Employee Turnover Is Costing Businesses Millions. Here’s What You Can Do About It

Employee Turnover Is Costing Businesses Millions. Here’s What You Can Do About It

Many businesses fear high employee turnover rates but accept them as fact rather than a number to be reduced.

This is especially true in blue collar industries. Jobs requiring a low skill threshold or a low level of commitment burn through employees at a significantly higher rate than those requiring a greater level of education or training.

The problem is, this causes businesses to fall into vicious cycles of constant hiring. Instead of implementing strategies to retain employees, they use excessive resources on hiring and training new people. And with estimates showing each new hire costs upwards of $4,000, this can quickly become a hefty allocation.

Over time, this cycle strains HR teams and leads to financial loss.

Think of it like a squirrel trying to fill a tree trunk with nuts without realizing there’s a hole at the bottom. In a similar way, a business that expects high turnover funnels resources into the process without comprehending the loss they’re incurring.

In order to fix the leak before addressing the entire issue, businesses should focus their efforts on recruitment, employee retention, and a strong feedback loop.

Here’s how to get started:

Understand the implications of high turnover.

There’s no doubt that operating while understaffed leads directly to business opportunity loss. And while there’s typically no singular cause for a high turnover rate, the strain of covering for a loss in labor has far-reaching implications for your business.

If you funnel through employees without a second thought, expect the following issues:

  • Increased Margin of Error
    When organizations attempt to force more work through already constrained production processes, attention to detail tends to suffer. As a result, error rates typically rise.
  • Inefficient Work Completion
    Staff shortages affect production capabilities, which impair your ability to meet production and project schedules.
  • Increased Stress
    As employees are stretched to meet job requirements, their stress levels rise, and they become incapable of maximizing their performance.
  • Customer Dissatisfaction
    Problems in delivery and quality inevitably result in decreased customer satisfaction, which may be compounded by poor service from overworked and overstressed staff.
  • Increased Personnel Costs
    As tension in the workplace rises, so does absenteeism, workers’ compensation claims, and the need for more management.
  • Employee Burnout
    Overworked employees only stay that way for so long. Even the best compensation packages may not make up for a decreased quality of life. And since the physical and psychological effects of burnout are estimated to cost between $125 to $190 billion per year, it can be a massive cost for businesses.
  • Inability to Capture New Opportunities
    A company hard-pressed to meet its current commitments isn’t likely to engage in new endeavors or partnerships. If you’re halting opportunities, you’re preventing growth.
  • Competitive Disadvantage
    Without the capacity to ensure exceptional service or to explore new business opportunities, lean organizations position themselves at a serious long-term disadvantage, compared to competitors who are well-staffed.

Fortunately, knowing how your turnover rate impacts business can help you better strategize solutions. By learning what to look for, and calculating your exact rate, you’ll have a starting point to optimize your retention efforts.

Shift your resources toward employee retention.

Despite research on the high costs of hiring, many businesses still believe it’s cheaper to recruit than to retain. But the loss of an employee is also a loss of training resources, company knowledge, time, and morale.

Today, most white collar businesses understand this. So, they put incredible effort into retention. You can probably name companies that provide meals and massages, offices with ping-pong tables. These workplaces know that they need to offer value beyond a paycheck for people to stay.

On the other hand, a number of blue-collar industries still feel it’s easier and less expensive to simply let employees leave. But, slowly, we’re starting to see a shift in blue collar industries. Lyft, for example, has begun to invest in car maintenance services and insurance for their drivers. The company has realized people need more than monetary incentives to stay on the road, so they’re leveraging services to improve retention.

It’s important to note: a smart retention strategy includes an improved recruitment process. You can’t have one without the other. Business may need to offer better hours, salary, or management to keep employees around — but that means the HR team should convey those benefits to new recruits.

A major part of this is talking to your employees about what they want and need.

Set up a strong feedback loop with your employees.

The best way to understand why an employee is leaving is to ask them directly — and have a system in place to capture their response.

White-collar industries do this with an exit or offboarding interview between HR and the employee. This allows the company to learn why someone is leaving and gather data around their retention, such as the duration of their employment and the company they’re moving onto.

Unfortunately, most blue collar industries don’t hold exit interviews. In some cases, it’s simply because they don’t allot time. In others, the HR team is so consumed with constant hiring, they lack the resources to hold an interview. It comes at too high of a cost.

But it’s critical to create infrastructure for exit interviews. Knowing the reason for an employee’s departure can influence future decisions and help reduce your turnover rate. Of course, this information is only obtained by asking the right questions.

  • What was your original intent when taking on your role?
  • How do you feel about the company?
  • Was there more the company could have provided you?
  • Are you leaving because you were unhappy?
  • What are you planning to pursue?

While it’s important to understand the reasons why employees leave, you should also consider why others stay. You can gather this information through regular check-ins and surveys, or through anonymous services like Glassdoor.

By listening to your employees — past or current — and incorporating their feedback into your recruitment and retention efforts, you can begin to reduce your turnover rate. When people feel their voices are heard in the workplace, they feel a stronger connection to it and are more inclined to stay.

No matter your company or industry, high turnover directly leads to increased loss for your business. You will see costs rise and your reputation drop. Luckily, there’s no better time to start turning your retention around than now.

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