A high turnover rate can have a number of negative effects on a company, both direct and indirect. When you are unable to retain employees, it costs your company money and goodwill.

Not only do you have to spend resources on recruiting and training new employees, but you also lose out on the institutional knowledge and experience that departing employees take with them. Additionally, high turnover rates can create an environment of instability and uncertainty, which can lead to lower morale and productivity. Here are 12 ways that a high turnover rate can hurt your business.

1. It can make it difficult to retain top talent

If you have a high turnover rate, it can make it difficult to retain top talent. The best employees may not want to work for a constantly changing company, especially introverted managers and leaders who take a while to feel comfortable around new people. 

They may feel like they would be better off working somewhere else where they can have stability. As a result, your turnover rate can have a direct impact on your eNPS and employer branding. It affects your ability to attract and retain top talent.

2. It's expensive to train new employees constantly

High turnover can be costly for a company in several ways. One way is that it can be expensive to constantly train new employees. With new employees come new training costs, which can add up over time.

Not only do you have to pay for the training itself, but you also lose productivity while employees are in training. This can be a big financial hit for a company, especially if turnover is high.

3. It's hard to maintain quality control

When you have a high turnover rate, it can be difficult to maintain quality control. This makes sense because it takes time for new employees to learn the ropes and become experts in their field.

In the meantime, you may have to deal with more mistakes. This can be frustrating for customers and can negatively impact your bottom line.

4. It can damage your company's reputation

If you have a high turnover rate, it can damage your company’s reputation. That’s because potential customers may perceive your company as being unstable or unprofessional.

They may not want to do business with you if they think you’re constantly changing employees. This is understandable, and it means that your turnover rate can directly impact your bottom line.

5. It can lead to lower morale and employee burnout

High turnover can also lead to lower morale among your employees. That’s because they may feel like they’re constantly training new employees, which can be frustrating. In addition, they may feel like their jobs are constantly in flux. This can lead to anxiety and stress which will end up burning out your employees

Low morale and burnout are particularly dangerous because they can start to snowball. Resignations and quitting can quickly turn into more resignations and quitting, and so on. Soon, you may find yourself in the midst of a full-blown moral crisis. Here is an article that could help you avoid a snowball of resignations in your company. 

Great resignation leading to a high turnover rate

6. It can increase your labor costs

High turnover can also increase your labor costs. That’s because you may have to pay more in overtime or hire temporary workers to cover for employees who have quit.

In addition, you may incur higher costs for advertising and recruiting if you’re constantly hiring new employees. All of these factors can add up over time and impact your bottom line.

7. It can lead to a decline in customer service

If you have a high turnover rate, it can lead to a decline in customer service. New employees may not be familiar with your products or services and may not be able to provide the level of service that your customers expect.

What’s more, if you’re constantly changing employees, your customers may feel like they’re never speaking to the same person, which can be frustrating.

8. It can make it difficult to implement new initiatives

If you have a high turnover rate, it can make it difficult to implement new initiatives. New hires may not be familiar with your company’s culture or the way things are done. That is why you have to worry about cultural fit since the recruitment process

The end result can be that they may resist or be slow to adopt new initiatives. This can lead to frustration and delays in getting new initiatives off the ground.

9. It can increase your insurance costs

Insurance cost and turnover are linked because when an employee leaves, the employer is often responsible for their health insurance until they find a new job. If you have a high turnover rate, this can become expensive over time.

In addition, your insurance costs may go up if you’re constantly hiring new employees because they typically have higher rates of accidents and injuries.

10. It can make it difficult to plan for the future

High turnover can also make it difficult to plan for the future. If you don’t know who is going to be working for you 6 months from now, it can be difficult to make long-term plans.

As a result, your company may be less prepared for the future and more likely to react to changes instead of proactively planning for them.

This is why it is key to optimize the employee lifecycle. By improving each stage, it will directly reduce your turnover rate.

11. It can lead to a decline in productivity

High turnover almost invariably leads to major drops in productivity. This makes sense, given that every time new people come on board, it takes a while to get them fully productive. Also, when human capital leaves the organization, you are not only losing time and money in terms of having to stop work, do training, etc. but competency and skills have also left.

Furthermore, your managers may feel they are wasting their time in 1:1 meetings and performance reviews with employees who are constantly rotating. Managers may end up losing motivation on encouraging employee development through these meetings, affecting your entire team’s productivity.

12. It can damage your employer branding

A high turnover rate can also damage your employer branding. If you’re constantly hiring and firing employees, it can make your company look unstable and unprofessional.

Perhaps the biggest downside of this is that word may spread that your company is a difficult place to work, which can make it difficult to attract new employees.

You can stop employee turnover rate from increasing by having real-time data about your employees’ pulse, engagement and motivations. We will get deeper into this later on.

High turnover rates affects productivity

12 actions to reduce a high turnover rate

High turnover rates can have a significant impact on your business, both in terms of cost and productivity. If you’re concerned about turnover in your company, there are a few things you can do to help reduce it:

1. Hire for cultural fit. Employees who align with your internal and external goals tend to be more engaged and satisfied with their work. This is a way to ensure high levels of productivity on the way!

2. Create a good onboarding process that makes the new hire feel as part of the team from day cero. Here is a step by step to a good onboarding to help you get your hands on it. 

3. Offer a work-life balance for your employees. This should be a must in your company culture, not an extra benefit.

4. Make sure you’re offering competitive salaries and benefits. Designing an employee wellness program will help you boost morale and gain employee loyalty.

5. Encourage open and transparent communication. By doing so, your employees will feel heard and valued, leading towards a positive work environment.

6. Provide opportunities for employee development and growth. When employees feel they can develop their skills, and pursue new professional goals, they are more likely to stay and succeed with the company.

7. Get every manager onboard on having 1:1 meetings on a regular basis. It will help you get to know your employees needs and identify possible red flags in your company culture.

8. Create a feedback culture. It will help you foster closeness and trust among employees, and promote stronger, supportive and trusting relationships. Gathering feedback will also help you set the right engagement strategie for your team.

9. Measure organizational climate. Doing so will help you obtain visibility on blind spots, detect toxic behaviors, dissatisfaction and areas of improvement.

10. Send periodic eNPS and pulse surveys. Beside measuring organizational climate, knowing your eNPS and people’s pulse, you will be able to make better decisions thanks to having real time data. Preventing conflicts, burnouts and continuously improving your culture will now be a piece of cake!

11. Promote employee recognition among your team. 36% of employees claim they leave their jobs because of a lack of recognition. So, why not take the time to set an employee recognition process that encourages everyone to give positive feedback?

12. Create a great talent management process. The Human Resources department plays a major role in a company. They manage talent acquisition, onboarding, payroll, benefits for the team, employee engagement and so much more! You need to be sure you have the right digital tools, so your HR team can be agile in anticipating conflict and defining the right actions for a better company culture.

Using an employee engagement software will make it a piece of cake for your HR department to start with these 12 actions. It will be the perfect tool to build a culture that everyone wants to belong to! 

It is time to leave the high turnover rate in the past and say hello to a team that wants to stay and flourish with you.