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The Impact of Employee Turnover

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As you move up in the business world, you can come to expect unwelcomed setbacks and challenges. One of the biggest problems you will probably face most often is when an employee decides to leave for one reason or another. There are two different kinds of turnover: voluntary and involuntary. Specific industries experience different fluctuations. The strength of the economy can dictate hiring and lay-off patterns, among other things. Regardless, businesses need to track and understand turnover. 

Voluntary turnover 

Voluntary turnover is when an employee leaves a job under their own violation. Perhaps for another job, retire, or transfer to another internal department. Voluntary turnover is typically more problematic because it comes as a surprise and can take more time and money to fill the position.

Involuntary turnover

  Involuntary turnover includes firing underperforming employees, lay-offs, or forced reductions in staff size. Involuntary turnover is still unfortunate but can lead to some benefits for the organization. For example, if you fire a bad employee and find a motivated, skilled candidate to fill their position, productivity and engagement from the entire department will increase. 

Calculate Turnover rates

To calculate your business turnover, determine the following:

  • The number of people you employed at the start of the period (A)
  • The number of terminations you had during that period (B) 

Use these numbers with the following formula to calculate your turnover:

B/A x 100 = Turnover Rate 

For example, imagine you own a small business that employs 80 people at the start of the 2nd quarter. During that time, 6 people quit. With the above formula, your turnover rate for the 2nd quarter was 7.5 percent. 

Downside of Turnover

Regardless of why an employee leaves your business, finding a suitable replacement is costly. SHRM estimates the average cost to replace a salaried employee is about six to nine months of that employee’s salary. Even if you lose an entry-level employee making $30,000 a year, finding their replacement may cost $15,000 to $20,000 in recruiting and training costs. 

Decreased productivity

Successful businesses employ the appropriate amount of people to meet the ideal cost of employment to work output ratio. This means when one employee leaves, the remaining workers are charged with picking up the slack. This takes time away from the employees’ responsibilities and creates a higher chance of things slipping through the cracks. By the time the employee is replaced, the new hire will need time to learn and adjust to the position. These setbacks can be a burden on company productivity and ultimately cost you a lot of money. 

Employee morale

With the former employee’s workload distributed among current employees, this can cause higher stress levels and decreases in morale. These employees could become discouraged or dissatisfied with their jobs and, if you’re not careful, one employee leaving could snowball into more. The longer it takes to find a replacement, the more of a chance there is that your employees will become less engaged. 

Reducing 

If your business is experiencing an unusually high amount of voluntary turnover, there are a few factors to consider to retain top-performing employees.

Invest in an Onboarding software 

Around 20% of employees leave within their first 45 days of employment. An integrated and customizable onboarding process can benefit your business in more ways than one. A structured onboarding process will help you nurture capable employees from day one and help them feel like a valuable part of your business. 

Do your employees have what they need to succeed? 

It’s frustrating to work in a position when you don’t have the tools you need to succeed. Make sure your employee has the tools and knowledge necessary to meet and surpass individual and department goals.

Review management

Unhappiness with management is an extensive reason employees leave. If you notice a specific department has a higher turnover rate or unsatisfied employees, look at the management to gauge what’s happening. 

While turnover is inevitable, there are ways you can reduce it. Starting with a great onboarding system can help dramatically. It's important to stay up to date with your departments and turnover numbers to see where your business can improve. 

 

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