Most companies understand that high staff turnover is undesirable. And despite some blips, overall turnover in the UK has largely been trending downwards over the past decade or so.
Some types of organisations, industries and sectors do have it worse than others, however, and in this guide, we’ll get to the bottom of why high turnover can cause companies to hemorrhage money - as well as people.
The cost of staff turnover
So, how much does turnover really cost companies? As you might expect, the answer can vary depending on the roles where this is experienced and a multitude of other contributing factors.
A 2014 report from Oxford Economics analysed turnover across five sectors and pegged the average cost at £30,614 - with the main financial loss resulting from reduced output until a new staff member is in place and fully trained up. On average, it was found new workers take 28 weeks to reach their optimum productivity level, costing companies upwards of £25,000.
Similarly, companies were found to spend nearly £5,500 on the logistical costs associated with replacing an employee, including recruitment agency fees, charges for advertising a vacancy and time lost on interviewing prospective candidates.
Other, less tangible, issues may also come into play within organisations that experience high turnover. Staff churn could be symptomatic of wider cultural issues and there’s a raft of evidence that a healthy culture can contribute to business success.
A 2016 study looked at 28 years’ of stock market data and found a strong link between employee satisfaction and long-term value. And in his book Pre-Suasion, author Robert Cialdini demonstrated that an unethical workplace can serve to undermine company success in several powerful ways, including:
Poor employee performance
Higher turnover rates
Greater levels of employee fraud
Losing staff also puts your remaining employees under more pressure. If people aren’t replaced, work must be distributed and if this isn’t addressed in the long-term, it can lead to high levels of stress.
In some organisations we’ve worked with, we’ve seen front-line staff badly affected by this. In one case, employees were essentially taking turns to be off sick in order to escape from ever-expanding workloads.
Some managers and business owners may be tempted to use this practice as a ‘crutch’, however, in our experience, they quickly come around once it’s made clear just how much they’re losing in managing high turnover and constantly replacing staff.
Combatting high turnover
Many businesses don’t try and address high turnover rates until they’ve become problematic. A certain amount of churn is expected and after all, not all turnover is necessarily bad. While no one wants to lose a valuable, high-performing staff member - departures from challenging staff who clash with your company’s culture and values can be welcome.
But over time, a trend towards persistently high employee churn rates can lead to significant cultural and operational issues that will affect business performance and profitability.
So what are the best ways to tackle troublesome turnover?
It’s not all about the money
A knee-jerk reaction to high turnover is to focus on the financials. After all, people work to live - right? But stumping up for pay rises, bonuses, or other improvements to remuneration might not be a silver bullet for ingrained cultural problems.
Reams of research has found that while important, pay isn’t top of the tables for driving employee engagement. LinkedIn’s 2015 study into how and why people change jobs found that only 34 per cent of employees left a role due to dissatisfaction with the financial package.
The desire for more challenging and exciting work was much more likely to provoke a job switch and the top motive for changing jobs was highlighted as career opportunities.
“People are leaving their jobs in search of better career opportunities. Yet recruiting leaders still have a hard time getting quality candidates to respond. Convince the best candidates by showing how your jobs & talent brand connect with people’s deepest career aspirations” advised the report.
Dan Ariely, Professor of Psychology and Behavioural Economics at Duke University, recorded similar findings in his investigations into job satisfaction. His team set up a range of experiments involving building Lego sculptures for varying amounts of remuneration.
While the pay structure remained the same, the elements that emulated job satisfaction were switched up and researchers measured how many sculptures would be built before participants gave up. In one group, the completed sculptures were put to one side and in another - they were disassembled in front of the people who’d built them.
The first group produced nearly double the number of sculptures as the latter and similar results were recorded in a range of other scenarios, leading Professor Ariely to conclude that ignoring people’s performance was nearly as bad as destroying the efforts in front of their eyes.
“Ignoring gets you a whole way out there. The good news is that by simply looking at something that somebody has done, scanning it and saying ‘Uh huh’ that seems to be quite sufficient to dramatically improve people's motivations. So the good news is that adding motivation doesn't seem to be so difficult. The bad news is that eliminating motivations seems to be incredibly easy, and if we don't think about it carefully, we might overdo it,” he said.
The reasons for high turnover can vary greatly from one organisation to the next, so there’s no one-size-fits-all solution to reducing it. Instead, we’d advise taking an objective look (or even getting outside help in assessing) your company’s culture.
Some of the most common areas for improvement that we’ve encountered include:
Many employees will gravitate to your organisation because of its reputation and if their expectations aren’t met - demoralisation can set in quickly. It’s hard to overstate the importance of leadership and management in retaining skilled staff and many employees won’t hesitate to flock to greener pastures if these are found lacking.
As covered in our post on the Peter Principle - many managers are thrust into the roles after succeeding in a non-managerial post. While they may be competent in performing their role, that’s no guarantee that they’ll be equally skilled in managing other staff in that position.
The answer to this lies in equipping managers with the skills they need to build fruitful and productive working relationships and while it may necessitate some up-front costs, should pay dividends in facilitating the smooth functioning of teams.
Nip problems in the bud
High turnover can often be symptomatic of bad hiring practices and while finding the right person for a role can be a perennial problem - there’s many steps you can take to improve your recruitment and stymie any potential culture or personality clashes before they become an issue.
Again, there’s an up-front cost of time and resource to consider, but by clearly setting out your hiring aims and the criteria by which you’ll judge the suitability of candidates - you can prevent having to repeat the exercise a few months down the line.
Improve your people focus
Offering benefits outside of the pay packet can jump-start your employee engagement. While what’s possible for you to offer will depend on the specifics of your business, common perks include:
- Remote working
- Holiday exchange schemes
- Medical cover
- Generous pension contributions.
More importantly, it’s crucial that you make sure your employees feel like they’re being heard. Encourage - and make time for - regular get-togethers between employees and managers to ensure they’re getting all the support and mentorship they need to blossom.
Offer training opportunities
There’s a common worry that if you invest in training staff, they might up sticks and join one of your competitors. This is a somewhat cynical tack to take, however, and we’d encourage you to look upon training as a long-term investment that’ll enable staff to take on more - and diverse - responsibilities.
Make sure your staff get a say in how they’re trained and in what areas they specialise. Promoting feelings of control and agency among your employees will help you to create a motivated and dynamic workforce that’s better-equipped to tackle challenges.
Ask your employees
If you’re committed to improving retention, there’s few better ways to get a handle on what’s important to your staff than to ask them directly.
Surveying new starters, long-term employees and those who are about to leave can help you glean invaluable insights on the driving forces behind why people stay - and why they go. Providing anonymity will yield better results, but be prepared to be confronted with honest assessments of what staff perceive to be the pros and cons of your organisation.
As always, we want to hear your thoughts. So if you’ve had any experiences - good or bad - around retention, engagement or turnover that you’d like to share - don’t hesitate to drop us a tweet or get in touch via LinkedIn.
And if you’re looking for bespoke advice on how to turn around your turnover problem, be sure to book an obligation-free chat with our workforce development team today: