High Employee Turnover? The Real Causes & Effects

January 26, 2022

effects of employee turnover

One of the biggest concerns for many companies is employee turnover. If the employee turnover rate in a company is high it can have some negative effects on the company and its employees. It can be difficult to stick with the culture and target of the company if there’s a constant need for hiring and training new employees. It’s easier to have a more engaged and focused workforce and maintain positivity in the workplace with a low turnover rate.

You might want to know if the employee turnover rate is high at your company, how it can affect the ways of the company. We will talk about that throughout this article. 

Staff turnover refers to the number of employees who leave a company and are needed to be replaced within a specific time period. The more employees leave within that time period, the higher the employee turnover rate of a company will be. If the turnover rate of a company is high, it affects the company a lot. The effects can be both negative and positive, but negative effects outweigh the positive ones by a lot. A high turnover rate affects company revenue, workplace morale, service or product quality, return on investment rate, the effectiveness of the workforce, and more. 

Let’s have a deeper look at the effects of employee turnover.

Company Revenue

Company revenue and profitability get directly affected by employee turnover. There are many different aspects of employee turnover such as lost sales and productivity, expenses of hiring new employees, training labor, etc. that contribute to the company revenue getting lower. The revenue impact can be different based on the employee’s wage, position, and the industry.

If the leaving employees are paid with a severance package, it works as an extra expense with no investment or return. Also, expenses regarding management labor costs in placing vacancy ads, reviewing the applications of new candidates, interviewing new candidates, and training them can add further to the loss of revenue. The revenue can also drop due to lost productivity or a lost clientele base.

Workplace Morale

If the turnover rate is high in a company, it can cause employee morale to below. The low morale can stem from the employees being overworked due to increased responsibilities and workloads, which have been caused by the lack of a trained or active workforce. Not only the old employees, but the new ones can also suffer from low morale as they might struggle to learn their new duties at work and various procedures. 

Employees might also feel demotivated and low when their colleagues that were close to them leave the workplace. It can lead to employee disengagement that affects the motivation and productivity of the workforce. It can cause them to make more mistakes at work. Also, when some employees plan to leave and the information gets to their fellow employees, it can create negativity around the workplace. The other employees can also start questioning themselves if they should leave too. 

If this type of environment continues to remain in the workplace, it can cause the company to face a more difficult time in keeping and attracting high-quality talent. 

Effectiveness of the Workforce

If the employees of a company often get replaced, especially the ones that hold top positions, or have the most experience, it can get the workforce to get distracted from their goals. Also, the remaining employees can get less productive and fail to reach the target due to excessive turnover. The effectiveness of different teams can get affected if key members of those teams leave, and need to be replaced. This is why high turnover is bad for a company.

The time that needs to be dedicated to the training and acclimation of new employees can slow down the growth and success of the company. 

Service or Product Quality

Lower quality of work can be one of the negative impacts of employee turnover. If the turnover rate is high, either the company keeps functioning with a lower number of employees, or with a portion of inexperienced employees that don’t have proper training. It can result in low quality work and low productivity. It is even more true for industries where comfort level and repetition play a bigger role than invention.

Experienced employees can work together to bring in great results. If a company loses any of those employees, it can affect the quality of work as well as the target of the company. No matter who you bring in, a new employee needs time to learn the standards and ways of the company, and achieve the experience and practice to have the same quality as the lost employees. In the meantime, you might lose customers due to them being dissatisfied with the quality of your service or product.

Return on Investment

Your return on investment can get lower if the company keeps losing customer referrals and return to customers due to your low-quality service or products. No matter how much you invest in your products, and in marketing to bring in new customers, you won’t be able to keep them for long if the service isn’t good due to a high employee turnover rate. This way a high turnover rate can affect your return on investment too.

More Employee Turnover

If the employee retention rate is low in a company, employees can even leave for reasons that have no relations with the workplace at all. They can just leave seeing other employees leave. When a large number of employees leave due to not being able to cope with the current situations at the workplace, or for other reasons, the existing ones start questioning their decision to stay. They have second thoughts about leaving the job and searching for new opportunities even if they are coping well at that given moment.

