Page 228 - The Green Building Bottom Line The Real Cost of Sustainable Building

206 CHAPTER 7

five times worse than outside air. With more than 17 million Americans suffering from
asthma, with $15 to 40 billion in health-care costs estimated to be directly related to
“sick” buildings owing to mold spores and other allergens, the Birmingham Federal
Reserve & Tower’s emphasis on superior indoor air quality translates to real cost sav-
ings in today’s dollars, as well as reduced liability exposure to the tenant. We have not
put a dollar figure on this savings, but feel that this benefit should be highlighted in a
presentation to potential tenants in a green building.

Reduced Turnover
Believed to be the highest hidden operating cost, employee turnover remains one of the
least attended cost centers of American business. In professional sectors, this cost con-
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servatively exceeds 100 percent of the departed employee’s annual salary. Direct costs
blend into indirect costs: separation costs (administrative expense, separation/severance
pay, unemployment compensation, litigation costs); vacancy (overtime for existing staff,
temporary employees); replacement costs (recruiting expenses, interviewing, skills test-
ing, medical exams, travel/moving expenses, administrative expenses); lost produc-
tivity (loss of expertise, loss of customers loyal to the departed staff member, mistakes
made by the new employee); and morale issues (turnover creates stress, resentment from
existing employees as they assume an increased workload).

Tenant Savings from Reduced Turnover
In our analysis, we take as our starting point the fact that businesses today see 100 per-
cent turnover roughly every four years. Further, we assume 10 percent of a company’s
staff members are key people whom the business would prefer to retain. In his book
The Sustainability Advantage, Bob Willard reports it costs about $25,000 to replace
just any staff member and somewhere between two to three times the annual salary of
a key employee to replace one. Moreover, it costs about $7,000 to hire a new staff mem-
ber. With these assumptions in place, we calculate the following for the 850 people
employed by tenants at Birmingham Federal Reserve & Tower:

■ Regular staff turnover. 191 regular staff members (one quarter of 90 percent of all
those working in the building) are likely to leave for other jobs each year, reduced
by 3 percent for an annual savings of $143,250, or $0.84 per square foot (191 ×
$25,000 × 3% = $143,250, which, divided by the 170,000 square feet in the build-
ing, comes to $0.84 per square foot).
■ Key employee turnover. 21 key staff members (a quarter of 10 percent of all those
working in the building), averaging annual wages of $50,000, are likely to leave for
other jobs each year, reduced by 3 percent for an annual savings of $78,750, or
$0.46 per square foot (21 × $50,000 × 2.5 × 3% = $78,750 which, divided by
170,000, comes to $0.46 per square foot).
■ Total expenses for turnover. 206 staff members total (97% of 212 because our
retention rate is higher than the national norm) who leave each year require expen-
ditures on the part of the company ($7,000 per hire). It has been our own experi-
ence that having a green orientation makes the process of recruitment smoother,