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Is Employee Turnover Killing Your Profits?

Employee turnover is a real and expensive concern for anyone doing business. Even the healthiest organizations can face challenges when crafting the ideal retention strategy.

According to Gallup's study, 51% of workers are actively searching for a new job at any given time. Further research shows that employee turnover can cost businesses 150% of their salary—and depending on the position, it could be as high as  200% by the time you account for hiring, onboarding, and training. Costs like this can hit a small business hard, especially if it happens frequently.

You can’t always change the duties that roles require, but there are ways to make the work environment more pleasant and satisfying for your employees—which will help retain good employees and save your organization money.

Costs for hiring replacements

Direct costs

Direct costs include fees for advertising and recruiters,time spent interviewing candidates, traveling, and pre-employment tests, and may even include relocation expenses. Once you’ve hired the ideal candidate, you then have onboarding and training costs. Those costs include any materials needed, hotel accommodations if your hire isn’t local, and the time and energy from your onboarding team. 

All these costs may seem insignificant, but if the turnover frequency is high, they’ll add up quickly. Slowly and quietly, they will kill your business.



Hidden costs

Anytime an employee resigns, a gap is left. To fill it, you often have to ask your best workers—already working at full capacity—to take on additional tasks. That can seriously damage the morale of your employees. Some may wonder if they need to jump ship, while others will feel unhappy with their workload, hurting their productivity. 

Businesses with a high employee turnover rate suffer from low work satisfaction, and decreased productivity and often report a high burnout rate. All this will slowly erode your business’s growth and profitability.

How to calculate employee turnover rate

Employee turnover rate, or attrition rate, is the percentage of employees who leave an organization within any given period (e.g., month, quarter, or year). It is a useful, quick figure to compare how your company is doing against the national average of 12% to 15% each year. Note: The average turnover rates can vary by season or industry.

To calculate the employee turnover rate, divide the number of employees who have left by the average number of employees, then multiply by 100. Typically, the employee turnover rate includes voluntary and involuntary employee loss, so include those who have left due to layoffs, termination, disability, retirement, and for other positions.

What drives high turnover rates?

Once you understand your turnover rate, dive deeper into what it means. Turnover impacts employers and employees in different but equally negative ways. Often these issues can be addressed if understood. Common reasons for high turnover include:

  • Too much work with too few employees
  • Lack of recognition
  • No work/life balance
  • Lack of job satisfaction or connection with a mission
  • Burnout

Most of us know workplaces with more cohesion and clarity around priorities are better places to spend 40+ hours weekly. Who wants to work for a company where the left hand never knows what the right hand is doing and every project is urgent or needs to be completed at the 11th hour? That type of work environment doesn’t create happy employees or a healthy work environment. These are employee pain points that can increase the rate of employee turnover in your business. If they are prevalent in your business, and you're not addressing them, expect to see a decline in your growth and profitability.

The good news is that most of the employee pain points can be addressed once you understand them. By working with your team and your executives, you can brainstorm solutions to low salaries, lack of recognition, burnout, and working extra hours. Alternatively, consider working with an expert to find solutions tailored to your organization.

How to foster a culture of retention

As we noted above, the employee experience is a large driver of why employees choose to leave. Conversely, it is also a reason they decide to stay. Finding a larger purpose is the key to building employee loyalty, which drives productivity, client happiness, and innovation. Companies that generate loyal employees reap the rewards. Employee loyalty leads to high employee retention. The retention rate is the opposite of the turnover rate. It is the percentage of employees who remained employed over a given period.

One of the best ways an organization can do this is by linking the work to the larger company vision and goals and continuously reinforcing and fostering that message.

How can you do that?

  • Clear and effective employee communication. When an organization lets employees know what's happening, employees feel more included and trusted.
  • Continuous training, investment, and professional development. When you invest in workers, they are more apt to invest in your company.
  • Expect greatness. When you raise the bar, employees will meet your expectations.

Loyalty to your business’s mission is difficult to attain. But mastering the employee experience, engagement, and retention also attracts new employees and clients.

Key takeaways

Providing a stimulating workplace environment and fostering happy, motivated, and empowered team members lowers employee turnover and improves performance.

Effectively recognizing and fostering a vision-based and employee-based culture will increase engagement, reduce turnover, and significantly impact your company’s bottom line.

Focused Energy is prepared to help your business thrive and have a proven process toward addressing culture and turnover issues. Whether you need help to address internal obstacles, change management, or determine your business's future, our experts are available for a  free consultation to help unearth anything holding your business back.


Contact Us

Headquartered in Denver, CO

6024 Youngfield Street, Arvada, CO 80004

(844) 413-6287


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