High employee turnover is problematic. Not only is it costly and time-consuming to find good workers to replace the ones you lost, but it also has other negative impacts.
Of course, not all employee turnover is bad because it’s perfectly OK, even desirable, to weed out employees who aren’t pulling their weight, are troublemakers, or just aren’t dependable or able to fulfill their job duties.
Losing this kind of employee is actually a good thing. Bad employees tend to bring down the morale of other employees, who resent the fact that the “bad” employee isn’t doing their share of the work or is otherwise causing problems.
Possible Causes for High Employee Turnover
While some employee turnover is expected, as you get rid of problem employees or older workers retire, high employee turnover is often an indicator that there is an underlying issue that needs to be addressed. A recent article in the Small Business Chronicle points out that one or more of the following three factors are typically behind high employee turnover:
1) Someone at your company, perhaps a human resource manager or maybe even you, is not doing a very good job of picking the right employees in the first place.
2) Something about your work environment is not motivating employees to stay.
3) Your pay and/or benefits are not competitive with other employers in your area or industry.
The True Costs of Employee Turnover
High turnover can cost you time and money to replace an employee. You’ll have to advertise the position, take candidates through the hiring process, and then train the new worker once hired. But the costs of employee turnover also seep into other aspects of your business.
Let’s Take a Look at Some of These:
• Productivity & Product Quality – When you lose a good employee, it affects productivity. Because you aren’t fully staffed, it is harder to get jobs done effectively and on time. What this often means is that orders are late or mistakes are made and product quality suffers. Even when new employees go to work, it will take some time until they perform as fast or efficiently as seasoned workers doing the same job. New workers are also more likely to make mistakes while they’re learning the right way to do things.
• Employee Morale – If you try to maintain productivity while short on staff, other workers have to pick up the slack. They not only have to do their own job, but have to carry the load of the employee or employees who have left. This can lower the morale of your existing employees, especially if they feel overworked, unappreciated or that they’re being taken advantage of, and if you’re not careful, they may start looking for work elsewhere themselves.
• Customer Service and Profit Margin – According to research, both profit margin and customer service can be negatively affected by high turnover, especially when you lose sales or customer service staff. That’s because the new, less experienced workers will not be as likely to provide the same level of customer service or sell high-value solutions to customers, at least not for a while.
• Lower Return on Investment for Marketing – Even if you keep spending the same on marketing, you will experience a loss if you lose return customers because of reduced customer service, missed deadlines or lower product quality or consistency. These can also hurt your reputation and scare off potential new customers.
What Can You Do to Lower Turnover Rates?
Some things that you can do to lower turnover rates and motivate employees to stay are:
• Try to put more time and effort into the hiring process so you get the best person for each job from the get-go.
• Likewise, make sure employees receive good training. This applies to both new and existing employees.
• Create a company culture that’s engaging and positive.
• Reward employees who do a good job through whatever means you have available. Rewards don’t have to be in the form of pay raises and bonuses; they can be recognition in your company newsletter; extra time off with pay; or just a pat on the back.
• Do your best to make sure your pay and benefits are competitive, especially with other employers in your area and industry.
