Every industry’s turnover rates differ. Some are much higher than others for obvious reasons; work like fishing and businesses that are particularly susceptible to seasonal peaks and valleys will see much higher turnover rates than other businesses. You might also see particularly high turnover rates in minimum wage jobs, as employees find other companies who will pay them more. Appreciating the impact of high turnover, however, may cause you to change your overarching strategy.
We can start by looking at the more obvious impact of employee turnover; we’ll call these direct impacts. First, you have to go through all the paperwork that comes with an employee leaving; this can take a lot of hours, depending on the industry, and that means money out of your pocket. Then there are the costs associated with finding someone to fill their spot. You’ll have to invest resources in searching for, hiring, and training that new employee. An article by Investopedia goes into great detail about the average financial cost of hiring a new employee – it’s thousands of dollars each time. Reducing your employee turnover directly reduces those costs.
Then, there are the many indirect costs of high turnover. When employees at your company see new employees coming and going, it’s discouraging! They may wonder what conditions are causing the high turnover, or whether or not there are better opportunities out there. What’s more, if there are employees who are well-integrated in the company leaving, it may make your employees question whether or not there’s room for growth. They may also, quite simply, feel sad about losing friends in the workplace – it’s important to work with people you know, trust, and appreciate. The indirect costs go further still. When you lose an experienced employee, you lose productivity and knowledge.
Opting to promote employees is a good solution to many of these problems. Other employees will see that there is real opportunity for growth and development, and potential new hires will see the same. A high turnover rate will likewise discourage promising, potential hires from coming to work for you.
You can see, then, that the impacts of high employee turnover can affect all aspects of your business. You’re spending more to hire new people, you’re losing valuable knowledge and experience, and you’re creating a disincentive for newcomers. That means it’s best to reduce turnover in as many ways as you can. This often starts with an earnest heart-to-heart with your employees. Ask them what elements of their work could be improved to reduce turnover. Take their suggestions to heart, and implement whichever ones you can.
Here at Compass Accounting, we strive to help you understand every element of your business, and how adapting can help your bottom line. We’ll help you translate the indirect costs of turnover into real facts and figures, then help you understand what steps you could take to reduce turnover, and what those steps would cost you. We’re here to make things that seem vague and immaterial into things that are real and actionable.