How a High Turnover Rate Poisons Your Company Culture

Organizations with high turnover rates have higher costs and lower profitability. Learn how to avoid these pitfalls.

What is a High Turnover Rate

The turnover rate is a critical indicator of a business's overall profitability; in fact, it’s one of the most important metrics. Consider how much money it costs to recruit, hire, and train new workers—not to mention the time it takes for them to produce results and begin to contribute to the company's bottom line.

Turnover rate indicates how quickly you must replace workers in your organization. Employee turnover is a concern for many businesses as it can substantially impact financial performance. When employee turnover is high, employers have to spend more resources finding new people and orienting them. Alternatively, if turnover is low, employers benefit from having tenured loyal employees familiar with the company's methods and culture.

Turnover can occur for many reasons. The most common situations include relocation, health matters, and parental leave.Although, employees often leave businesses because they have become dissatisfied with their position or believe there are limited opportunities for advancement.

Ensure your company stays profitable by keeping a close eye on your turnover rate. If employees are leaving for greener pastures, it's clear there are systemic issues that need attention and remedy!

How High Turnover Rates Hurt Companies

High turnover will not only chew into your profits, but it can also seriously damage your reputation and ability to acquire new applicants and keep them. According to a study by Harvard Business Review, concerns about job security, dysfunctional teams, and poor leadership are the top three contributors to a negative reputation and high turnover rates.

Think reputation doesn't have an impact on your hiring ability?

According to HBR's survey of 1,003 full-time professionals, half of them would choose not to work for an organization with poor company culture or reputation—even if they received a substantial offer. Unemployment in the United States has fallen below 5%, and today's job market is more candidate-driven than in the previous decade. Even a 10% increase in pay would only entice 28% of workers surveyed to consider an offer from a company with a reputation of poor employment.

Still Skeptical? Check this out: 

A company with 10,000 employees with an estimated annual turnover rate of 16.4% could be spending as much as $7.6 million in additional wages to make up for a poor reputation. Furthermore, the 10% pay increase necessary to attract new candidates to take a job at such a company amounts to around $4,723 more per hire.

An established reputation is worth more than money. On the other hand, a terrible reputation is costly to the business. But, don’t worry, there are methods to address the source of your company's poor reputation and improve your ability to communicate the benefits of working for you.

Turnover Calculation, What Is A Good Turnover Rate?

Turnover rates vary depending on the sector. A high employee turnover rate indicates that many of your staff, more than anticipated or is considered average, departed the company.

In a perfect world, there would be no turnover. As a rule of thumb, companies with “good” turnover rates target 10%, but most fall within the range of 12% to 20%. As mentioned earlier, specific sectors have higher turnover rates due to the nature of some occupations.

Industries with the highest turnover rates include:

●     Food Services And Supermarkets

●     Entertainment

●     Social Services

●     Administrative And Support Services

●     Repair And Maintenance

●     Retail Automotive

●     Construction

You might examine the average turnover rates for comparable enterprises in your region. However, comparing your company’s turnover ratios to other businesses in your sector will provide better insight.

By comparing your turnover rates to others in your industry, you might be able to identify how efficiently these firms manage their hiring needs. Some businesses need more resources devoted to finding talent. It’s essential to see where your company fits and determine the best practices for preventing and managing employee turnover.

This section will go over how to calculate and evaluate your turnover.

The Formula

To calculate a turnover rate, divide the number of separations in a month by the average number of working employees and multiply that result by 100 to get the turnover percentage, like this:

(Number of Separations ÷ Average Number of Employees x 100 = Turnover Rate)

Separations are individuals who leave, get laid off, or retire due to disability or family obligations. For an accurate average, use the number of working employees per quarter.

Employee Turnover Rate Statistics

Typically, a high rate of turnover indicates 28% or more of your fresh recruits quit within the first 90 days of their employment. High turnover is often the result of bad company culture; of the 28% of churned employees, 34% report that an incident or bad experience drove them away.Again, this is a significant expense for businesses when they must continue recruitment, hiring, and training new people.