In the end, many of them actually end up leaving the company. Also, many employees feel like leaving the company when their close friends or colleagues leave the company due to their personal reasons. This is how employee turnover can further affect the turnover rate.

Things that Cause Employee Turnover

There are various factors that can cause employee turnover, or increase the turnover rate. While some turnovers are normal and expected like employees quitting for personal reasons, most of the causes of employee turnover are in control of the company. If there are negative triggers that occur at an unexpected rate, it causes huge employee turnover. There are various causes of the high employee turnover rate. Among the main reasons, there is a lack of opportunities for growth and development in a workplace or having a toxic workplace culture. 

Some of the common reasons for a high employee turnover rate that are seen in different workplaces are-

  • Employees getting overworked and feeling burnt out.
  • Employees get little to no recognition or feedback from the higher-ups.
  • Lack of opportunity for growth and career development for the employees.
  • A negative view of the management.
  • Employees not getting the chance to have a proper work-life balance.
  • If the workplace culture is toxic.
  • A natural progression in the career of the employees.
  • Internal transfer or promotion.
  • Facing a significant life or family event.
  • Employees get better offers from other companies.
  • Employee termination or involuntary departure.

Let’s have a deeper look at the most important and common reasons-

Getting Overworked

You might naturally ask your employees to take on further responsibilities than they already have when there is a huge pressure of projects, also economic pressure. Also, there are periods when your employees might want to work overtime themselves. But if they are asked to work for longer hours too much, it can leave them feeling frustrated, stressed, and overworked. It can ultimately result in employee turnover.

Lack of Career Development and Growth Opportunities

One of the most important factors to retain employees is to provide them with proper facilities and opportunities for their personal and professional growth and development. If employees feel that they are not going to gain anything by working in a particular workplace, they are likely to start looking for jobs at better companies. They’ll look for workplaces that will provide the chance for developing their skills, income, and status.

Lack of Recognition and Feedback

Lack of recognition and feedback from the higher-ups can be a huge factor in employee turnover. In order to retain your best talents, you must recognize them for their hard work, efforts, and good performance. Everyone likes to get recognized for their efforts, and your employees aren’t any different.

If they are recognized for their performance and work, they feel highly valued and appreciated. They get engaged with the workplace. As a result, employee retention rate increases and turnover rate decreases. Also, proper feedback helps them to refocus and manage their workload. So, make sure to provide your employees with proper recognition and feedback. Otherwise, they will feel disheartened and quit the company.

Toxic Workplace Culture

If the workplace culture is toxic in a company, it can cause rampant conflict, resulting in unmotivated and disengaged employees. Employees that will feel that they don’t fit into the company culture, or aren’t getting along with their colleagues might want to leave the company as soon as possible.

A Negative View of Management

Employee turnover rate can get driven up by a negative view and lack of trust in the management. If the employees don’t see the management positively and don’t trust them, it can lead to them leaving the workplace. If employees are micromanaged in every aspect, it can make them feel overmanaged and stifled. They might feel that they don’t have enough freedom to perform based on their expertise. It can highly increase employee turnover rates. 

Final Words

If you keep losing employees that have been in the company for a long time, in whom you invested a lot of time and effort so that they can learn their work and the ways of the company, it is a huge loss for the company. Also, losing big talents to your rivals can hurt your business big time. So, it’s important that you take effective measures to keep your employees happy, satisfied, and engaged so that they decide to stay at the company and the turnover rate decreases by a lot. You must make sure that you are working on the reasons your employees might want to leave your company, and look for better opportunities. This way you will be able to retain your best talents and experience your desired success and growth.

Incentivize, Recognize, Reward

Recognize increases staff productivity, provides company engagement insights, and helps retain top employees. Providing HR with an out-of-box solution since 2012.

Watch Video