The Effects of High Turnover in Companies

A company with high employee turnover has problems. The root causes of turnover must be discovered to reduce the number of employees leaving the organization and seeking employment elsewhere. If a company has worked hard to recruit good talent, the last thing it wants to do is continue to pay costs for recruiting, onboarding and training new people to replace others. The impact of staff turnover is significant; its effects are felt in productivity, revenues and remaining employee satisfaction.

Causes of Employment Turnover

Most business leaders boil turnover down to a basic concept: are employees happy at work or not. There are many reasons for unhappiness at work. A common reason for turnover lies with the pay and benefits. Employees need to make enough money to provide a decent lifestyle for themselves and their families. If a company is consistently paying below-standard rates, people might come to the company to get enough experience until they can transition to a company where there is a better pay and benefits package.

Another common reason is employee appreciation or the lack of appreciation. Employees want to feel appreciated and recognized for doing a good job. If management is oblivious to the good work employees do, people will seek a place where their efforts are not taken for granted.

Other causes of turnover are bosses with unrealistic expectations or poor leadership skills. If there is tension among co-workers, people will leave and seek a place where they can feel safe, appreciated and enjoy coming to work.

Effects of Labor Turnover

There are significant effects of high turnover. It costs a company money to deal with turnover. Every time they have to spend resources on recruiting, hiring and training a new employee, they are paying money or losing the opportunity to make more money. Gaps in staff mean there aren't the correct number of team members to do the job, this means productivity simply drops.

Even if productivity manages to remain somewhat constant, the turnover has now put the added burden on the other employees to fill the void. This isn't just while the position is vacant. The void doesn't completely dissipate until the new employee is at 100 percent capacity which takes time. This increases stress levels at work and can become a downward spiral with other great employees leaving because they can no longer handle the stress of doing everything themselves.

From a manager's perspective, turnover takes time away from building the company with strategic plans and marketing. Instead of putting time and resources into these growth areas, the manager is faced with dealing with keeping productivity up while he replaces people. If left unchecked, turnover becomes a never-ending problem that eventually can lead to company failure.

Higher Than Industry Standards

It is important to recognize that some industries and some job types have higher turnover rates than others. Construction companies often see workers come and go since the work is strenuous, has a degree of danger and can be inconsistent. Sales positions and customer service positions are also very common areas for high-turnover in any company. Salespeople often live by the sales they make; if they aren't successful they leave. Attrition is natural. Customer service representative has to deal with the negative demands of upset clients. This can lead to burnout and turnover.

Changing the Turnover Cycle

If a company is experiencing high turnover rates, it needs to find the root cause and make adjustments. If it is a compensation issue, business leaders must determine the industry standards and find a way to be competitive. If being equal in pay simply isn't possible, the business needs to consider ways to make job satisfaction higher, creating fun internal contests to recognize staff, allow them some freedoms at work such as flexible scheduling and train them to deal with the negatives. Inspiring a team approach leads to a more positive corporate culture, and that helps keep employees loyal to the company.