Impacts of High Turnover
The Negative Impacts of a High Turnover Rate
High turnover rates can negatively affect a company and its employees in many ways. With the constant need to hire and train new employees, it is easy to veer from true mission and vision of the organization. By retaining employees, companies can provide a higher caliber workforce that positively affects the bottom line. Businesses can lower turnover rates by providing adequate training, rewarding employees for a job well done and creating a company culture of trust.
Revenue
Employee turnover has a direct impact on company revenue and profitability. For example, according to the “Organization Science” magazine, the estimated cost of a lost employee earning $8 per hour at a retail chain store is $3,500 to $25,000. Aspects contributing to this include hiring expenses, training labor, lost sales and productivity. Obviously, the revenue impact can be much higher depending on the industry, employee’s position and wage. If a severance package is paid, this is an expense with no return on investment. Consider, also, management labor costs in placing classified ads, reviewing applications, interviewing and training. Although some companies utilize a job-placement service, this is still an expense. Additional expenses result from lost productivity or a lost customer base.
Low Workplace Morale
A high turnover rate can result in low employee moral. This may stem from overworked employees who have had increased workloads and responsibilities due to a lack of an active or trained workforce. New employees are not immune. They too may suffer from low morale as they struggle learning new job duties and procedures. Continuation of this type of work environment can result in the company having a more difficult time attracting and keeping high-quality talent.
Deteriorating Product or Service Quality
Lower productivity and sub-par quality of work can result from a disruption in daily operations due to an overall low number of employees or inexperienced employees without complete training. This is especially true in industries where repetition and comfort level play a larger role than innovation. For instance, new hotel clerks may not provide top-tier customer service, as they are unfamiliar with the organization’s policies. This could manifest in situations as trivial as providing refunds from broken snack dispensers. Although a seemingly small issue, there could be a sizable impact on customer satisfaction.
Reduction in Marketing Return on Investment
Even if marketing expenses remain consistent in efforts to attract new customers, the return on investment is lowered if the company is losing return customers and customer referrals due to inexperienced staff or lower-quality products. This increases the cost of a one-time customer, lowering marketing return on investment.
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