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The True Cost of Employee Turnover – and What You Can Do About It 

Thirty-three percent – that’s how much of your employee’s annual salary you stand to lose, on average, due to turnover. Where does that come from?  

There are pre-hire costs including recruiter fees, decreased productivity from being short-staffed, and time taken away from valuable team members for interviewing. Then you add in the post-hire ramp up time for the new hire, their onboarding (which pulls away their trainer from their typical tasks), and any training costs… and you’re looking at a pretty penny. 

In fact, the cost of onboarding time alone is enough to make anyone feel a little uneasy. According to Forbes, 

It usually “takes 8-12 weeks to replace a knowledge worker, and then another month or two before the replacement gets to full productivity mode.” If the team member who left was bringing in $100,000 in revenue, that means your company will experience $25,000 less in income and profits for the next three months or so. 

That is a lot of revenue lost, and we have not even begun to touch on the turnover’s damage to morale, company culture, and team dynamics… It all adds up! 

Before we get too far ahead of ourselves, it is important to note that not all turnover is “bad” or avoidable. Sometimes our people move on from us for something truly better for them, and that is a wonderful thing! We want the best for our employees. Other times we may have thought we hired the next Michelangelo for our office mural, only to find out this latest hire’s experience with painting doesn’t go beyond Crayola fingerprinting with his 4-year-old. Yikes. Clearly, we missed something (more on that later).  

In both scenarios, it’s better for our organization (and that employee) that we part ways. However, there are other causes for turnover that point to growth opportunities for us as leaders, managers, and an organization.  

Leading Causes of Employee Turnover 

So, what are the top reasons for employee turnover? And what are some ways to decrease unwanted employee turnover in your organization? Let’s take a look. 

  1. Money
    • While not the only reason for turnover, money certainly is a common one. Unless you have worked to create a culture that truly is something special, or you have another desirable perk to offer your employees, most will jump ship for higher compensation.  
  2. Benefits/total compensation 
    • Sometimes benefits are enough to tip the scale in favor of another organization. A lower base salary is not inherently a deterrent if an organization is able to offer benefits such as healthcare, phone stipends, mileage reimbursement, gym membership, on-site childcare, and more. 
  3. Personal circumstances 
    • We all go through different seasons of life, some easier than others, that can influence turnover. Perhaps it’s adding a child to the family, the declined health of a loved one, a change in a partner’s work situation, or something else entirely. Whatever the case may be, sometimes the cause of turnover is entirely outside of your control as an employer. In those situations, it’s best to be as supportive of your employee as you can be during their transition period. Who knows, the support you show them during a time of change may be enough to bring them back to you in time. 
  4. Work-life balance 
    • Employees can only sustain 12-hour workdays for so long before burnout settles in. Take a look at the expectations you have of your employees. Are they realistic? Or are your performance expectations contributing to turnover due to the stress and pressure employees are facing? If another opportunity offers more flexibility and a sustainable pace compared to your organization, it will be appealing.  
  5. Growth 
    • Do your employees know what’s next for them in your organization? Or have they hit their ceiling? Top performers are especially drawn to increased opportunities for growth in their careers. If you cannot offer them that, someone else will! 
  6. Toxicity in the workplace 
    • An unhealthy workplace environment will certainly lead to a high turnover rate. Whether it’s underappreciation, bullying, harassment, or blatant discrimination – employees know they (and their colleagues) deserve better. They won’t stick around in a toxic environment. 
  7. Ineffective or uninvolved management 
    • You’ve likely heard the phrase that employees don’t leave their jobs, they leave their managers – and there’s truth to that. If an employee feels unheard, unseen, or unvalued by their manager it can lead to disengagement. A manager who isn’t committed to employees’ growth and wellbeing, whether personal or professional, will often end up with a demotivated and underperforming team. 
  8. Unrealistic job expectations  
    • The final cause of turnover is more likely to be overlooked, but it’s especially common in a candidate market – overselling the job. When employers desperately want to fill a role, it can be tempting to make a job out to be better than it really is. When employees’ expectations of a job and the realities of that job don’t align, frustration and resentment can kick in, leading them to look for employment elsewhere. 

Depending on the employee, the state of your organization, and a whole host of other factors, you may or may not want to – or even be able to – do something about the turnover you’re experiencing. Determining that will require a bit of self-reflection and an evaluation of just how “revolving” your door really is. In other words, are employees dropping like flies? Are you losing top performers left, and right? Or is the attrition you are experiencing all a healthy part of a growing and changing workplace? Only you can answer those questions. 

But if at the end of the day you are experiencing a bit more turnover than you would like, there are some things you can do about it.  

Ways to Mitigate Unwanted Employee Turnover 

If you want to reduce employee turnover in your organization, here are 7 simple ways to get started.  