Here’s more on what the 28% had to say when asked what caused them to leave their position:

●     43% say their role was misrepresented.

●     34% report that a specific situation forced their resignation.

●     32% left due to poor company culture.

Additionally, some recruits were unsatisfied with their onboarding experience,

●     23% said they didn't understand protocol or understand their responsibilities.

●     21% thought the training was incomplete.

●     17% said they found the existing culture unpleasant, and a simple smile from another staff member would have influenced them to stay with the company.

Companies need to provide a supportive workplace that allows employees to thrive to keep these statistics from poisoning your productivity.

Determining  A Cause

So, you have a high turnover rate; what now? You must identify why employees are leaving your business.

If you are experiencing a high turnover rate due to an aging workforce, that is different from losing qualified recruits shortly after onboarding. Likewise, employees taking time off for family or medical reasons are not the same as those terminated due to poor performance.

The rate of your company's turnover may be the result of one situation or a combination of pain points. When examining the turnover rate, keep in mind all variables and decide whether you need to prepare for future retirements, improve training efforts, or find new ways to recruit employees.

Addressing The Issue

If you can determine why your staff are leaving, it's time to address the issue. It's vital to evaluate what you offer new team members when considering high turnover. If you aren't competitive in the market, exceptional talent will continue to migrate to companies that pay better and provide superior benefits. 

Consider your training and onboarding efforts if you're frequently firing people or people are leaving your company quickly and unhappy. Look to establish new initiatives for recruiting and training team members if this is the case. If you discover that inadequate training isn't the problem, investigate areas of your onboarding and interview processes to enhance the quality of your recruitment. Improved HR practices will help improve the employee experience, ultimately reducing turnover.

6 Causes of High Turnover Rates

1.  Bad Company Culture

No company intends to develop toxic work culture.However, employees often feel afraid to voice their opinions or don’t feel recognized for their hard work.

Here’s a startling stat from SHRM for perspective: 25% of U.S. employees despise their job, but why? Ask yourself:

●     Do people feel respected?

●     Are they able to complete their duties without being micromanaged?

●     Do they feel comfortable taking time off or sick days?

●     Do managers trust their staff enough to delegate responsibilities?

●     Is there a culture of inclusion in the workplace? 

Explore how sincerely and frequently leaders interact with staff to determine whether the behavior of management is encouraging high turnover. Efforts to change culture often start with good intentions. But course correction on a declining corporate culture can be challenging without a well-managed, engaged workforce. 

2.   Mismanaged Management

Poor compensation, lack of work-life balance, insufficient training, or job advancement possibilities are all reasons why employees leave their jobs. Managers are often responsible for these communications.

Wait, let's not throw anyone under the bus here. Toxic managers, who take credit for others' ideas, express favoritism, or even abuse their employees, aren’t what we are talking about. Companies should make an effort to divest those personalities. Managers that are merely poor at their jobs, on the other hand, are less evident. HR professionals must find a way to identify supervisors with under developed skills and then develop a solution, such as transitioning them to a new responsibility or offering assistance and training. 

Managers who anticipate their employees' needs and talents take a long-term view of their role and recognize themselves as career builders. Leaders with vision know and appreciate their people's particular skills and quirks, then figure out how to properly incorporate them into a cohesive strategy.

3.   Employee Engagement Needs Improvement

The most common reason employees seek employment elsewhere is a lack of engagement.

“Employee engagement is the emotional commitment the employee has to the organization and its goals.” (Forbes) 

An increase in disengaged employees often results in higher turnover rates. And, without a doubt, employee turnover is expensive—both the organization and the employee profit from this expenditure of discretionary effort and energy. Employees who are genuinely engaged are enthusiastic about their work, devoted to the company, and not looking for new opportunities.

4.   There’s a Generation Gap

Maybe our opinion of what a career implies has shifted for good. Regardless, millennials tend to job hop more often than generations before. With 60% of employees open to a new assignment, retention strategies might be complex.

