of hu-
man capital is sometimes called “social capital,”
whereby the interactions in organizations are valued
based on their contribution to organizational per-
formance and returns.19 Organizations may make
numerous investments in employees, such as: a) de-
voting time and money to seek out and hire indi-
viduals with certain knowledge, skills, and abilities;
b) training new employees to familiarize them with
the organization; c) socializing new hires into their
work unit; d) structuring competitive benefits; e) of-
fering competitive salaries; f) providing on-the-job
training to educate employees in new techniques
and technology; and g) paying tuition for employees
who gain additional education and increase organi-
zational capacity.
Organizations also invest through ongoing re-
tention efforts targeted at maintaining a high-
JONA • Vol. 34, No. 12 • December 2004
quality and stable workforce, such as the creation
of a rewarding work environment, and compen-
sation plans that reward individual human cap-
ital investments and stable performance behav-
iors. Returns can accrue to the organization in the
form of increased revenues, organizational perfor-
mance, and/or reputation. An organization invest-
ing in nurses through training and other mechanisms
would seek to retain nurses through such activities
as raising wages to ensure a return on past invest-
ments. Conversely, nurses have less incentive to leave
if their nursing knowledge and skills are recognized
and valued by the HCO.
Conceptualizing Nurse Turnover Vis-à-vis
Human Capital Theory
Nurse turnover occurs when nurses terminate their
employment within an employing HCO (external
turnover), or when they change jobs or positions
with their employing HCO (internal turnover).
When nurses change jobs or move to a different posi-
tion within their employing organization, little effort
is generally directed at understanding or reducing
turnover because it is not viewed as an organiza-
tional loss. When nurses change jobs within their
employing HCO, it suggests that there are oppor-
tunities for professional growth and advancement
available to them with their employing HCO. For
example, a nurse may change jobs within a HCO to
gain experience in a specialty area, to advance to a
management or educator role, or to work in an area
with more appealing working conditions. However,
losses may result from internal RN turnover, if it
costs more to replace the nurse who changes jobs
internally than it does to fill the vacancy he or she is
filling.
Turnover is viewed in HCT as an individual in-
vestment for which the individual or organization
expects a return. For example, when a nurse decides
to change jobs or employers, he or she incurs the op-
portunity costs of job search and information gath-
ering, moving, and other personal losses that accom-
pany changing jobs, and potential short-term salary
interruptions. By changing jobs and/or employers,
nurses are trading off the costs and benefits of staying
in their present job and organization with the costs
and benefits of leaving, relative to anticipated long-
term returns on their human capital. While nurses
may be unaware of all of the costs and benefits of
changing jobs, they may be willing to incur vari-
ous short-term costs if doing so offers the promise
of long-term gains in improved working conditions,
career growth and advancement opportunities, job
satisfaction, compensation, and life fulfillment.20,21
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In contrast, nurses who perceive better opportuni-
ties by remaining in their present job or organiza-
tion than elsewhere are likely to stay in their current
job or move to a different job within their employing
organization, thereby avoiding the costs of changing
jobs.
While turnover—and particularly external turn-
over—is typically viewed as an organizational cost,
it can also yield organizational benefits. HCOs may
benefit from nurse turnover in that it provides oppor-
tunities to gain staffing flexibility, acquire an infu-
sion of new ideas and innovations, and achieve cost
savings from the lower salaries and fringe benefits
paid to newly hired RNs. Also, when nurses leave,
it provides HCOs the opportunity to replace depart-
ing nurses with others who may perform at a higher
level or be a better “fit” with the organization’s
needs and philosophy, and enables the organization
to hire new RNs with experience in a new service
area.
Usually, however, nurse turnover represents a
cost to HCOs that is especially challenging when
nursing shortages exacerbate RN turnover and its
costs. Nurses’ working conditions often suffer un-
der shortage conditions, affecting nurses’ job satis-
faction, morale, and productivity21 ; nurses, in turn,
may be more apt to turnover in search of improved
working conditions and/or higher pay.20 Shortages
also tend to create vacancies within HCOs and new
employment opportunities for nurses who are con-
templating a job change. As nurses turnover, fewer
nurses may be available to staff units, and those who
remain have to work harder and/or longer hours,
sometime on unfamiliar units. Healthcare adminis-
trators obviously must address RN turnover to meet
staffing and patient care demands and ensure ongo-
ing operations, but they may do so by employing
increased numbers of temporary or agency nurses to
fill RN vacancies. Nurses who remain in the HCO
work side-by-side with temporary nurses who are
brought in to meet staffing needs, but who are of-
ten paid more than permanent nursing staff. Even
if the temporary RN does not receive a higher total
compensation than permanent staff (ie, permanent
staff may receive benefits not available or provided
to temporary nurses), the resulting environment
may breed even greater discontent and dissatisfac-
tion among permanent staff.
