Employee turnover tends to have ugly connotations to it, mainly because replacing lost talent is costly in terms of employee compensation and business profitability.
On the one hand, excessive turnover can cost an organisation about 33% of its employees’ compensation package, which includes wages and benefits. On the other hand, companies with high turnover rates can be outdone by offices with low employee turnover up to four times profits-wise.
On top of these losses, companies also have to keep employee morale in check, as poor morale is deemed unhealthy for organisations overall.
Why Employees Leave
Employees leave for a variety of reasons such as lack of culture fit, an unhealthy work environment, or below-average compensation especially for top performers or achievers. However, it takes objectivity for your HR team to understand that poor people management is also a major culprit in most turnover cases.
One of the ways this could be demonstrated is how managers coach employees. Without proper coaching, employees maintain a status quo with no improvement in their work performance, which may eventually result in employees becoming unproductive or feeling inadequate. Either way, it could have a negative impact on the growth and success of individual employees, as well as on teams within an organisation.
It’s also possible for employees to feel that the responsibilities given to them do not match their expectations, no thanks to indistinct discussions of what exactly the job is all about during the interview stage.
Uncertainties and mistrust may then get in the way of manager-employee relationship, causing another stumbling block in talent retention. In extreme cases, there could be an unjust treatment of employees such as playing favourites or playing the blaming game happening in the workplace, which could antagonise members of the organisation.
These are just some of the scenarios that explain why having good managers in your workforce makes unnecessary turnover a little less common—if not totally avoidable. Whether or not this holds true for your organisation, what’s certain is that excessive turnover is detrimental for your business in more ways than one.
The Cost of High Turnover
We’ve already established the fact that exiting employees can cost your business, given that you had to invest resources into hiring, training, and certifying them in the course of their employment. Those investments immediately vanish into thin air once an employee resigns, while replacing old employees can make you expend additional resources yet again on job posting and other recruitment activities.
Unfortunately, your company’s turnover woes don’t stop there. The following areas also suffer negative impacts when there’s a high rate of employee attrition in your office:
1. Overall business performance
There’s a perceived deterioration in profit margin and customer service attributed to employee turnover, according to a study about the impact of employee turnover on performance.
The premise is that when good employees quit and less experienced workers are retained, the quality of business solutions and service provided to customers decreases, as customers tend to get attached to certain employees in the organisation. Once customer relationship is compromised, overall business conditions might be put at risk as well.
2. Daily task management
Apart from quality issues, employee turnover also affects the quantity of work finished. The Encyclopedia of Business asserts that it may be a struggle for teams where employee turnover is high to complete their daily tasks or functions, especially when there is no proper coordination or exchange of information between former employees and current ones.
3. Company image
A high attrition rate can result in a negative reputation for companies as potential employees may find it alarming that people are choosing to leave the organisation.
Recruiters attest that it is challenging for them to map qualified candidates to any organisation where there is history of beyond-normal turnover.
4. Team dynamics
Frequent changes in employee line-up can have serious consequences on a team’s ability to establish rapport among its members. It can be extremely difficult and might take a long time for teams to adjust to the work habits of a new employee who has been hired to replace someone from their own bunch, especially if it’s an outsider that’s brought into the organisation.
5. Productivity and continuity
Individual and team productivity may slow down due to employees leaving the company. For one, the new employee has to go through a period of adjustment in the workplace, which means tasks may take longer to finish as far as the new hire is concerned. Consequently, there might also be delays within teams who are relying on their newbie member to help them get things done.
Further down business operations, the continuity of service to clients may likewise be affected by a high turnover rate, especially for companies in customer-oriented industries. When your most experienced employees leave, they take with them their expertise and other internal mechanisms that are necessary for someone to perform well.
This could pose a concern on customer loyalty, which could be at risk when you have customers who might find it difficult to communicate their usual concerns to a new customer service staff every time. Not to mention that a new employee might not be as capable as your former, more experienced employees.
Turnover as a result of top employees getting transferred to a different assignment or department can also be harmful for productivity and continuity, especially when the managers who are supposed to handle them are not quite ready for such change.
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