Tangible Benefits of Reducing Turnover

Reducing employee turnover is a common objective of human resource management. However, putting your finger on the actual benefits of lower turnover is challenging. Not all turnover is bad. Getting rid of low performers or problematic employees benefits your business in the long run. Understanding the reasons to lower turnover, though, can motivate your managers to do a better job hiring, training and motivating employees.

Studies vary greatly on the actual dollar costs of replacing lost employees. They all generally support the fact that it is costly to lose one employee and then hire and train a replacement. A 2006 study by the Society for Human Resource Management indicated a per-employee turnover cost of $3,500 for an $8 per hour employee. Recruiting, hiring processes and training time with the new employee are common costs. Additionally, companies sometimes forget the opportunity costs that result from lower productivity with a new employee.

The longer you retain employees, the more experience and skills they develop if they are well managed. Having a higher average tenure rate on your staff means your sales, service, production and support performance should benefit. Your staff has a better working knowledge of your business and the customers you serve.

While customers may appreciate your product quality or prices, the personal interaction with sales and service reps still goes a long way in building customer loyalty. In a retail environment, having a stable staff makes customers more comfortable coming in to the store. Customers also benefit from knowledgeable employees who can answer their questions. Dealing with constant turnover can frustrate established customers who prefer the face and name recognition of a longtime employee.

Over the course of time, employees develop bonds with co-workers. Dealing with regular turnover affects those left behind and makes it more likely they will eventually leave as well. A high-morale culture, where employees have good chemistry, contributes to the effectiveness of your business. In manufacturing, employees who know each other well more easily collaborate on production and work through glitches.