Whether employees leave voluntarily for new positions, decide to retire or get terminated, employee turnover has an effect on your small business's everyday operations.
Not only do you have to consider the costs of replacing and training new employees, but the effects of employee turnover can cause your existing employees to have lower morale and work less productively. You also experience disruption that can cause quality issues. Identifying the effects and causes of employee turnover can help you take actions to reduce the impact on your business.
It Hurts Your Bottom Line
Due to the expenses involved in replacing employees and other disruptions that occur, you can see significant effects of staff turnover on your company's bottom line. When you consider costs such as recruiting, interviewing, onboarding and training possible replacements, DailyPay estimates that the cost can run between 50% to 150% of the position's salary depending on whether he has exempt or nonexempt status.
Your profits see additional damage beyond the replacement cost as well. For example, not having enough staff can hurt your productivity, customer satisfaction and quality, meaning you will incur additional costs and maybe face lost revenue.
Employee Morale Goes Down
When your company has problems with turnover, your remaining employees suffer since they will have to pick up the workload and deal with the disruption to daily routines. Employees may feel demotivated when employees who were close to them or who held top positions leave the company. This can lead to disengagement that hurts productivity and may cause employees to make more errors in their work.
Additionally, employees who plan to quit and make that information known to colleagues can create some negativity in the work environment that lowers overall morale. Hearing about colleagues planning to quit might even cause your most-experienced employees to consider whether they should also leave the company.
It Hurts Your Workforce's Effectiveness
The effects of employee turnover have a negative impact in that employees get distracted from your company's mission and may not work productively to meet your company's important goals. When you have to replace employees often, especially those who have the most experience or hold top positions, your workforce gets distracted from its real mission. The effectiveness of work teams also suffers when key members quit and replacements have to be integrated.
The time dedicated to training and acclimating new employees can ultimately slow down work in your company, meaning you can not produce goods or provide services at the performance level your customers need. This can lead to customer satisfaction issues that cause you to lose customers to competitors who do not have these problems related to high turnover.
Quality of Work Suffers
Lower quality of work is one of the effects of staff turnover that stems from both the disruption existing employees face and the need to onboard new employees who can meet the company's standards.
When you have experienced teams that can work together well and make few errors, losing any of those team members to turnover can cause problems with the quality of your products or services. When you do bring in someone new, it will take time for the person to learn the company's quality standards and gain the practice and experience to be up to par with the lost employee.
In the meantime, you might see more defects that cause you to scrap and redo work or have some customer service issues. These problems can increase your costs and lower productivity and customer satisfaction.
Identify Causes of Employee Turnover
To reduce the effects of employee turnover, know the common causes so your business can avoid making costly mistakes. Employees often leave an organization that has a toxic culture and bad leadership. Overworking employees, giving them meaningless or boring assignments, paying low wages and not offering proper development and training can also make your employees head elsewhere.
Offering a work environment with fair pay, good working conditions, appropriate recognition and autonomy, supportive leadership and opportunities for advancement can help reduce turnover.
- Jostle: 5 Causes of Employee Turnover (And How to Prevent Them)
- Hppy: When Numbers Fall: 4 Negative Effects of Employee Turnover
- DailyPay: Why Employee Turnover Is Also Bad for Your Employees
- Forbes: Companies Need to Know the Dollar Cost of Employee Turnover
- Humanity: Boost Your Retention: Employee Turnover and How To Reduce It
- Bonusly: What You Need to Know About the Cost of Employee Turnover
Ashley Donohoe started writing professionally about business topics in 2010. Having experience running all aspects of her small business, she is knowledgeable about the daily issues and decisions that business owners face. She also has earned a Master of Business Administration degree with a leadership and strategy concentration from Western Governors University along with a bookkeeping certification. Some other places featuring her business writing include JobHero, LoveToKnow, PocketSense, Chron and Study.com.