Calculating - and Minimizing - the Impact of Employee Turnover

Calculating - and Minimizing - the Impact of Employee Turnover

In an "ideal" workplace, employees are keenly aware of each other’s strengths; new hires are welcomed into established rhythms; and company-wide knowledge is exchanged easily from experienced team members to newer ones. Indeed, in a stable working environment like that, employees organically build genuine, ease-filled working relationships where unwritten protocols are understood and confidence is fostered from knowing both their role and their value. A business that has cultivated such a productive, resilient foundation maintains a stability that encourages employee loyalty which in turn supports strong employee retention - a valuable asset that extends far beyond what appears on any financial statement.

The lack of such a stable foundation leads to the opposite of employee retention: employee turnover, or churn - the rate at which workers leave an organization and must be replaced. While some turnover is natural and even healthy, when it’s high, it destabilizes a business, negatively affecting its ability to grow.

Factors influencing employee turnover

Common employee rationales for jumping ship and seeking greener pastures - and their remedies include:

Unfair compensation - doesn’t match market rates or recognize growing experience
Remedy: competitive compensation; recognize growing expertise before employees need to ask

Poor management - lack of support from superiors, unclear job expectations or toxic leadership
Remedy: leadership training that emphasizes clear communication, consistent feedback and genuine support

Limited growth opportunities - nowhere for ambitious employees to expand their horizons
Remedy: clear pathways for advancement via promotions, expanded responsibilities or skill development opportunities

Work-life balance issues - become exhausting, especially in positions that demand the constant availability of an employee
Remedy: prioritize work-life balance through realistic workload expectations, respect for personal time and flexible arrangements where feasible

Company culture - failure to accommodate/value diverse perspectives or allowing workplace conflicts to go unchecked
Remedy: foster an inclusive culture where diverse perspectives are valued, conflicts are addressed promptly and fairly and respect is non-negotiable

Unrecognized/undervalued - employees feel invisible or like their contributions go unnoticed
Remedy: acknowledge contributions, celebrate achievements and ensure employees understand how their work connects to larger organizational goals

The costs of high turnover

Recruitment and hiring expenses are just the tip of the employee churn iceberg. Exiting experienced employees take with them valuable assets which include:

• Institutional knowledge - the understanding of why certain processes exist
• Relationships with key clients or vendors
• Problem-solving shortcuts learned through experience

New hires, no matter how capable, need time to develop this expertise; during that learning curve, productivity inevitably dips.

Additional pain points of a business afflicted with high turnover:

Remaining employees begin to question their own decisions to stay, wondering what colleagues knew that prompted their departure. The energy required to repeatedly integrate new team members, rebuild trust and re-establish working relationships drains morale. From an organizational point of view, high turnover signals instability to those who remain and potential hires alike (which makes it difficult to attract quality candidates to fill the vacant positions).

Productivity takes a measurable hit during transitions. The departing employee’s workload must be redistributed, often overwhelming remaining staff. Training new hires pulls experienced employees from their own responsibilities. Projects lose momentum as team composition shifts and time invested in bringing previous employees up to speed represents wasted expense.

Financial tolls include obvious expenses like recruiter fees, advertising costs, background checks and new hire training. Less obvious are the costs of reduced productivity during the transition period, overtime paid to cover gaps and mistakes made by inexperienced replacements. Depending on the role’s complexity and seniority, in 2019, Gallup Research discovered that the cost of replacing an individual employee ranges from one-half to two times the employee’s annual salary. (An interesting additional finding discovered that 52% of voluntarily exiting employees say their manager or organization could have done something to prevent them from leaving.)

Customer relationships suffer when turnover affects client-facing roles. Clients value consistency and the rapport built with specific representatives. Repeatedly starting over with new contacts frustrates customers and creates opportunities for competitors to step in.

The costs associated with high employee turnover are numerous and ultimately detrimental to your bottom line. Strive for a workplace that values employees by compensating fairly, supporting their efforts through clearly articulated expectations, providing a pathway for advancement, holding realistic and flexible expectations, respecting their diversity and recognizing their contributions to the company at large. Such practices will reward you with a stable, well-oiled machine of a workforce.

How does your business avoidhigh employee turnover?