The Hidden Costs of Staff Turnover

Employee turnover is more expensive than most people assume. There is the upfront cost of hiring a replacement, which could cost thousands of ringgit. Yet, there could also be additional indirect costs associated with staff turnover.

While some of these costs may immediately affect your company, others could have a more detrimental long-term impact.

These are five hidden costs to be aware of when employees leave your company, as well as strategies you can take to avoid or mitigate these losses.

1. Employee turnover can harm your company's reputation.

Every organisation has to deal with turnover. The way you manage it will significantly impact how workers, partners, and clients view it.

Employees can be stressed by frequent or poorly managed turnover, which can undermine relationships with clients and partners. Then, a chain reaction of unhappiness might accelerate turnover.

It might also tarnish your company's reputation. This can limit the number of applicants available for the roles you need to fill, lengthen the time it takes to fill vacancies, and raise your cost per hire.

It takes time for this worst-case scenario to materialise. You may avoid it by recognising and managing the additional costs associated with staff turnover.

2. You risk losing vital knowledge and relationships.

Every one of your employees acquires information that is distinct to them and beneficial to the organisation over time.

For instance, the sales department that loses a key member also loses the employee's extensive knowledge of:

• Customers' needs and demands

• Budgets

• Contact preferences

Customers may stop doing business with you if they feel that your team's service has declined after the employee leaves.

When a senior line worker leaves a manufacturing plant, you may lose knowledge of how the machinery functions when it requires maintenance or repairs. If there is a loss of knowledge, it could result in expensive production interruptions and last-minute repairs to broken equipment.

There are numerous steps you can take to avoid or reduce the impact of the hidden cost:

• Create and implement a succession plan for the department or team.

• Allow junior employees to shadow senior staff to learn from their nuanced expertise.

• Prioritise information sharing so that individuals are "cross-trained" in the roles of other team members.

• You can lessen the possibility of turnover-related info losses by fostering a knowledge-sharing culture and making plans for knowledge transfer.

3. Team productivity may suffer.

Usually, when one member of a team leaves, the team is effectively down two for days, weeks, or even months:

• The former employee

• The person in charge of identifying and training the replacement.

The management must concentrate on identifying the right person until the post is filled. Once a new employee has been hired, the manager or a high-performing team member must commit time to train the newly hired employee.

The need to concentrate on hiring and training can influence the entire team as they pick up the duties of the former employee and any tasks that the trainer no longer has time for. 

When teammates have too many tasks on their to-do checklists, their engagement and performance decline.

4. Employee development may get stalled.

When a team has a high turnover rate, another opportunity cost can arise: development.

Managers preoccupied with filling roles and training new hires may lack the time and resources to stay abreast with succession planning, cross-training, and employee development.

Even if managers have time to concentrate on acquiring and training current employees, members of the team may be too preoccupied with extra tasks to adhere to a development plan. This can eventually fuel a vicious cycle in which the team's performance and development lag, which increases turnover.

To prevent becoming trapped in this costly cycle, make resolving your turnover problem your highest priority. Trying to propel a team forward while there is continuous turnover is similar to sailing a leaking boat. You won't get far unless you plug the leak.

To "stop the leak," you must first identify the source of your turnover problem:

• How competitive is your pay?

• Do employees believe they are supported and engaged?

• Is it a matter of culture?

Gathering information from your employees is one efficient strategy to reduce turnover. Exit interviews for voluntary separations might help you discover why they departed. Climate surveys can reveal what your employees think about your company.

If you perform climate polls, you must be prepared to make adjustments based on the findings. Asking for employee feedback and failing to act on it might backfire and result in more turnover.

You should be able to concentrate more on staff development once you've taken initiatives to reduce turnover.

5. Team dynamics might be disrupted by turnover.

Even a single employee leaving might impact how your team works collectively. Putting a knowledge-sharing scheme in place and managing productivity and development expectations throughout hiring searches can help.

It's also critical to track how an available spot impacts team members individually. Top achievers are sometimes the hardest hit by turnover because they are driven by collaboration and shared goals.

They may become agitated or discouraged due to a teammate's leaving. Other employees may grumble about the additional work they are doing or the uncertainty about when they will fill the available position.

To combat shifts in your team's attitude, let your best performers know you value their efforts. And handle complainers so that their ranting doesn't spread a hostile culture that leads to increased turnover.

How to minimise the damage of employee turnover

A decline in team productivity may occur after a worker leaves. There are, however, things you may do to minimise and mitigate the damage.

1. Resist the impulse to place a person in an open position hastily.

One bad hire can be incredibly expensive, leading to increased turnover and productivity loss.

2. Decide how management will assist the department until a competent candidate is found.

If the position is merely tactical, it may be prudent to recruit a temp until the proper person is found. Otherwise, you may need to distribute the task among the team members.

3. Discuss with the team how to allocate those duties until you hire a new employee.

Make it clear that you intend to find someone who is a good fit for the position and the team, which may take some time.

You may decrease the feeling of overwhelm that your staff may feel by adjusting their expectations and asking for their input on allocating extra work.

Finally, you can also reduce the hidden cost of staff turnover and keep your staff on pace to meet their goals by setting expectations, keeping communication open, and supporting your team, even if you're a team member short.