To thrive in business and stay ahead of your competitors, it’s important to hold on to your best talent.
That may not be happening in all businesses though.
If you’re facing a staff turnover problem in your business, you can hire a replacement and carry on. But what you may be overlooking is the negative effects of staff turnover on your business and its bottom-line.
Failing to retain your workers can impact everything from productivity and customer service to your company’s credibility in the markets you serve. That’s why it’s essential to assess your human resources habits before your business faces serious long-term problems.
To learn more, this article shares seven points demonstrating just some of the ways staff turnover can wreak havoc with your business.
1. Financial fallout
It’s hard to predict the true cost of replacing an employee but this example from Insync Surveys shows that to replace someone in an administrative position, it would cost 96% of their annual salary. This amount could be higher depending on the industry, position and wage.
Some of the costs you will face include agency fees and advertising costs, to promote your job vacancy. You may also incur labour costs for creating the job ad, reviewing applications, interviewing, as well as for onboarding and training. You may need to pay for overtime, whilst existing employees take on additional workload until you find a suitable replacement. You can also face significant costs from lost productivity.
2. Reduced productivity
An employee has departed from your business and you’re now left with a pile of work that needs completing. Whilst you can try to make do by splitting tasks up amongst your remaining team, heavy workloads can see certain tasks overlooked. Their own jobs may also get neglected and projects may stall.
Once you have hired a replacement, you may expect productivity levels to return to normal. But it will take time for your new hire to become fully effective in their new role. This can be frustrating when time really is money.
3. Lost customers
The best customer relationships are based on an intimate understanding of needs and requirements – a quality that is cultivated over time. Your staff members have likely built long-standing relationships with your customers.
When your employee leaves, your customers will have to deal with a new member of your team. They may face knowledge gaps or feel like they’re being passed from one employee to the next. This can cause inconsistencies and wasted time, resulting in fraught relationships. Customers may decide to take their business elsewhere or follow your previous employee, leaving a dent in your cash flow.
4. Retraining expenses
You may have invested $10,000 on your employee’s product knowledge or coding skills, but what happens to that expense when the staff member leaves your company?
An investment in a past employee’s professional development doesn’t automatically translate to your new hire. It will remain a cost that you will have to write-off, whilst re-investing again into your new hire.
5. Lost knowledge
When an employee leaves, you lose more than a member of your team. You also lose all their unique knowledge and experience which they have built up over time. This knowledge helped them to do their job effectively and enabled your business to move forward.
It can take years for a new employee to become as efficient as their predecessor. As a result, you may face unnecessary delays getting products and services to customers, whilst innovation and business growth may slow down. This can have a serious impact on your profits.
6. Bad reputation
In a world where you’re more likely to trust recommendations from your friends and family (85%) over advertising materials, it’s important to have a positive relationship with your customers. When customers are frustrated with their experiences because of high staff turnover, you risk not getting the positive feedback and recommendations you’ve been working so hard to achieve. This will have a serious impact on your future sales pipeline.
If your business gets a reputation for low staff retention rates, you may struggle to be seen as a desirable place to work. This could damage your chances of attracting the best quality employees.
7. Low staff morale
Whilst you might be focused on filling your vacancy, don’t forget to spare a thought for your existing employees. They’ve lost a colleague and are left to pick up their work. This extra workload can put additional pressure and stress on them.
Productivity could be further affected, and staff can be left feeling overworked and underappreciated. If this happens, more resignations could be to follow, leading to even higher, damaging costs.
Managing staff turnover in your business
With a record low in Australia for unemployment rate, the labour market is incredibly competitive. It’s even more important than ever to retain your top talent. To get started, keep these key steps in mind:
- Focus your attention on attracting and hiring the right people. Ensure new employees are properly welcomed into your team and a thorough onboarding process is carried out. This increases the chances of them staying around.
- Talk to staff and carry out exit interviews to understand where fundamental issues lie. You can then use this information to make some positive improvements. Top of the list may be providing competitive salaries, giving staff career progression opportunities, offering flexible working and providing better leadership.
- Instead of being reactive to problems, be proactive and identify the motivations behind your staff turnover. Not only will your employees be happier, but your bottom-line will be too.
If you need help finding the right staff for your business, get in touch with Robert Half.