  1. Re-evaluate your hiring process. 
    • Did you rush to make a hire? Over sell the position? Not dig deep enough to discern value-alignment? Whatever the case may be, you will want to start by reflecting on your current hiring process to ensure it is not contributing to the turnover in your organization.  
  2. Re-evaluate your culture. 
    • Is your culture something to be proud of? Do employees of all backgrounds feel safe being themselves at work? Get a pulse of how your employees really feel and see if there are areas for improvement. 
  3. What else do you have to offer? 
    • Get creative and think outside of the box! Maybe you cannot increase everyone’s salary, but you can offer additional parental leave, shares of company stock, or a company phone. Additionally, flexibility and autonomy are increasingly attractive to employees. While it may not be feasible to leave employees’ hours entirely up to them or have them work 100% remotely, would it be possible to have a couple of days a week where this flexibility is an option? 
  4. How can you increase variety in your employees’ days? 
    • While routine and structure are helpful for a productive work environment, monotony can be a stifling bore. How can you offer employees exposure to new things? Even if it’s as simple as more interdepartmental collaboration, a little variety can help maintain momentum and get creativity flowing.  
  5. Make rest as high of a priority as work. 
    • When we take time away from work and recharge, we come back with a fresh perspective, able to refocus on the task at hand. Consider making PTO “non-negotiable.” In other words, maybe you could go as far as requiring that your employees take a certain amount of time off every quarter or year. Or if that’s not for you, consider being more encouraging and supportive of employees taking time off, rather than viewing it as a nuisance. 
  6. Offer growth opportunities 
    • Get employees involved in their career planning and professional development. While promotions are a wonderful opportunity for employees to grow, find ways to offer growth opportunities beyond that. Things such as ongoing training, conferences, certifications, and tuition reimbursement will be attractive to top performers. 
  7. Support your managers. 
    • Your managers play an integral role in driving engagement, performance, and retention. If they are overwhelmed, overworked, and burnt out, chances are their direct reports will be too. Provide your managers with the resources, training, coaching, and mentorship they need to be their best. That is where a performance management system, like M4P, can be a game-changer for your team.  

At the end of the day, not all turnover is avoidable – or bad. Sometimes it’s in your organization’s best interest, or that employee’s best interest, to part ways. That’s okay! However, when it becomes more of a “revolving door,” where few – if any – employees are sticking around for more than a year or two, it might be time to re-evaluate. 

If you are feeling stuck or want to chat about other ways you can increase retention in your organization, we would love to connect! Hit the button below to schedule a meeting with a member of our team. 

Thirty-three percent – that’s how much of your employee’s annual salary you stand to lose, on average, due to turnover. Where does that come from?  

There are pre-hire costs including recruiter fees, decreased productivity from being short-staffed, and time taken away from valuable team members for interviewing. Then you add in the post-hire ramp up time for the new hire, their onboarding (which pulls away their trainer from their typical tasks), and any training costs… and you’re looking at a pretty penny. 

In fact, the cost of onboarding time alone is enough to make anyone feel a little uneasy. According to Forbes, 

It usually “takes 8-12 weeks to replace a knowledge worker, and then another month or two before the replacement gets to full productivity mode.” If the team member who left was bringing in $100,000 in revenue, that means your company will experience $25,000 less in income and profits for the next three months or so. 

That is a lot of revenue lost, and we have not even begun to touch on the turnover’s damage to morale, company culture, and team dynamics… It all adds up! 

Before we get too far ahead of ourselves, it is important to note that not all turnover is “bad” or avoidable. Sometimes our people move on from us for something truly better for them, and that is a wonderful thing! We want the best for our employees. Other times we may have thought we hired the next Michelangelo for our office mural, only to find out this latest hire’s experience with painting doesn’t go beyond Crayola fingerprinting with his 4-year-old. Yikes. Clearly, we missed something (more on that later).  

In both scenarios, it’s better for our organization (and that employee) that we part ways. However, there are other causes for turnover that point to growth opportunities for us as leaders, managers, and an organization.  

Leading Causes of Employee Turnover 

So, what are the top reasons for employee turnover? And what are some ways to decrease unwanted employee turnover in your organization? Let’s take a look. 

