Why high staff turnover costs you more than you think

Staff turnover can be a huge problem for a company's bottom line. And the smaller your company is, the more critical it can be to your survival.

In the following article, we'll be discussing the cost of a high staff turnover rate every time you lose an employee into whom you've poured your time and resources. But first, let's look at what it is and the reasons they're likely leaving you in the first place. 

What is staff turnover?

Staff turnover or employee turnover is the amount of employees that leave the organisation in a period of time and, therefore, need replacements. A high staff turnover can bring many negative effects for a work environment.

What causes high staff turnover?

The cost of labour turnover may not seem as noticeable if you run a large business with lots of employees and massive revenue. But when you're lean and agile, it can call attention to shortcomings in a hurry. 

And since you made sure to ask the right interview questions for managers, you cannot be blamed every time you reenter the hiring process. However, a pattern of staff turnover signals many potential weaknesses. Here are some of the most common.

Lack of engagement

Not every employee is George Costanza. You know, the type that wants to sneak into a position, collect a paycheck unnoticed for a total number of years, and play Golf Solitaire all day long on their computers or smartphones?

Now that we're a largely results-driven economy, most employees realise they need to make an impact to prove themselves valuable. If you're not allowing them to do that, they figure that it's only a matter of time before you realise you don't need them.

When that feeling sets in, they try to leave you before you can leave them. Keeping employees engaged at work will go a long way to prevent high employee turnover.

Unappreciated employees

Employees whose efforts go unnoticed will seek out places that make them feel otherwise. It's human nature. To guard against staff turnover, it's a good idea to increase employee satisfaction and prove that you care.

You can do this in both small and big ways. A few suggestions: 

• Recognising special accomplishments or tasks they're responsible for in a company newsletter
• Contacting local media any time an employee gives back to the community
• Giving away a special award and/or Employee of the Month recognition
• Gift cards and bonuses
• Additional employee benefits
• Competitive employee compensation

Remember this. Showing you care does not necessarily have to cost anything. It can be as simple as a better company culture. 

Better opportunities

Have a place for your employees to go. No matter how comfortable they get in their current duties listed on their initial onboarding checklist, most will want to better themselves. If your company has nowhere for them to go, they'll seek another that does. Not surprisingly, staff turnover will only be a matter of time.

Toxic culture

Toxic people can be found everywhere. But toxic culture usually starts at the top with how you treat employees. Some of the actions that can lead to a toxic culture and high staff turnover:

• Promoting toxic people or placing them in positions where they can influence new-hires
• Being indecisive
• Allowing gossip and negativity
• Not providing adequate tools and resources for employees to do their jobs (aka respecting your employees' working time)
• Holding yourself to lower standards than you hold your employees
• Not recognising your talent for all they do
• Making people feel expendable
• Micromanagement

If you're doing any of these things, cut it out now. Refusal to do so will virtually guarantee high employee turnover rate.

Poor diversity

Lack of diversity in the workplace leads to uniformity of ideas and action. That can cause a pretty big disconnect between you and the community or customers that you serve.

Diversity is something employees prefer as well because they realise it's the 21st Century, and pretty much every single industry is a global one. Seek and provide opportunities to people from every possible background, and you'll be better equipped to compete at that level.

So what's the cost of high staff turnover? 

It's not possible to estimate the impact of high staff turnover without knowing the details of your business. But in this section, we'll do our best to help you get to the final employee turnover figure.

Let's continue. But a word of warning. This isn't for the faint of heart. 

1. Onboarding process

Calculating staff turnover costs begins with what it costs just to ready them for their first full day on the job. It can cost as much as $4,000 and take up to 52 days to onboard an employee.

It may then cost 6-9 times the employee's monthly salary to adequately train them for the position. Now add that to what you invested during the onboarding process.

2. Lost productivity

What is the revenue impact you expect each employee will have on your operations? If you haven't figured that out yet, here is a helpful tool for doing so.

Now turning to staff turnover costs, ask yourself how long the position has gone unfilled over the course of a year. For simplicity's sake, we'll say six months. 

If you expect a position to produce a positive revenue impact of $5,000 per month, then you're losing $30,000 a year strictly leaving the position unfilled. That doesn't include what it cost you to onboard and train the employee(s) who didn't work out.

3. Marketing the position

Set aside the previous costs for just a moment. Before an actual person can cost you money in onboarding, training, and lost revenue, you have to spend money and time attracting them to the position in the first place.

To do that, you probably resorted to tactics that weren't free. Add up the following expenses to the staff turnover account: 

• Advertisements on job listing sites
• Promotion through Facebook and other social media channels
• Radio or television spots
• The cost of producing marketing collateral for those advertisements

Losing an employee after all of that adds to the growing deficit. It also can frustrate your existing employees and lead to even greater staff turnover. 

4. Rebooting the process

Every time a position is vacated, the process starts all over again. In short, it's the higher staff turnover, the more you lose. 

Make sure you hold exit interviews with the employees leaving your business. Constructive feedbacks are always welcome to help you to improve internal processes and reduce staff turnover.

Employee retention is your weapon against staff turnover

If you don't want staff turnover to become a bigger problem, it's best to give your workers the HR analytics they need to focus on productivity and adding value. One important way of doing this is by auto-piloting their administrative tasks through HR system like kiwiHR .

Not there yet? No worries. Get started today with a free trial , and see what a tremendous difference HR analytics reports can make to your employees' satisfaction.

Simplifying HR processes is easier said than done. Know how we get it done by starting your kiwiHR free trial!