Top Reasons for High Turnover Rates (And How to Lower Them)

Employee turnover rates is a huge issue for small and midsize businesses. They’re costly, tough on other workers, and hurt morale. Here’s what to do.


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high turnover rates are costly and can be a massive detriment to small businesses

Ask any HR Manager about their company’s greatest asset, and they are likely to give you the same answer. Talent. Whether you work for a small business or a multinational corporation, your business can’t run without employees. Unfortunately, many companies are facing the challenge of doing just that– as turnover rates rise employers are experiencing a record number of job vacancies without enough qualified candidates to fill them.

The vacant job problem is greater today than it has ever been, one of the main factors being high employee turnover rates. Many workers are unhappy with their jobs. In fact, 95% of HR leaders admit that employee burnout is a problem in their company. And since there are so many other businesses with positions to fill, an unhappy employee doesn’t have to stay in a job they hate.

42 million workers have left or will soon leave their jobs in 2018.

Take a look at this infographic from Maximillion, a UK-based events planning company. According to their research, 42 million workers have left or will soon leave their jobs in 2018. And many of these workers are top-level management or highly skilled technical employees. In fact, 50% of organizations have difficulty retaining their most valuable employees.

This high level of turnover rates cost US employers $600 billion dollars per year. That’s “Billion” with a “B.”

The reason companies lose so much money is that replacing employees is expensive. It can cost up to 200% of their annual salary to replace highly trained employees and executives. On top of that, it can take up to two years for a new employee to become as productive as an existing worker. 

Let’s take a look at two of the top reasons for high turnover rates, along with some steps you can take to lower them.

Career Development

Problem: Employees lack opportunities for career advancement.

Solution: Implement succession planning and offer professional development opportunities.

In the Maximillion infographic cited above, lack of career development opportunity was the most common reason given for changing careers. No one wants to stay in a dead end job. Employees want opportunities to both develop skills and move ahead in their careers. Unfortunately, for too many people, their only chance for a promotion or a raise is to change employers. In fact, a recent survey from the staffing agency Robert Half found that 64 percent of professionals (including 75 percent of millennials) believe that job-hopping can benefit their careers. And they’re right. A 2014 study found that people who stay in a job for more than two years decrease their lifetime earnings by 50 percent or more.

The solution, of course, is to give your employees the professional opportunities they crave. To do this, your company should focus on three things:

  • Making succession planning a regular part of your management process.
  • Offering employee professional development opportunities.
  • Increasing pay raises.

Succession planning is a strategy for identifying future leaders in your company. It’s important to protect the company in the event of a vacancy at the top levels. Who will take over when the people you currently have in leadership positions resign, retire, or leave the company for some other reason?

It’s also important for employee retention because it shows your staff that you are interested in advancing their careers.

People who stay with their employer can expect an annual pay raise of about 1 to 3 percent, but job hoppers often get a salary bump of 10 to 20 percent.

In addition, you should also offer your staff the chance to learn new skills. Employee learning and development programs show your team that you value their contributions and you are willing to contribute to their ongoing development.

And finally, if you are still giving pay raises that barely keep up with the rate of inflation, it’s time to re-think that. In the early 2000’s, the recession gave every employer a great excuse to freeze salaries or offer small annual salary increases. Studies show people who stay with their employer can expect an annual pay raise of about 1 to 3 percent, but job hoppers often get a salary bump of 10 to 20 percent. Why would anyone choose to stick with their current job when it pays a fraction of what another employer is offering?

If you want employees to stick around, you need to show them how your company can contribute to their career success, now and in the future.

Organizational Culture

Problem: Employees feel burnt out at work.

Solution: Adjust organizational structures and routines and promote a healthy work/life balance.

Employee burnout can cost companies big time. It contributes to low productivity, loss of top talent, and, of course, high turnover rates. Unfortunately, many employers treat it as an employee management issue, when in reality, burnout is a company culture problem.

A study in the Harvard Business Review found that in organizations with high burnout rates there are three factors that are often to blame:

  • Excessive collaboration
  • Weak time management
  • Overloading the most capable

Excessive collaboration means that there are too many decision-makers whose input must be sought before a decision can be made. It forces employees to sit through endless meetings and conference calls, or send reports through a long list of supervisors who must approve them before any action can happen. And weak time management means that employers often don’t measure the cost of the time wasted in these collaborations.

Furthermore, many companies have not hired enough talent to keep pace with their growth. They overestimate the amount of work that technology can take care of, and don’t bother to check in with staff to see if their assumptions are correct. Unfortunately, highly talented team members suffer the most because their knowledge is the most sought after. 

But overwork often contributes to lower productivity. When employees have to work long hours to complete their jobs, they actually get less done. And those long hours can also be damaging to employee morale. According to the Mental Health Foundation, employees who work long hours suffer from a host of mental health problems: 27 percent feel depressed, 34 percent experience anxiety, and 58 percent feel irritable.

The solution? Promote a corporate culture that encourages efficiency in work and a healthy work/life balance. Analyze the number of hours your workers put into completing their jobs. If it’s more than 40 per week, how can you reduce it? Can you cut out meetings? Streamline your review and approval process? Perhaps the bottom line is that you need to hire more staff. 

You can also offer a competitive PTO policy. Not only will this encourage your employees to take time away from work to decrease their stress levels, but it is an attractive benefit that your staff might not want to walk away from if they’re thinking about changing jobs.

High employee turnover rates are a huge problem that affects employers of every size. Regardless of the type of organization you run, you can’t operate without stellar employees. It’s no wonder that HR leaders overwhelmingly say that reducing turnover rates is one of their top priorities.

By addressing employee career development and organizational culture issues, your company can move toward retaining more of your top employees.


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