The real cost of staff churn to your business

Mike Scott

Written by

Mike Scott

Filed under

Posted on
December 4, 2018

In the past, employees were steadfastly loyal for a lifetime. It was smooth sailing right out of school to retirement, but for better or worse things have changed.

And while there’s a case for job hopping and the gig economy, employers are suffering the price (and it’s not restricted to your wallet!). You know it’s costing your business big, but what is the real cost of staff churn?

High staff turnover costs you money

High staff turnover hits you right where it hurts, your bottom line. A study by the Society for Human Resources Management found that employers can spend up to 9 months of their employees’ salary trying to find and train their replacement.

Businesses without an internal recruitment function often face eye-watering fees, with agencies charging a sizeable percentage of the vacant roles annual salary. This can get especially pricey when hiring for senior or niche roles where they can charge 30%+. Even if you try to reduce costs by moving recruitment in-house the cost of placing job ads, time spent qualifying candidates and training resources eat heavily into your end of year profits.

Staff churn erodes productivity

The longer you occupy a job role, the more it becomes second nature. You know the systems, processes and people to get things done in the most efficient way possible. When you leave, you take that experience with you. New employees have to go through a bedding in period before they’re even close to matching the output of an experienced employee.

Kevin Oakes, the CEO for the Institute for Corporate Productivity, cited that it can be between 1 and 2 years before new employees are at their most productive.  This can be particularly damaging to companies with a large number of inexperienced staff. Not only is there a wait time to get through the necessary training, but the lack of mentors and role models could have a serious effect on the effectivity of newer staff.

Low morale is also closely linked to poor productivity. Read more about it in our blog Poor morale damages productivity (and profitability!)

High staff churn damages employee engagement

When employees leave the business in quick succession, an underlying feeling of ‘abandon ship’ isn’t uncommon amongst the rest of the team. Businesses that don’t manage the exit process correctly can create more trouble for themselves. Operating with transparency is important. Without it, businesses risk fueling gossip. This breeds discontent and can make your remaining workforce worry about job security. Businesses who experience low employee engagement can often find themselves periodically losing and hiring large swathes of employees.

Operating a revolving door approach to recruitment and retention, where new faces are constantly coming and going can make it difficult to create a positive work environment. In order to forge good working relationships, the team has to experience a degree of consistency. When a stream of people are constantly being replaced it makes employees feel disposable. This kind of negative feeling is not only damaging to productivity but is highly contagious and can lead to your best employees reaching for the job pages.

The value of a positive team dynamic should not be underestimated. Discover how to unite your team for better business results.

High staff turnover risks your reputation

We live in a world where everyone’s a critic. If you’re regularly losing unhappy staff you can be sure jilted employees won’t be singing your praises. Independent employer review sites like Glassdoor provide a platform for employees to leave frank anonymous reviews. This can affect how a prospective employee might feel about working in your company.

And negative chatter isn’t just reserved for online. People talk and so do other businesses. This can be particularly damaging if you work in a small area or in a niche industry. Once your reputation has been tarnished it can be difficult to attract and retain the top talent that will help your business grow.

Churn damages customer service

Business is all about relationships and employees are on the front line cultivating those relationships with your customers. If they do their jobs well those customers will return again and again. If they do their jobs really well, those customers might think twice about visiting your business once those relationships have been severed. They may even follow that employee to your competition.

Customers appreciate familiarity. Much like the risk to employee engagement, a stream of new faces is damaging to customer engagement. This is especially true if they’re invested in a relationship with an existing employee. Customers like knowing what to expect because consistency is comfortable. If a business is constantly shedding employees it can ring alarm bells. No one wants to do business with a company who treats their people badly.

The last word

The long and short of it is losing good employees damages your business. Knowing what’s driving them away empowers you to do something about it. 76% of employees who don’t feel valued are looking for other job opportunities. That’s potentially a large proportion of your workforce looking to go elsewhere. Simply put, businesses who show their employees how much they value them experience less churn and higher productivity. It pays to care!

And we care too! That’s why we’ve developed The One Question platform to help you understand how your employees really feel. This understanding is the first step to making positive changes in your business to create a welcoming and dynamic company culture. Sign up for a free demo today. We can help you reduce the high employee turnover that’s damaging your business.

Discover exactly how The One Question can help your business

Find out more

Catch up on this week's
most popular content