Employee Turnover Costs & Causes

Stats show that 2017 was a record year for hiring, with over 65 million employees hired throughout the United States. The number of people that quit or got laid off from a job was almost 60 million, combined. Turnover was high in food service, retail, hospitality, and warehousing. Companies can be susceptible to high turnover if management isn’t aware of, and acting against, the various causes behind it.


The Cost of Turnover

High turnover can cost a company 1.5 times the amount it would take to employ a person for a year. Think about the time and money spent finding that employee and training her, then watching her leave and take that training elsewhere. Add the cost of finding her replacement, training him and getting him up to speed.  It’s exhausting just to think about. Thankfully, there are actual turnover calculators to do the math for us.

Companies with high turnover may be experiencing many things. Exit interviews can be a great way for a company to determine why employees are leaving a company. Those only prove beneficial when the exiting employees are honest, and that tends to not always be the case.  Below we’ve identified several reasons behind company turnover.


Issues that Affect Employee Retention


Companies that lack understanding of a clear path upward for employees and fail to communicate how they can climb it will tend to have high turnover. If employees are unaware of the expectations of the job, and have managers who don’t communicate when they are meeting these expectations or not, then frustrations can arise. Performance reviews and clear job descriptions can help remedy this, but meeting annually isn’t good practice. Communication needs to be more consistent.


An employee is rarely happy to stay in the same job, for the same pay, for a long period of time.  She wants to make more money, and if her current company isn’t providing it, she will go looking for a place that is.  If her current employer throws money at an exiting employee in the form of a counteroffer to encourage her to stay, they may find she will still leave. The reason the employee was looking for a change in the first place will likely still remain, after she has forgotten about the bonus check or increase in pay.


Job Insecurity

Turnover can also be forced, such as in the case of layoffs. When a company has to let go parts of its staff, this can cause insecurity for the ones who stay behind, and those employees may leave out of fear that they will be next on the chopping block. Layoffs can also cause low morale among the remaining staff, and extensive communication and reassurance can often be the only way to retain these employees.

Good Turnover

Sometimes turnover can be good. There are individuals in every company that are considered the “slackers” of the group and not contributing in the way they should.  These employees can have a negative impact on staff who are doing their jobs well, particularly if the poor performance goes unnoticed by management. You wouldn’t want a top performer to become demotivated and leave because they feel management is offering them the same compensation as someone not working as hard as they are.  Cleaning house of these slackers is beneficial to the company because it creates an open position for someone that can be more productive, and to the top performers because they will see management is noticing performance and doing something proactive about it.


Preventing Turnover

So how can your company prevent turnover? As mentioned previously, companies can do so by creating clear communication regarding performance and expectations, appreciating their top performers, and respecting that employees are humans, not numbers. HR could also work with upper management to create a retention program, instead of being reactionary to each resignation.

A solid retention program can be created with insights from all levels of the organization. What keeps a manager may not be the same thing that retains an entry level employee. Wall Street Journal offers great tips on how to get started with a retention program, with ideas such as conducting a “stay” interview, offering training for employees to enhance their current skills, and providing a competitive benefits package.

If you are looking to decrease your turnover numbers, the first step should involve speaking to your employees about what they would change in your business and be sure make improvements that identify their concerns.

Blog post written by Annie Karp.

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