There are a few constants at every business: the best snacks in the break room always disappear first, Ted from accounting is late every Monday morning, and some employees are going to quit each year. Some turnover is completely natural. However, when turnover becomes a regular occurrence at your business, the costs can be astronomical. And when looking at voluntary turnover, specifically, we see a rising trend: there’s been an 88% increase in voluntary turnover rates since 2010 and an 8% increase since 2018. And the Great Resignation only made this worse.
However, there are things that business leaders can do to minimize the risks of excessive employee turnover rates. There are strategies that you can use to minimize people leaving.
What exactly does employee turnover cost your business? What are the hidden costs that aren’t as easy to calculate? And how can you avoid unnecessary turnover? Read on to learn everything you need to know about turnover.
Monetary Costs of Employee Turnover
It can be difficult to accurately calculate the cost of employee turnover because the cost depends on many factors, such as the employee’s tenure, production, and position. However, here are two frightening statistics to get started:
- Turnover costs American businesses roughly 1 trillion dollars each year.
- The average cost of turnover for a single employee is anywhere from one-half to two times that person’s salary.
To put a number on this, if an employee who makes $50,000 a year decides to quit, the process of hiring and training a replacement will cost you anywhere from $25,000 to $100,000—and that’s just for a single employee! If a manager making $100,000 decides to quit, the cost of replacing them is exponentially higher.
But we all know that the monetary costs of employee turnover are high and difficult to swallow. The hidden costs, however, are where the real issues come into play.
Hidden Costs of Employee Turnover
We’re defining hidden as any non-monetary cost that companies may or may not have considered before. Here are some of the costs you should be aware of, even if they don’t directly affect the bottom line.
Lower Morale and Higher Stress
When employees see friends and coworkers leaving, they’ll worry that something is wrong with the workplace. When good people leave, the rest of the employees will feel the void that is left over. In addition to the lower morale, the remaining employees will have to pick up the slack—the more influential the employee was who quit, the more work everyone else has to make up.
When employees leave, everyone is affected. The mood is lowered and the work is made more difficult, which all affects your business culture.
Even Higher Turnover
When someone quits, the rest of their team is led to consider the elephant in the office: why did they quit? Is the grass greener in another pasture? Are the best snacks always in stock at a different company? When employees start asking this question, it inevitably leads to them wondering what opportunities they might have outside your organization.
Turnover contagion is a real thing, and whether employees are following a beloved manager who quit or they’re reacting to a disliked policy change, when one person quits, others are more likely to follow.
This one is true regardless of who quits (or nearly regardless). Every employee at your business puts in work, and when they quit or are fired, that work isn’t being done. That gap between an employee leaving and a replacement being hired can be a huge dip in productivity. And even if other employees step in to fill that gap, they’ll be hard-pressed to reach the same level of productivity as before the employee left.
Plus, your hiring and HR teams will be forced to prioritize hiring a replacement rather than handling their other responsibilities.
Lost Knowledge and Skills
When an experienced employee decides to leave the company, you lose all of the intangibles that they brought to the table. Maybe they knew exactly when to call a certain client, or maybe they knew just how to capture your company’s voice in writing. Whatever the skill, a new employee, no matter how qualified, won’t have the same knowledge as the person who left.
Strategies to Avoid Employee Turnover
So excessive turnover is bad; bad for business, bad for morale, and bad for productivity. What employee retention strategies can you implement to keep your employees (and even attract new ones)? After all, 52% of employees who quit say their organization could have done something to prevent them from leaving. We’re going to assume you’re already offering competitive salaries and good benefits (if you’re not, do it!), so here are a few other ideas.
Build a Culture of Comfortable Communication
This may sound small, but frequent communication can make a huge difference. According to Gallup in the link above, over half of the exiting employees say that neither their managers or other leaders even spoke to them about their job satisfaction in the last three months. In three months(!) no one bothered to ask how they were doing with their job.
Managers need training to have frequent, meaningful conversations with their employees about their satisfaction and happiness at the company (and their lives outside their work). Performance reviews, one-on-ones, or just regular conversations are all great for this.
This is the foundational tip because with genuine communication comes clarity on how your employees are doing, what they’re not happy about, and what you can do to keep them around.
(Here some more evidence: when employees are engaged by their managers and they feel valued by the company, it takes more than a 20% pay raise to lure them away. When an employee’s manager doesn’t care or show their appreciation, it takes basically nothing for an employee to leave.)
Be Supportive, Understanding, and Appreciative
The number one reason employees quit during the Great Resignation of 2020-21 wasn’t low pay or a lack of benefits; it was a toxic work environment. Toxic can mean anything from disrespectful to unethical to cutthroat. Managers may be aloof, abusive, or uncaring. All of these environments lead to people quitting more than anything else.
Clear and consistent communication is a great way to combat this. Here are some more ideas to be more caring and appreciative:
- Employee recognition can be of great use. After all, recognition can lower turnover by 31%. (Pssst—Awardco has a nifty ROI calculator where you can see exactly how much recognition can do for you!)
- Flexibility in the workplace is an awesome trend. Show employees you value them by allowing them to work where they want, when they want, or how they want. Give them extra PTO for special occasions or let them take an hour off for a dentist appointment. Find a way to prioritize employee work/life balance in a way that’s healthy for them and the company.
The main theme here is to show your employees you care, even if it’s a little inconvenient for you. Employees are smart: they’ll see what you’re doing for them, and they’ll love you for it. And when employees feel important, valued, and cared for, they are much less likely to leave.
Provide Purposeful Work With Room to Grow
When employees feel that their work has a purpose, that it connects to the company’s overall goals and vision, they’ll feel more energized, motivated, and engaged—all great things for cutting down on turnover.
The next step up from that is to provide professional development and career growth opportunities. Stagnation—when employees feel stuck doing the same tasks day after day—leads to dissatisfied people looking for a new job. However, when you invest in career development for your employees, such as training, courses, or coaching, they’ll be able to broaden their skills, take on more responsibilities, and get that promotion they’ve been eyeing.
Lower Your Turnover Today
The main theme running through this article is that companies need to show their employees that they care. When employees feel valued, appreciated, cared for, and noticed, they are much less likely to quit. Through consistent communication, acts of appreciation, and purposeful work, your employees will stay engaged at your organization.
Ted may still be late every Monday, and the best snacks may still disappear within an hour of restocking them, but you’ll see your voluntary turnover rate shrink as you and your managers show genuine care for and appreciation of all your employees.