A High Employee Turnover Rate Can Be Costly
The cost of a high employee turnover rate varies per industry but will cost any business its time, money, and top talent. With the impact of the pandemic, employees who lack job satisfaction are re-evaluating their workplace choices and looking for better offers and opportunities elsewhere. Employees desire flexibility, growth, support, and competitive compensation and benefits, and will leave if a business fails to provide these for their employees.
Now more than ever, employees are faced with competitive offers and unique roles and opportunities from companies focusing on well-being, work-life balance, talent development, and overall employee experience. A business today will need to set itself apart with a compelling vision, strong cultural health, top-of-the-line benefits, and an employee-centered business focus to retain its employees most effectively.
If your business is not analyzing and measuring its high turnover, and determining the turnover reasons in your business culture, it will be challenging to understand the root issues of your employee retention needs. Determining these issues will be essential for leaders to avoid costly and high turnover rates and to improve their workplace for all its people.
Ways High Turnover Rate Can Cost Your Business
There are several elements of a high turnover rate that can cost businesses. With variations between industries and job roles, organizations must better understand their turnover rate and how it impacts their business. It is important to note not all high turnover costs are financial, as high turnover can additionally cost a business its time, success, and its people.
The following are a few examples of the possible costs of a high employee turnover rate:
1. Financial Losses – According to Gallup, the cost of employee turnover in businesses across the US can cost up to a trillion dollars per year. The loss of many good people can cost specific businesses thousands to millions of dollars per year, depending on the size of their business, the number of employees, and specific industry circumstances. Not all businesses can recover from such substantial losses, so leaders must act to prevent a high turnover rate to avoid these significant and unnecessary Calculating your employee turnover rate annually is the best approach to measuring this rate for your business.
The average business loss per individual employee turnover can be up to twice the salary of that employee leaving. With high turnover, there will be increased costs for your business. When employees leave an organization, this costs a business those salaries as well as the salaries of the new employees filling those vacant roles. Improving employee retention by taking care of your people is one of the best ways to avoid losing good talent.
Businesses will also see a costly increase in spending surrounding recruitment, onboarding, training, development, and other industry-relevant needs to acquire and retain new talent. The hiring process can be costly to a business, so retaining employees will be the best way to avoid a high turnover rate. Businesses with a compelling culture will save money by experiencing a lower-cost, lower employee turnover rate.
2. Lack of Operational Efficiencies and Success – When employees are dissatisfied in their roles and seek other opportunities, they are likely not as efficient and productive. Employees are critical for a business to excel and effectively operate. It is important each employee has the leadership, support, and capacity to carry out their responsibilities and duties.
High turnover can cost the business its operational efficiencies. When an employee leaves, this leads to gaps in productivity and efficiency. A business runs because of its people, so a high turnover rate can cost the business its greatest efforts, growth and development, and goal accomplishments. Businesses should prioritize employee well-being and morale, which is negatively impacted by a lack of efficiency in an organization.
3. Loss of Employees and Potential Top Talent – Losing good people is a loss to any business. They are losing individuals who may have been loyal, efficient, innovative, and valuable to the company in both the short and the long term. This can be an opportunity cost, due to the competence of the individual and the expertise and knowledge they brought to the organization. Your people add value to your business and are your biggest asset.
Effective leaders who support and engage their employees are better able to retain the best talent and show the best employee tenure rates. A high employee turnover rate will cost your business knowledge, skillsets, and valuable backgrounds. Your people are unique and bring value to your brand and your organization’s cultural health. Losing talent can create issues for brand awareness and company reputation, leading to possible issues with customer satisfaction and client rapport.
4. Negative Impact on Client Experience and Partnerships – A customer’s service or business experience is critical to the growth and success of a business. Leaders should recognize high turnover can negatively influence the customer experience, client needs, and the company’s relationship with clients. Consistency in client support will help retain clients and help support your employees in their roles. Clients desire consistency and reliable support. High turnover can cost your business its ability to build client relationships that are crucial to support clients.
Overall, high employee turnover can cost a business financially and have a negative impact on operational efficiencies, retaining top talent, and with its client experience and partnerships. High turnover can cost a business time, money, and people resulting in significant losses. With the increased turnover in today’s marketplace, businesses must understand their turnover rate and the costs has on the business.
Leaders need to lead with a compelling and engaging vision. They need to develop a compelling and enduring culture in which they take care of their employees with positive workplace culture, employee experience, and great opportunities and benefits. This will greatly improve employee retention and reduce employee turnover, avoiding the possible issues and costs of a high turnover rate at your business.
CEO, EDA, Inc.
Executive Coach, Author, Speaker and Leader of Custom Executive Development Consulting Firm with world-class consultants, recognized in their fields as the creme-de-la-creme. Services include Executive and Leadership Development, Executive Coaching, Succession Planning, and High Potential Development.
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