Most business leaders know that a merry-go-round staff base is often an exercise in cost control. However, companies are usually blind to the ways that high staff turnover can take a serious financial toll. Failing to retain your workers can impact everything from productivity and customer loyalty 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 hits the curb. Here are the four less-than-obvious turnover costs likely to wreak havoc with your bottom line.
There’s no denying that low employee retention rates can equal hefty recruitment costs, not to mention the risk that the new candidate just won’t be up to scratch. However, company leaders often underestimate the extent to which high staff turnover can spark serious financial fallout. An October 2012 survey by research firm Insync found that an average staff turnover rate of 18 per cent costs companies with over 100 employees nearly $1 million a year. That’s a serious incentive for fine-tuning your management strategies and investing in your most important resources.
So you’ve fired a staff member that made one too many mistakes and now you can’t work out why major tasks aren’t getting done? It’s likely that you’ve failed to account for the duties your former employee completed day by day. Even if you delegate responsibilities to remaining staff members, heavy workloads can see certain tasks overlooked. High staff turnover can also spell disaster for employee satisfaction and increase the chance that your most valuable workers will seek out new roles.
Your staff members often build long-standing relationships with the customers that pay your bills. But when a good employee leaves, they sometimes take this history with them. Remember that the best customer relationships are based on an intimate understanding of needs and requirements – a quality that is cultivated over time. If your loyal customers are constantly dealing with knowledge gaps and inexperience, they might take their business somewhere else.
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 jumps ship? An investment in a past employee’s professional development doesn’t automatically translate to your new hire. It’s also worth noting that your existing employees will have to spend precious energy showing your new recruit the ropes. This means you’re paying two salaries for your employees to complete one job.
High staff turnover = poor brand image
The damage from staff turnover isn’t just quantitative – it hurts your industry credibility as well. If your business gets a reputation for low retention rates, you won’t attract superstar recruits or build a reputation as a desirable place to work. Sadly, if your company suffers from credibility issues, it often has a ripple effect – existing workers battling flagging morale will consider seeking out greener pastures.
Ultimately, high staff turnover affects your business in more ways than one. That’s why recognising and rewarding your employees’ efforts can represent the smartest business move.