Thus, the phenomenon of nurse turnover, espe-
cially during periods of shortage, may be charac-
terized as one in which turnover begets turnover.
For example, nurses may change jobs or leave the
workforce due to increased job stress, dissatisfac-
tion, burnout, or other factors; nurses may leave be-
566
cause of the departure of colleagues or disruption of
the group; and/or nurses who had no intentions of
leaving may do so because there are greater job op-
portunities in the market.22,23 The result may have
detrimental effects on the quality of care, patient
and staff safety, and the cost-effectiveness of care
delivery.
Human Resource Accounting Methods
Human capital theory has been used to derive hu-
man resource accounting methods13,24 for valuing
the contributions of “knowledge-workers”14 within
organizations and examining the costs of employee
turnover.7,13 These methods use micro-costing, or
accounting, techniques to operationalize HCT and
“regard investment in nurses in the same way as capi-
talization of buildings, equipment, and inventory.”15
These methods also provide a way to examine the
investments made in employees who leave, based
on the assumption that employee investments are
valid if the returns—in terms of productivity and/or
revenues—exceed the total investment.
Human resource accounting methods are appro-
priate for calculating the costs of nurse turnover be-
cause they treat the costs of replacing nurses who
leave as human capital losses that decrease future re-
turns on prior human capital investments. Replace-
ment costs include the costs of recruiting, selecting,
hiring, and developing a new employee to reach a
given performance level.13 These costs relate to the
major constructs of HCT. For example, replacement
costs reflect all investments that an HCO has made
in hiring nurses to increase workforce capacity and
productivity. This approach assumes that if replace-
ment costs (or past investments) are known, these
costs can be used to determine returns on invest-
ments, or the profits or losses that result from prior
investments. The incentive for organizations is to re-
tain employees because of prior investments and the
potential loss of future returns from those invest-
ments when an employee leaves.
Human resource accounting methods recog-
nize that turnover-related costs may be incurred by
HCOs for the obvious reasons of recruiting and hir-
ing new nurses. However, nurse turnover may be
costly for less obvious reasons, such as the inability
to hire comparably qualified RNs to replace those
who leave, and even if comparably qualified RNs
are available, a newly hired RN will need time to be-
come familiar with the organization and processes.
When an RN leaves an HCO, he or she also takes
specific knowledge of the HCO to a new employer,
which may mean a loss of “competitive advantage”
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Aspen Pub./JONA na341206-2 December 2, 2004 4:24
to the original HCO over the short or long run. Ad-
ministrators may be concerned about the turnover
of employees with knowledge, skills, and training
that are specific to the organization, and should be
willing to invest in employee retention.12
From an economic perspective, both the behav-
ior of employees and organizations would suggest
that low turnover should be associated with higher
wages, and vice versa, all things being equal.20 This
does not mean that individuals will change jobs
solely based on wages, or that raising wages will
retain all employees in organizations. However, it
does suggest that individuals may base turnover de-
cisions on the desire for higher wages over the long
run, and organizations concerned with turnover will
look for a wage that maximizes employee retention
and minimizes overall costs.
The Nursing Turnover Cost Calculation
Methodology
The Nursing Turnover Cost Calculation Methodol-
ogy (NTCCM) was developed over a decade ago6,25
to calculate the costs of nurse turnover by identify-
ing the major cost components of replacing nurses
who leave and estimating total and per-RN turnover
costs. The original NTCCM (components of which
are illustrated in Table 1) was based on the work of
Hall24 and Hoffman.26 This methodology defined
the 2 broad categories of nurse turnover costs as di-
rect and indirect. Direct costs included advertising
and recruiting costs, the costs of unfilled RN posi-
tions, and hiring costs; indirect costs included ori-
entation and training costs, the costs of decreased
new RN productivity, and termination costs. Using
human resource accounting methods, total and per
RN turnover costs were calculated for each of the 6
categories.