A generation or two ago, the objective was to get a sustainable position and persist until retirement. Over the years, the meaning of "work" and "career" has altered—as have employee priorities. It's becoming more common for people to stay in a job for only a few years before moving on. 

What can you do to keep youthful employees? Engage them, listen to them and try to speak their language. Younger generations value education and experience. So if you're going to invest in their training, help them put their skills into practice, and ensure they continue to develop; it will foster employee loyalty and absolutely be appreciated.

5.   It’s A “Dead End Job”

Another cause of employee turnover is a lack of growth opportunities. Employee development is an essential component of talent management. Explore offering continuing education, tuition reimbursement, career development services, personal coaching, or leadership development programs.

How can you approach training differently and more effectively? How does your company offer its employees advancement? 

Ask yourself:

●     Is there a clear path for professional development and promotion? Is senior management behind our employee training plan?

●     Do we have a formal training and development program in place? Do we have the option of external learning and development to assist employees in acquiring new abilities?

●     Do we have established programs to mentor employees, and is there room to learn about other departments and operations?

●     Do we have a cohesive vision for the company and its employees?

6.  Remote Work And The COVID-19 Pandemic

Covid-19 has accelerated the need for brick and mortar businesses to enter the digital realm, and for some companies, it has become a life or death decision. During unprecedented, unpredictable times, employees now pursue remote work for a sense of financial security in an era of always impending lockdowns.

If you're not already a remote business or offering hybrid solutions, evaluate your business's necessities, find out how many competing companies offer similar positions remotely. If rival companies offer remote work, it's probably safe to assume that some of your workers are considering their options.

Virtual work isn't suitable for everyone or every job. Regardless, it's a significant draw for many people. In fact, it's one of the most appealing non-monetary perks. To establish a remote working policy at your company, you must first consider the various working styles of your employees and how you're going to operate.

Things to consider when transferring an onsite team to remote positions:

●     How will people communicate with one another?

●     What organizational and management techniques will you employ?

●     How will your leaders manage the team?

●     How will you conduct1-on-1 meetings with them to check in on their progress?

●     What can you do to maintain your team's cohesion?

●     How will you keep your employees engaged?

The good news is many companies have reported an increase in productivity and revenue as a result of going remote. And, thanks to modern software companies, there are various ways to keep your team connected and streamline operations.

Preventing Employee Turnover with Employee Engagement Software

Reducing turnover is not an impossible goal. There are simple adjustments that can make a substantial difference in retention. Once a business has data-driven insights into turnover patterns, it can develop solutions targeted at the particular issues driving good employees out the door.

Employee engagement software automates data collection and provides means to analyze and respond to it. Pinpoint segmentation means you’ll be able to determine issues with ultimate accuracy and get started on a solution. With EES, turnover rates can be broken down by year, quarter, voluntary and involuntary, business unit, department, territory, and demographic group. The latter can be further segmented by age, gender even ethnicity. These applications also improve the performance of management by allowing for more effective manager/employee interactions that will encourage career development and retention. 

Businesses committed to promoting a healthy culture should focus on the entire employee experience, from recruitment to onboarding to performance management and development throughout succession planning. Here’s what we know about how profitability ties to the employee experience and employee engagement software. (source

●     Teamwork and alignment with the organization are two factors that encourage employees to stay. Employees who are highly engaged are 87% less likely to depart their firms than those who are not.

●     Engagement has many advantages that go well beyond turnover. Companies with engaged workers outperform those without by 202%.

●     Employee engagement impacts financial objectives by allowing businesses to generate 2.5x more revenue.

Improving Employee Relations Reduces Job Abandonment

Employee turnover is costly and may have harmful consequences. A business's ability to succeed hinges upon a strong workforce that is highly committed towards their job responsibilities -but how do you get there?

It may be challenging without proper engagement strategies in place from day one. Improved internal communication can help improve engagement and ensure that your workforce feels connected and loyal to your company. High turnover and job abandonment result from a bad corporate culture, poor communication, and lack of support. Businesses can no longer afford to ignore employee engagement; it’s imperative for long-term company success and gaining a competitive edge in recruitment.