Does High Turnover Affect Productivity?
The factors that make up your company's productivity are complex and constantly changing. One factor that definitely hurts productivity is high employee turnover. When your employees are constantly leaving, it is difficult to maintain the same level of output. That's mainly because new employees need time to train and get used to the work before they reach full productivity.
Training costs can have a big impact on your productivity and profitability. Managers and new employees are busy with tasks that are not directly related to operating the business and producing products, services and sales. Instead, they are being paid for work that will not benefit the company until the employee is fully trained. The less turnover that you have, the less training expense you will need and the higher productivity you will have.
Employees with a long tenure in a company have what is known as institutional knowledge. This means that not only do they understand how the equipment, technology and business processes work, they also understand who to talk to in order to get things done. For example, a long tenured employee will know which data in the business process management are important to update and view. A new employee will not have this knowledge. He can only build it up over time and with the help of coworkers.
Firms with higher turnover require much larger investments in recruiting and hiring new employees. Depending on how intensive the hiring process is, management must devote an increasing percentage of their time to fielding through applications, interviewing candidates, hiring them and handling paperwork. This gives them less time to devote to proactive duties that can boost productivity.
High turnover usually has a negative effect on the morale of the remaining employees. Whether workers are being laid off or leaving of their own volition, the remaining employees end up being insecure about their own jobs. In addition, many will have to take on additional duties when someone leaves, which can create resentment and lead to lower morale. Low morale tends to make employees less enthusiastic and productive.