An updated version of the NTCCM recently was
used to measure nurse turnover costs and will be dis-
cussed in Part 2 of this series. The NTCCM was up-
dated in several ways. First, NTCCM costs and cost
categories were refined by identifying relevant omit-
ted costs through an extensive search of the nurs-
ing, healthcare, and business literature. Second, new
calculation methods were developed and defined to
represent new nurse turnover costs and cost cate-
gories. Third, an expert panel (composed of finan-
cial experts with knowledge of microcosting tech-
niques, economics experts in human capital theory,
and nurse researchers and practicing nurse execu-
tives with knowledge of nurse turnover and health-
care financing) evaluated new cost categories, calcu-
lation methods, and data elements. The costs, cost
JONA • Vol. 34, No. 12 • December 2004
categories, calculation methods, and data elements
were modified based on the expert panel recommen-
dations.
Table 2 provides an overview of the updated
NTCCM, with 2 broad categories redefined as Pre-
hire and Post-hire nurse turnover costs. Figure 1 il-
lustrates conceptually the relative periods of time
over which nurse turnover costs are presumed to
accrue. All of these NTCCM costs represent invest-
ments that an HCO makes to put nursing staff mem-
bers in place and preserve or improve organizational
productivity. The organization makes these invest-
ments in anticipation of recovering those costs—in
the form of future returns on investment—during the
tenure of the RN staff member. An HCO’s return on
nurse investments will depend on the nurse’s condi-
tional value (ie, the value of potential services nurses
can render) and the nurse’s length of tenure with the
HCO.13
The updated NTCCM reconceptualizes nurse
turnover costs as occurring both before (Pre-hire)
and after (Post-hire) a new nurse is hired to replace
nurses who leave, rather than the original catego-
rization of direct and indirect costs. The major cat-
egories of the NTCCM were renamed to avoid con-
fusion with economics and finance meanings of the
terms “direct” and “indirect,” and to reflect the tim-
ing of the turnover cycle, and the fact that direct
costs (ie, “visible” costs that can be traced to a spe-
cific activity) and indirect costs (ie, “invisible” costs
that cannot be traced to a specific activity but are
incurred generally across multiple activities)13 occur
across all cost categories of the revised NTCCM.
Pre-hire costs of the NTCCM are incurred by
an HCO during the process of recruiting new RNs
to replace nurses who leave, and occur prior to the
time that the new nurses are employed on staff. Pre-
hire nurse turnover costs include: (1) advertising and
recruiting, or the obvious costs to market open posi-
tions; (2) vacancy, or losses that are incurred while
attempting to fill open or vacant positions resulting
from RN turnover; and (3) hiring, or costs that are
required to bring a new nurse on staff.
Post-hire costs are incurred after new nurses are
hired to fill RN vacancies, but prior to an employed
nurse turning over. Posthire nurse turnover costs in-
clude costs associated with (1) orientation and train-
ing while newly hired RNs become familiar with or-
ganizational policies and procedures; (2) new RN
productivity, or costs incurred by the HCO during
the period of time required for newly hired nurses to
become 90% productive; (3) preturnover produc-
tivity, a new cost category that reflects productivity
changes (for individuals and workgroups) that may
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Table 2. Pre-Hire and Post-Hire Costs of the Updated Nursing Turnover Cost Calculation
Methodology (NTCCM)
Pre-Hire Costs: Costs incurred during the recruitment and
hiring of RNs to fill RN turnover vacancies.
Advertising and recruiting: Costs associated with attracting
new RNs to fill vacancies caused by prior RN turnover.
• Recruitment personnel salaries and expenses
• Supplies
• Job fairs, seminars
• Student visitation days
• Advertising
Vacancy∗ : Costs incurred while attempting to fill open
positions that result from RN turnover and staff
shortages.
• Temporary nurses
• Overtime
• Closed beds
• Productivity of unit staff†
• Patient deferrals†
• Adoption of new staffing programs†
Hiring: Costs incurred once a prospective RN employee
enters the interview process or has accepted a position
within a healthcare organization to fill an RN turnover
vacancy.
• Interviewing personnel time, salaries, and expenses
• Employment processing
• Bonuses
• Search firm costs†
• Background checks†
RN, registered nurse.
∗
Category renamed (from “Unfilled Positions”) in updated NTCCM.
