How Employee Turnover Impacts Your Business?

How Employee Turnover Impacts Your Business

There used to be a culture of gaining an entry-level position and rising through the ranks of a company until you reach the top. This mindset meant it was easy for companies to retain great employees, you just had to promote them from time to time and you had a loyal growing workforce. This system hasn’t worked in a while in corporate, mostly because the wrong people seem to get promoted ahead of the right ones, keeping hard workers in the lowest positions and the slackers moving up, which doesn’t just piss everyone off, it creates flawed systems where the people in leadership roles have no leadership ability or motivation to learn the needed skills. 

This is just another incentive for intelligent employees to leave corporate jobs and strike out on their own.

You may have broken out of the corporate rat race as a small business owner, but it won’t be long until you need a workforce of your own, even if it’s a micro one. The last thing you want to do is mirror corporate mistakes. What you will quickly realise is that the impact of employee turnover on your business can be crippling, especially when it means your time is spent picking up the pieces instead of working towards the goals in your strategic plan.

High staff turnover has big impacts on short and long-term business growth including:

  • Gaps in knowledge
  • Loss of skills
  • Remaining staff shouldering the workload
  • Change in workplace culture/vibe
  • Extra costs of hiring
  • Expense and time of training/induction
  • Lower efficiency during handover

Many businesses make the mistake of ignoring the reasons behind staff turnover and focusing on rehiring which is why we’ll look at the reasons staff leave as well as offer some tips to minimise resignations and keep the great staff you have in your business.

What Are The Biggest Contributors To High Staff Turnover?

High staff turnover can be caused by a number of factors. Understanding what the biggest contributors are means you can put business systems and practices in place to heal small hurts before they fester into big issues.

Poor management 

Employees will usually leave if they feel undervalued, unsupported, or micromanaged by company leaders. Failing to communicate effectively, provide clear expectations, or give constructive feedback leaves employees feeling disengaged and seeking employment elsewhere. Be sure to offer constructive criticism alongside positive feedback and never correct a staff member in front of their peers.

Limited opportunities for growth and advancement

You want your team on board with your business goals for sure, but remember they have goals of their own too. The best way to keep them with you is to ensure you are helping them reach their personal best. If an employee feels they have hit a ceiling in terms of their growth and career development, they will start looking around for better options.

Offer training and development, education and skill enhancement, performance reviews, and opportunities to advancement in line with their individual goals.

Hiring the wrong people

There needs to be a lot of research done to hire the right people. Some of this research will happen well before you list a vacancy. You want to know exactly what role is needed, what the skills and responsibilities are and how the role will fit into the team. This will help you attract the perfect people and also correctly narrow down your applicants. There are so many variables that are up to you to get right:

  • Wording on the job ad
  • Skills and certification required
  • Salary
  • Where the vacancy noticed is placed (newspaper, online, shop window, newsletter circulation, internal promotion, social media)
  • Ability and personality tests and interpretations
  • Assessing how well candidate values match your own and the company’s
  • Temperament
  • Candidates personal goals and objectives and how you can help them excel

Overworked and overloaded 

A temporary increase in workload is okay from time to time but there needs to be compensation for overtime. Overworked and overloaded team members burn out, suffer health issues, lose passion for their work and feel taken for granted. 

It’s your responsibility as a business leader to ensure you have the right number of team members to handle the workload and come up with solutions to ease the burden.

Good leadership is all about correct allocation, the right systems so there are no double-ups or confusion and the right number of skilled staff to get the job done well. That all comes back to providing a good work-life balance so as well as ensuring your team isn’t overworked, find ways to provide the flexibility they need to work around their other responsibilities and passions.

Toxic culture

As well as individual toxic behaviours such as bullying, passive-aggressiveness and cliques, managers can contribute to toxic workplaces by seeking competitiveness between individuals or teams, favouritism and putting personal beliefs and ideals ahead of business ones.

It is far easier to maintain a positive culture than to turn a toxic one around. Make sure you set an example, clearly state what is acceptable as well as apply professional consequences when the line is overstepped.

Significant family or life event

In some cases, staff will leave and it has nothing to do with you. Reasons can include:

  • Moving to a new location
  • Personal or family illness
  • Change in personal circumstances

When this happens, wish them well and offer support to start their next journey which might be more flexible work hours or options for how to provide their unused holiday payments.

It might also be beneficial to stay in touch and offer them an opportunity to return if their circumstances change again.

What Does Employee Turnover Cost Australian Businesses?

