All companies try to keep employee turnover low, but it's especially critical for smaller businesses. With a small staff, just one person leaving can have an outsized impact on both productivity and morale. As a manager, assess employee satisfaction and seek ways to minimize turnover to ensure the organization's long-term success.
Why is high employee turnover a significant problem for a business?
High turnover rates can significantly harm an organization's profit and operations. Reducing employee turnover starts with understanding how it can be problematic for a business. Here are some of the hardships a company might face due to high numbers of employees leaving.
Employee turnover is expensive for companies, which incur the costs of recruiting and training new employees. When an employee leaves, the company pays to advertise the position and to review and interview applicants. Once a candidate accepts an offer, they must go through onboarding, orientation, and training. The funding for these phases comes from the organizational budget and decreases funds available for other operational activities.
When an employee leaves, productivity gaps may exist while the position is open. Newly hired personnel usually require training, and they often exhibit low productivity at first while they learn the tasks associated with the job. A missing employee can increase a team's project completion time, adding strain and pressure on existing staff. Departments without enough workers might have to postpone planned projects until they're fully staffed.
Experienced employees can perform their jobs faster and more effectively than new employees, who must go through onboarding and training to become capable of doing the job. Also, the company loses some comprehensive knowledge of the production process with each experienced employee who leaves. New employees are still learning the process, and the old employees aren't there to oversee the work and offer guidance. This is another way turnover reduces a company's productivity.
Decrease in employee morale
High turnover often leads to decreased morale, which can be damaging to an organization, costing U.S. organizations billions of dollars annually. Employees who remain often feel overworked and undervalued, and diminished productivity due to the staff shortage can make it impossible for the business to meet its goals.
Tarnished company reputation
When high turnover rates decrease morale among existing employees, it can hurt the company's overall image. Exiting employees might share negative reviews on open forums, harming the public's perception of the company. Job candidates might look elsewhere for employment, and an unstable workforce can damage customer loyalty.
Organizations can develop a strong company culture and promote employee satisfaction to build staff loyalty and reduce the likelihood of high employee turnover rates. Below are six tactics to offset the most common reasons employees leave their jobs.
“Organizations can develop a strong company culture and promote employee satisfaction to build staff loyalty and reduce the likelihood of high employee turnover rates.”
Ensure the organization offers opportunities for advancement
Helping employees create a satisfying career path that meets their goals can bolster the company's retention rates. Nobody wants to feel stuck in a dead-end job, so employees may start looking for new opportunities if they don't see any chance to advance at their current company. That's especially common in small businesses, where there are often fewer opportunities for upward mobility.
Promote healthy work-life balance
Not only does helping employees achieve a healthy work-life balance benefit them, but it's also good for business. Encourage your employees to use their vacation days. You may also consider offering flexible schedules or arranging a more accommodating work-from-home policy.
Combat burnout and overworked staff
Employee burnout is all too common in workplaces where staff constantly feel challenged to "do more with less." You can prevent burnout—and even reverse it––by identifying the root causes and making reasonable changes to management practices. When turnover rates are high and departments are understaffed, employees may look elsewhere for a less stressful environment.
Focus on improving management practices
You've probably heard the saying, "Employees don't leave companies; they leave managers." But what defines a bad manager? One CareerBuilder study found that workers who were unsatisfied with their bosses noted the following problems: poor communication style, negative attitude toward personnel, unequal treatment of employees, and lack of recognition of employees' good work. While those may be familiar sources of tension, it's essential to identify potential issues at your company before you start losing employees. Survey your staff anonymously to determine where management could improve and take the necessary measures to fix those areas.
Create a positive working environment
Getting along with your boss is just as important as getting along with your employees. Gallup research shows a direct link between job satisfaction and how well people get along with their colleagues. On top of that, having friends at work has also been shown to improve an employee's performance. Unfortunately, not every workplace can maintain a consistently positive atmosphere. Learn the signs of a toxic work culture and, if you recognize them in your organization, take steps to eliminate the problem. Foster a positive work environment and offer employees respect so they know the organization values them.
Compensate employees with competitive benefits and rewarding perks
Low pay can contribute to high turnover rates. This is a tricky area for small businesses, many of which can't afford to match the pay rates bigger companies can offer. If you don't have the budget to give your employees a raise, look for competitive benefits and perks you can offer instead. Some popular options include transportation and tuition reimbursement, flexible telecommuting options, and extra PTO.
Learn more about how to reduce employee turnover:
A high turnover rate is often closely linked to low employee morale, so avoid these 10 phrases that kill employee morale.
Retain staff using upskilling strategies that help employees advance on their career paths.
Support employees' work-life balance by encouraging time off and developing a positive company culture.