†
New costs or category added to update NTCCM.
occur during the 3-month period immediately be-
fore turnover occurs; and (4) termination, or costs
incurred by a HCO upon an RN’s resignation and
departure.
Several steps were involved in the process by
which the updated NTCCM was employed. A data
collection tool was developed to facilitate data col-
lection corresponding to cost, cost categories, and
data elements needed to calculate turnover costs.
The data collection tool alone does not provide
nursing turnover cost results, but provides a way
to retrieve data for the analysis component of
the NTCCM. The actual calculation of nursing
turnover costs requires data collected by this tool
and semistructured interviews, which were used to
gather additional data that was necessary for calcu-
lating nurse turnover costs, but was not easily cap-
tured by the data collection tool. However, simply
summing data from these sources will not result in
an accurate calculation of nursing turnover costs for
the study period. To address this issue, a spreadsheet
model was developed to include a series of calcu-
lations that were used for data entry and analysis.
Total and per-RN turnover cost estimates were then
derived using these processes. Estimation of turnover
568
Post-Hire Costs: Costs incurred after new RNs are employed to
fill RN turnover vacancies.
Orientation and training: Costs incurred while familiarizing
new RNs with policies and procedures to prepare them to
fill RN vacancies.
• Training personnel salaries and expenses
• Supplies
• Equipment
• Preceptors
Decreased new RN productivity: Costs incurred during the
time required by new RNs to become 90% as productive as
seasoned RNs and assume a patient care assignment
expected of RN staff.
• New RN productivity during “learning” period
• Supervisor/co-worker productivity†
Decreased pre-turnover productivity† : Costs incurred during
the period immediately before turnover occurs.
• Departing RN†
• Co-workers†
• Supervisor†
Termination: Costs that are incurred upon the departure of an
RN employee.
• Exit interview personnel time, salaries
• Supplies and expenses
• Unused vacation and sick time
• Early retirement†
costs in this manner helps to identify the sources and
magnitude of nurse turnover costs.
Conclusions
Administrators in HCOs experiencing nurse
turnover are faced with trading off the costs of
turnover, including replacement costs, with the
costs of retaining nurses who have organization-
specific knowledge. In many cases, HCOs may
make human resource and organizational decisions
without full knowledge of the trade-offs. Whether
these decisions are cost beneficial for individuals or
organizations is largely unknown, especially under
constrained nursing labor market conditions when
there are insufficient numbers of nurses available to
fill vacancies.
It is logical to expect, however, that in a con-
strained labor market, the advantage might go to
the nurses who leave, given that they are in short
supply and employment opportunities may be abun-
dant. Also, under poor working conditions, nurses
may leave in search of a better work environment,
even if doing so means taking a short-term loss of
wages.27 Gaining a better understanding of nurse
JONA • Vol. 34, No. 12 • December 2004
Aspen Pub./JONA na341206-2 December 2, 2004 4:24
Figure 1. Turnover cost accrual timeline used in this study. Timeline not drawn to scale; varies by individual.
turnover costs and benefits provides a way to begin
designing interventions to adequately address RN
turnover in ways that recognize nurses’ human cap-
ital potential.
Human capital theory and human resource ac-
counting methods provide a means of conceptual-
izing RN turnover and replacement costs, and de-
veloping methods to categorize and calculate RN
turnover costs. These methods recognize nurses as
organizational assets with knowledge, skills, and
abilities that impact organizational productivity
and performance. The updated NTCCM uses these
methods to derive more realistic and accurate esti-
mates of nurse turnover costs. Nurse executives can
use the resulting information in organizational deci-
References
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pdf. Accessed July 15, 2004.
3. Business Editors. Unifi Network, A Division of Pricewater-
houseCoopers, uncovers link between employee turnover and
JONA • Vol. 34, No. 12 • December 2004
sion making, and to develop policies and practices
aimed at nurse retention. Part 2 of this series will
illustrate an application of the updated NTCCM us-
ing data from an acute care hospital and demonstrate
how the costs of nurse turnover can be used to build
a business case for nurse retention.
Acknowledgment
This research was supported in part by a Faculty
Research Opportunity Grant from the University of
North Carolina-Chapel Hill School of Nursing. The
author also gratefully acknowledges the thought-
ful comments of colleagues Drs Barbara Mark and
Mary Lynn on an earlier version of this article.
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