Different industries will see different costs associated with employee turnover depending on how easy it is to find suitable replacements. If you need to hire someone who works in a specialist field or requires specific qualifications, replacement times and training costs can skyrocket.

On average employee turnover cost Australian businesses almost $4 billion annually with recruitment costs alone costing almost $4 million. Breaking that down the cost to replace an employee is roughly 2.5 times what you pay their annual salary.

But it’s not just the financial costs, there is an emotional toll as well – and that’s wasted energy you could be putting to better use.

How Can I Reduce Employee Turnover?

Reducing staff turnover is a positive move for your business as it keeps your team together and helps you continue an upward drive to success.

Here are some tips you can use to help keep staff with:

Recruit the right staff at the right time

Too many business owners only recruit staff when things are getting out of hand. It’s too late at this point, they are entering a chaotic work zone and your other team members won’t have time to offer support or settle them in. Hire when you are expecting an increase, not after you get there. It takes about three months for them to get settled and operating at their best.

As well as hiring the right people and taking the time to match candidate personalities to your business, giving them time to settle in will help them feel secure and find their feet to help sustain a positive work culture.

Engage in two-way Communication

It’s not enough to tell your team what to do and leave them to it. They need to feel confident to talk with you about any concerns, questions or additional ideas they might have. Encourage them to share their ideas and be positive and take action when they do to show them their opinions are valid and important.

Ask for performance and management feedback as well as how they feel about their work. It helps to ask for suggestions they might have for improvements. If you encounter hesitation make the feedback anonymous.

As well as management, two-way communication needs to happen across teams and between team members, so make sure you encourage catch-ups and mingling.

Focus on well-being and staff satisfaction

Look for ways you can improve well-being and staff satisfaction to provide a welcoming, supportive and engaging workplace.

As well as you implementing activities, allow your team members and senior staff to add improvements and incentives.

  • Consider
  • Walking groups
  • Gym memberships or team sports
  • Lunch swaps
  • Provide training opportunities
  • Workplace talks
  • Comfortable breakout rooms

Some turnover is a natural part of business, and it can be a positive thing if someone has outgrown your business or is bringing a negative attitude. If you are worried about the number of staff exiting your business then you need to ask questions (of yourself and your team) to understand what’s going on and repair it. Best practice is to provide the kind of work environment that people love to be in. If they are staying with you, pat on the back, you are doing it right!

If you need leadership training or support to find the right systems and business direction Evolve to Grow has the team that can ask the right questions and offer suggestions that will turn your experience around. Book a free call and let’s get the conversation started…

How Employee Turnover Impacts Your Business – FAQs

Why is employee turnover important to a business?

Employee turnover is important to a business for several reasons. Firstly, it can have a significant impact on the company’s bottom line, as the cost of recruiting, hiring, and training new employees can be high. Secondly, high employee turnover can lead to a loss of knowledge and skills within the company, which can affect productivity and performance. Finally, high employee turnover can also impact employee morale and job satisfaction, leading to decreased motivation and engagement.

What is turnover rate and how does it affect a company?

Turnover rate is a metric used to measure the number of employees who leave a company over a specified period, usually a year. A high turnover rate can indicate that there are issues with employee retention, which can have a negative impact on the company’s bottom line, as well as on employee morale and productivity. It can also increase the workload for remaining employees, who may need to take on additional responsibilities to compensate for the loss of staff.

How does employee turnover affect customers?

Employee turnover can have a significant impact on customers, particularly in industries where customer service is critical. High turnover rates can lead to a lack of continuity and consistency in customer service, which can result in lower customer satisfaction and loyalty. Additionally, new employees may take time to get up to speed, which can lead to longer wait times, errors, and other issues that can negatively affect the customer experience.

Why is employee turnover a problem for a business?

Employee turnover is a problem for businesses for several reasons. Firstly, it can be costly, as the company needs to invest time and resources into recruiting, hiring, and training new employees. Secondly, high turnover rates can lead to a loss of knowledge and skills, which can impact productivity and performance. Thirdly, turnover can also impact employee morale and job satisfaction, leading to decreased motivation and engagement.

What are the positive effects of turnover?

While high employee turnover is generally seen as a negative for businesses, there are some positive effects that can come from turnover. For example, turnover can bring fresh perspectives and new ideas to a company, which can lead to innovation and growth. Additionally, turnover can provide opportunities for existing employees to take on new responsibilities and develop new skills, which can increase their job satisfaction and engagement. Finally, turnover can also help companies identify and address issues that may be causing employees to leave, leading to improvements in retention over time.