Negative Effects of Employee Turnover
Are you concerned about employee turnover rates within your company? Studies have shown that there are many negative effects of high employee turnover, including lost sales and decreased employee morale. In order to protect your company's revenue and keep your employees happy, it is important to understand the consequences of high turnover rates. Read on to learn more about the negative effects of employee turnover and how to prevent them.
What Is Employee Turnover Rate?
Employee or Staff Turnover refers to the rate at which employees leave their position. Turnover can be costly and disruptive to a business, while low turnover rates may indicate healthy workplace culture. There are many factors that contribute to high employee churn including lack of job satisfaction, inadequate pay/ benefits package, as well as workload.
Negative Effects of Employee Turnover
High staff turnover has a significant financial and interpersonal cost for organizations. Let's take a closer look at those.
Productivity
A common complaint in the workplace is that newer employees are not adequately trained and this causes a decrease in productivity. This so-called "lag" can put a strain on other employees who have to pick up the slack, and it can cause delays in planned projects.
Seeing colleagues leave regularly can also contribute to a sense of workplace pessimism, where employees do not feel connected to the workplace or trust the organization. This can further cause a drop in productivity.
Financial Losses
Employee turnover is a huge cost to businesses. It is estimated that it costs a company 1.5-2 times the employee's salary to replace them, depending on their position.1 This is because businesses have to spend money on advertising, training, and onboarding new employees.
The high cost of employee turnover can be reduced by taking measures to improve retention. This includes things like offering competitive salaries, providing good benefits, and creating a positive work environment. By reducing turnover, businesses can save time and boost company revenue.
Morale
One of the most important aspects of any business is employee morale. When morale is high, employees are more productive and more likely to stay with the company. However, when turnover rates are high, it can have a negative effect on morale. This is because employees who stay with the company are often left feeling overworked and underappreciated. This creates a negative company culture that leaves staff feeling resentful of their organization.
In addition, high turnover rates can lead to a shortage of experienced workers, which can make it difficult for a company to meet its goals, creating frustration for the team. The key to maintaining a high level of morale is to ensure that employees feel valued and appreciated. This can be done by providing regular feedback, offering competitive compensation and benefits, and creating a supportive work environment. By taking these steps to boost employee retention, companies can prevent the negative effects of high turnover on employee morale.
Company Image
A high employee turnover rate is often seen as a red flag for potential new employees. If a company can't seem to keep its employees, what does that say about the workplace culture? Is it toxic? Do the rewards not match the work involved?
Involuntary turnover can indicate that the people in charge view their staff as expendable, which can have a negative impact on the company's reputation. Voluntary turnover can be just as damaging; it can suggest that employees are unhappy with their work-life balance or feel undervalued by their employer. Overall, it suggests a toxic workplace culture.
Either way, a high employee turnover rate is often seen as a sign that something is wrong within the company. And that can be a turn-off for new hires.
Motivation
High employee turnover has a number of negative effects on motivation within a company. When employees leave, it can be difficult to retain the institutional knowledge that they have.
In addition, high turnover can lead to low employee morale. Employees may feel like they are constantly training new hires, which can lead to burnout.
Finally, high turnover can be expensive for a company, as they have to continually invest in recruitment and training. This can mean fewer financial rewards or benefits for existing employees. As a result, it is important for companies to retain employees in order to maintain a motivated workforce.
Frequently Asked Questions
How Does High Turnover Hurt Productivity?
When experienced employees leave their positions, it takes time and resources to find and train new employees. In the meantime, work often suffers as the remaining staff tries to pick up the slack.
Additionally, high turnover can lead to low employee morale, which essentially gives staff a negative feeling about the organization and their roles. Employee engagement depends on trust, enthusiasm, and mutual support. All of which are absent when there is a staff turnover issue.
How Does Staff Turnover Impact Competitiveness?
Workforce competitiveness is defined by how much of the necessary skill set a workforce has in order to successfully complete their tasks and keep the business thriving in a competitive business climate.2
Staff turnover can have a big impact on a company's competitiveness. When inexperienced employees are constantly leaving, it takes longer for the company to develop a cohesive team and culture.
In addition, more employee turnover can lead to more errors and mistakes, which can damage a company's reputation.
The costs of constantly training new employees can also add up, eating into profits and making it difficult to invest in other areas of the business, such as training and rewarding ambition.
Ultimately, if a company wants to be successful, it needs to find ways to keep its employees happy and engaged. Otherwise, the cycle of turnover will continue, and the company will find it increasingly difficult to compete.
How Can HR Impact Turnover?
Although it may seem like a necessary evil, turnover can be costly for businesses. For example, management turnover can lead to decreased productivity as new leaders try to get up to speed and their subordinates get used to changes in leadership style.
HR can minimize the negative effects of this by promoting internally so that the new manager is already well known to the team. Promoting existing staff reduces the risk of further turnover and therefore reduces management labor costs.
In addition, turnover can also create feelings of uncertainty and insecurity among remaining employees, leading to increased stress levels and absenteeism.
While there's no easy fix, HR can play a role in reducing management turnover by improving communication and developing programs that foster employee engagement. By taking proactive measures, HR can help to mitigate the negative impacts of management turnover and create a more positive work environment for all.
How Does Employee Turnover Affect Organizational Performance?
One study by Harvard Business School found that high employee turnover rates are associated with negative business outcomes. However, the study also found that when managers ensured work processes were standardized throughout periods of high turnover, negative outcomes were avoided.3 This suggests that in some circumstances, a company's productivity and revenue impact can be salvaged by stable management practices.
Overall, turnover requires rigorous efforts to maintain stability within an organization. If the effects on company performance are mitigated, a large turnover rate will still take its toll on managers and other workers.
How Does High Turnover Impact Customer Service?
Depending upon the industry, customer-facing roles have some of the highest turnover rates. This can be due to the generally low-paid, high-stress environments workers are subjected to, but it can also reflect on a key piece of information - customer service is an art.
Great customer service requires an ability to filter out negative experiences on an ongoing basis so that a worker can give their most courteous and mindful effort to solving the next person's issue. It also requires great interpersonal skills, multitasking abilities, brand knowledge, and often a great working memory.
When the best workers leave their customer-facing positions, this can negatively affect the first impression a company makes on new customers. If customer service reps are replaced by people unfit for the demands of the job, the company loses its connection with clients, which can be disastrous for revenue.
References
1 Heinz, 2022, https://builtin.com/recruiting/cost-of-turnover#:~:text=The%20cost%20of%20turnover%20is,average%20of%20%241%2C500%20per%20employee.
2 Bates, 2002, https://www.researchgate.net/publication/255576096_Characteristics_of_a_Globally_Competitive_Workforce
