Is High Employee Turnover Hurting Your Business?

TSP • @myTSPnet


It’s no secret that high employee turnover hurts your bottom line. It’s estimated that the average cost of a lost team member is 38% of their annual salary. Interviews, recruitment and onboarding costs all add up, especially for small and middle-sized companies (SMBs). If your company has worked hard to recruit good talent, the last thing you want to do is continue to pay for recruiting, onboarding and training new employees.

The impact of staff turnover is significant — it affects all facets of the workplace. Here are a few telltale signs to determine if high employee turnover is impacting your company.

Loss of productivity is one-way high employee turnover can negatively impact your business. If employees are coming and going frequently, it can be hard for projects to get done in a time-efficient manner. Additionally, it can be challenging to maintain a consistent work output level. 

According to a survey by Allied Workforce Mobility, about 30% of companies said that it takes a year or longer for a new employee to reach the full productivity level of a departing employee. Companies with fewer employees may find it hard to replace roles, as workers may fill a wide array of specialized roles. This can create a problem for small businesses, by affecting performance and productivity levels.

Low employee morale can also be an result of high employee turnover that hurts your company’s culture. Inconsistency in employee treatment, lack of discipline, lack of effective communication and not providing clear processes and expectations are just a few of the impacts that can be seen in the workplace. These often result in low employee morale, which in turn can affect client satisfaction.

It’s important to keep employee morale high to ensure that everyone feels like they are a valued part of the organization and are producing the best work.

Sub-par work can also be the result of a downsized team or inexperienced employee making up for an employee loss. This is especially evident in industries where repetition and skill level play a critical role in the job. It’s key to provide high-quality work to appease your clients and constituencies.

Even if marketing expenses remain consistent in an effort to attract new customers, the return on investment decreases if the company is losing repeat customers and customer referrals due to inexperienced staff or lower-quality work. This increases the cost of one-time customers, lowering marketing return on investment.

Employee turnover has a direct impact on company revenue and profitability. Aspects contributing to this include hiring expenses, training labor, lost sales and productivity. The revenue impact depends on the industry, employee’s position and wage. If there’s a severance package involved that must be paid, this expense has no return on investment.

Consider also the labor costs in managing job postings, reviewing applications and interviewing. Although some companies utilize a job-placement service, this is still an expense.

If your company is experiencing high turnover rates, find the root cause and make the necessary adjustments. If compensation is an issue, business leaders should determine the industry standards and find a way to be more competitive. If this doesn’t solve the issue, the business needs to consider ways to make job satisfaction higher, like fun internal processes to recognize staff, allowing them freedom in scheduling and training them to deal with the work negatives.

Inspiring a team approach leads to a more positive company culture that, in turn, will keep employees happy and loyal to the company.

If your company is noticing any of these signs, employee turnover is an obstacle your company is facing. One of the first things you can do to understand employee turnover at your company is to get a pulse on the health of your organization.

By sending regular engagement surveys, you can identify and address factors like lack of development, ineffective leadership and lack of purpose. By gaining a better understanding of your employees’ observations, you’ll be able to get to the root cause of your company’s high employee turnover problem.