How Employee Turnover Hurts Your Business

Categories: Advice for HR Professionals, Advice for Start-ups and Entrepreneurs


High employee turnover rates are a plague to the business world today. According to a 2013 study by consumer credit reporting agency, Equifax, 40% of employees who leave their jobs do so within six months of starting a position.

In a separate study published in 2017, 42% of millennials expect to change jobs every 1 to 3 years, at the very least. However, beyond these staggering attrition rates, what’s more bothering is only 9% of senior managers believe that turnover is an urgent issue.

Employee retention efforts have to become part of any organizational culture, even if you’d need recruitment consultants to help you with it. From the lack of proper onboarding processes to not incentivizing retention, here are a number of ways high employee turnover rates can hurt your business.

Higher Costs and Lower Profitability

A study by the Society for Human Resource Management revealed that companies would spend the equivalent of six to nine times the worth of an employee’s monthly salary to find and train their replacement.

If you do the math, an employee with a monthly salary of $5,000 (₱250,975) will cost the company $30,000 (₱1,500,000) to $45,000 (₱2,250,000) to source and train a new hire. It’s even worse for highly-trained executives, as another study by the Center for America Progress said that that number could go up to 213% of their salary; meaning, an exec making $10,000 (₱500,000) per month could cost the business up to $213,000 (₱10,000,000).

With the high number of lost employees comes a direct negative impact on the company’s bottom line. Every time an employee leaves and needs to be replaced, costs will start to build up starting from time spent on exit interviews and separation pays down to hiring and training of new employees.

Low Employee Morale

When an employee resigns voluntarily, it can take some time before a replacement is hired. During this time, those left on that former employee’s team will need to pick up the work while still performing their own responsibilities. Even when a replacement eventually gets hired, the new employee will need about 8 weeks for onboarding, orientation, and training sufficiently for the role.

The overwork often leads to poor workplace morale and productivity, which often result in even more employee turnovers, and the cycle continues until the company finds difficulty in attracting and retaining quality workers.

Subpar Team Dynamics

Frequent changes in teams due to employee turnovers do not help teams build a positive dynamic. Team dynamics and momentum happen only when the same group of individuals works together over time.

So when an employee or two leave, the rest of the team is left in limbo until the replacement comes to rebuild the dynamic with them.

Further, group tasks and projects that will rely on the new team member may slow down and affect even the tenured employees’ productivity levels.

Poor Product/Service Quality

The chain of effect that employee turnovers cause does not end with just costs, low morale, and decreased team dynamics. It will eventually lead to poor product or service quality that customers are bound to see.

For example, a new hotel receptionist might not provide excellent customer service as he or she may be unfamiliar with the company’s policies. This may manifest in something like not knowing the process on refunds on early cancellations, which could impact customer satisfaction.

Lack of Continuity

Consistent relationships with clients build customer loyalty. For companies that heavily rely on relationships with clients, in particular, poor continuity could result in lost business.

For example, advertising agencies often have account executives (AE) that work directly and regularly with clients on campaigns and other marketing initiatives. Clients may grow tired of having to deal with a new AE every couple of months and terminate the relationship instead.

Substandard Knowledge Base

High employee turnovers mean constant fluctuations in your team’s average years of experience. New employees are generally less familiar with the day-to-day tasks, the internal workflow, and how to deal effectively with customers.

With an understanding of the costs and issues that go with employee turnover, the next logical step for businesses experiencing high attrition is to develop a comprehensive retention policy.

Review business processes and practices that could be directly or indirectly impacting your turnover rate, work with recruitment consultants to redesign ineffective hiring and onboarding tactics, and evaluate opportunities for learning (training and development) and growth (promotion plans and performance-based pay increases).



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