What Is Dysfunctional Employee Turnover?

In May of 2025, approximately 3.3 million Americans quit their jobs. A recent Gallup poll revealed that nearly 50% of employees in the U.S. are looking for an opportunity to leave their current place of employment for a different job. With millions of employees changing jobs every month, it’s more important than ever for organizations to understand what dysfunctional employee turnover is and how to manage the risks of losing top talent.

UNDERSTANDING FUNCTIONAL vs. DYSFUNCTIONAL EMPLOYEE TURNOVER

In simple terms, employee turnover occurs when your business loses an employee, either due to resignation or workforce reduction. When a trend of dysfunctional turnover develops, it’s often a warning sign of organizational problems.

Functional Turnover: Improving Your Operations

Not all cases of turnover are negative. Functional turnover refers to the loss of employees who were not the right fit for the organization, and their departure ultimately benefits the company. When such employees leave, the company can often improve overall morale and productivity, allowing stronger and more aligned team members to thrive.

For instance, letting go of an employee who disrupts the team dynamic or creates discomfort among colleagues can significantly boost team morale. As a result, productivity and innovation may increase, and the overall work environment becomes more collaborative and effective.

Dysfunctional Turnover: Losing Your MVPs

Things are different if one of your company’s “rising stars” or “pillars” decide to quit. These are valuable employees who actively support their colleagues, go above and beyond to make clients happy, and bring fresh ideas to the drawing board. Losing your top talent can be devastating for your business.

Here are a few examples of dysfunctional employee turnover:

• An admired manager quits because of a better job offer
• The top salesperson leaves after the company mandates overtime work
• The entire HR department leaves in protest of a controversial new policy
• A longtime production head resigns due to increased job stress

In all of these cases, the decision to leave can have a significant impact on your operations, usually hurting both short-term and long-term productivity.

MEASURING DYSFUNCTIONAL TURNOVER RATES IN YOUR ORGANIZATION

To learn if your business has dysfunctional turnover, analyze your employment data. Divide the number of employees who voluntarily quit by your total employees at the beginning of the year, then multiply by 100 to get the annual turnover percentage. Do the same with previous years. If the rate is increasing, this usually indicates an issue.

AVOIDING THE NEGATIVE IMPACT OF TURNOVER

Losing valuable employees can have a significant impact on your organization, both financially and operationally. The costs associated with turnover go beyond just filling positions. If not properly managed, turnover can affect your company's culture, performance, and bottom line. To mitigate the negative consequences and improve employee retention, it’s important to recognize how turnover can impact various aspects of your business and take proactive measures to prevent it.

Losing valuable employees can cost your organization in many ways:

• Training costs: Finding, hiring, and training new workers are expensive and time-consuming, diverting resources away from productive tasks.
• Loss of expertise: Experienced workers elevate the entire team, enriching your company’s culture and overall capabilities.
• Morale problems: Losing friendly co-workers can be a turning point for other employees who also decide to quit.
• Lost capital: When turnover involves talented individuals who drive revenue to your business, you may notice a sharp reduction in working capital for several months afterward.

There’s no one-size-fits-all solution for dysfunctional turnover, but you can take steps to avoid it by looking for patterns. Is there some issue that is prompting high-quality workers to go elsewhere? You may assume pay is the only factor that matters, but personal well-being and work-life balance are often bigger influencers. Asking workers who quit for feedback directly may be beneficial.

REDUCING THE RISK OF DYSFUNCTIONAL EMPLOYEE TURNOVER FROM THE START

One of the most effective ways to reduce the risk of dysfunctional turnover is by hiring the right people from the outset. By focusing on recruiting individuals who are not only skilled but also align with your company’s culture and values, you can minimize the likelihood of turnover that disrupts operations. Investing time in the right hiring process helps ensure that you’re bringing in employees who are committed, motivated, and more likely to stay in the long term.

At TSP, we can help your company avoid and recover from dysfunctional employee turnover by finding high-caliber IT professionals to join your teams. Throughout our recruitment process, we look for top performers who are excited about supporting your organization. Explore our IT workforce management options and start building a stronger, more stable team today.