  1. Money
    • While not the only reason for turnover, money certainly is a common one. Unless you have worked to create a culture that truly is something special, or you have another desirable perk to offer your employees, most will jump ship for higher compensation.  
  2. Benefits/total compensation 
    • Sometimes benefits are enough to tip the scale in favor of another organization. A lower base salary is not inherently a deterrent if an organization is able to offer benefits such as healthcare, phone stipends, mileage reimbursement, gym membership, on-site childcare, and more. 
  3. Personal circumstances 
    • We all go through different seasons of life, some easier than others, that can influence turnover. Perhaps it’s adding a child to the family, the declined health of a loved one, a change in a partner’s work situation, or something else entirely. Whatever the case may be, sometimes the cause of turnover is entirely outside of your control as an employer. In those situations, it’s best to be as supportive of your employee as you can be during their transition period. Who knows, the support you show them during a time of change may be enough to bring them back to you in time. 
  4. Work-life balance 
    • Employees can only sustain 12-hour workdays for so long before burnout settles in. Take a look at the expectations you have of your employees. Are they realistic? Or are your performance expectations contributing to turnover due to the stress and pressure employees are facing? If another opportunity offers more flexibility and a sustainable pace compared to your organization, it will be appealing.  
  5. Growth 
    • Do your employees know what’s next for them in your organization? Or have they hit their ceiling? Top performers are especially drawn to increased opportunities for growth in their careers. If you cannot offer them that, someone else will! 
  6. Toxicity in the workplace 
    • An unhealthy workplace environment will certainly lead to a high turnover rate. Whether it’s underappreciation, bullying, harassment, or blatant discrimination – employees know they (and their colleagues) deserve better. They won’t stick around in a toxic environment. 
  7. Ineffective or uninvolved management 
    • You’ve likely heard the phrase that employees don’t leave their jobs, they leave their managers – and there’s truth to that. If an employee feels unheard, unseen, or unvalued by their manager it can lead to disengagement. A manager who isn’t committed to employees’ growth and wellbeing, whether personal or professional, will often end up with a demotivated and underperforming team. 
  8. Unrealistic job expectations  
    • The final cause of turnover is more likely to be overlooked, but it’s especially common in a candidate market – overselling the job. When employers desperately want to fill a role, it can be tempting to make a job out to be better than it really is. When employees’ expectations of a job and the realities of that job don’t align, frustration and resentment can kick in, leading them to look for employment elsewhere. 

Depending on the employee, the state of your organization, and a whole host of other factors, you may or may not want to – or even be able to – do something about the turnover you’re experiencing. Determining that will require a bit of self-reflection and an evaluation of just how “revolving” your door really is. In other words, are employees dropping like flies? Are you losing top performers left, and right? Or is the attrition you are experiencing all a healthy part of a growing and changing workplace? Only you can answer those questions. 

But if at the end of the day you are experiencing a bit more turnover than you would like, there are some things you can do about it.  

Ways to Mitigate Unwanted Employee Turnover 

If you want to reduce employee turnover in your organization, here are 7 simple ways to get started.  

  1. Re-evaluate your hiring process. 
    • Did you rush to make a hire? Over sell the position? Not dig deep enough to discern value-alignment? Whatever the case may be, you will want to start by reflecting on your current hiring process to ensure it is not contributing to the turnover in your organization.  
  2. Re-evaluate your culture. 
    • Is your culture something to be proud of? Do employees of all backgrounds feel safe being themselves at work? Get a pulse of how your employees really feel and see if there are areas for improvement. 
  3. What else do you have to offer? 
    • Get creative and think outside of the box! Maybe you cannot increase everyone’s salary, but you can offer additional parental leave, shares of company stock, or a company phone. Additionally, flexibility and autonomy are increasingly attractive to employees. While it may not be feasible to leave employees’ hours entirely up to them or have them work 100% remotely, would it be possible to have a couple of days a week where this flexibility is an option? 
  4. How can you increase variety in your employees’ days? 
    • While routine and structure are helpful for a productive work environment, monotony can be a stifling bore. How can you offer employees exposure to new things? Even if it’s as simple as more interdepartmental collaboration, a little variety can help maintain momentum and get creativity flowing.  
  5. Make rest as high of a priority as work. 
    • When we take time away from work and recharge, we come back with a fresh perspective, able to refocus on the task at hand. Consider making PTO “non-negotiable.” In other words, maybe you could go as far as requiring that your employees take a certain amount of time off every quarter or year. Or if that’s not for you, consider being more encouraging and supportive of employees taking time off, rather than viewing it as a nuisance. 
  6. Offer growth opportunities 
    • Get employees involved in their career planning and professional development. While promotions are a wonderful opportunity for employees to grow, find ways to offer growth opportunities beyond that. Things such as ongoing training, conferences, certifications, and tuition reimbursement will be attractive to top performers. 
  7. Support your managers. 
    • Your managers play an integral role in driving engagement, performance, and retention. If they are overwhelmed, overworked, and burnt out, chances are their direct reports will be too. Provide your managers with the resources, training, coaching, and mentorship they need to be their best. That is where a performance management system, like M4P, can be a game-changer for your team.  

At the end of the day, not all turnover is avoidable – or bad. Sometimes it’s in your organization’s best interest, or that employee’s best interest, to part ways. That’s okay! However, when it becomes more of a “revolving door,” where few – if any – employees are sticking around for more than a year or two, it might be time to re-evaluate. 

If you are feeling stuck or want to chat about other ways you can increase retention in your organization, we would love to connect! Hit the button below to schedule a meeting with a member of our team. 

Post Categories: Insights
Date Published: Apr 7, 2022
Post Categories: Insights
Date Published: Apr 7, 2022