If you want your employees to be dedicated to your business, you have to be dedicated to your employees. Happy employees are like magic that makes a business thrive. 

Unfortunately, building a thriving business is challenging when you’re constantly replacing and re-training employees. High employee turnover hurts your business in many ways. Losing good employees is like driving in a race with one flat tire. It’s hard to keep up with the competition when the business isn’t running on all cylinders. It’s not ideal when you take the time and invest in mentoring your employees, only to lose them to your competitor.

You get to search for a new person and start from scratch to groom the new person into a great employee. It’s a really frustrating cycle that never gets anywhere, like a gerbil in a wheel.  It’s got to stop if your business is going to grow at all.

The hidden cost of employee turnover isn’t really hidden at all. Most of it you can’t pay for with a credit card or paycheck. The greatest costs of employee turnover are intangible but can really add up in a hurry. The damage can have a huge impact on your business. That is why making it worthwhile for your employees to hang around can go a long way towards growing your company.  Employees appreciate being appreciated by their employer. 

The Hidden Cost of Employee Turnover

It’s easy to calculate the cost of the hiring process. The true damage comes from the hidden cost of employee turnover. 

There are certain ‘hard’ costs that we are all familiar with when it comes to filling a job opening in your business.

  • Costs for the outgoing employee, exit interviews, payroll paperwork, and COBRA administration.  
  • Pay to temporary workers or increase the workload for your remaining team members.
  • Recruitment and hiring expenses, like advertising openings, screening, and testing applicants,  interviews and background screenings
  • On-boarding new hires and allotting time for induction and training
  • Paying out severance packages.

There are also the ‘intangible’ costs to consider, though. This is the real hidden cost of employee turnover. 

When you lose experienced members of your team, you have to consider:

  • The loss of expertise and knowledge on the best way to do the job.
  • Lost relationships with customers or vendors.
  • The disruptions in workflow and delays in meeting deadlines
  • Disruptive impact on other employees productivity
  • Uneasy communications and reduced morale, and 
  • Further sympathetic employee loss

Because of this, the real cost of employee turnover is hard to truly calculate, but the negative impact is hard to deny.  

5 Issues That Contribute Towards the True Cost of Employee Turnover and How to Overcome Them

By understanding these hidden costs of employee turnover, you can take steps to avoid or reduce it. Some of these costs are immediate and obvious, while others are more subtle and affect your business over the long term.

1. A High Employee Turnover Rate Can Damage Your Brand  

Every organization will experience normal employee turnover. It’s the way you manage that turnover that will determine how employees and your customers think of you. Your reputation as a business hinges on how you deal with your employees. 

If employee turnover is managed badly, it will most certainly have a bad effect on your relationships with your customers and your vendors. This can lead to further employee dissatisfaction.  This can lead to a domino effect that will make the hidden cost of employee turnover even higher.

If you find yourself in this situation, your business and your brand may appear out of favor or dysfunctional. If that happens it will take you longer to fill your vacancies and you might need to increase pay rates or employee benefits to find good candidates. This will increase your cost per hire and will also increase the cost of employee turnover.

It is always important to show your customers, partners, and employees how valuable they are to you. Instead of telling your employees that you value them, you should show them with things like great health benefits. Actions speak louder than words; they are also good as reducing employee turnover. Offering your employees affordable health benefits that they like can reduce employee turnover like crazy.

By making sure your employees are feeling appreciated, they will think twice before leaving your organization. They might even tell their friends what a great employer you are. This will help to bring down the hidden cost of employee turnover in your business.


2. Losing Experienced Employees Means Losing Knowledge and Sacrificing Relationships 

Every employee builds up knowledge about your business processes that is unique to them. The more they learn, the more valuable they are to the company.

If you lose a key member of your sales team, for example, you also lose information about:

  • Budgets 
  • Ordering protocols, and 
  • Customers’ needs and preferences.

Rebuilding this knowledge can contribute to the hidden cost of employee turnover. 

If your customer feels that their service has gotten worse after the loss of their favorite salesperson, you might lose their business along with your reputation. 

It is important to have a plan for how your team would need to adapt because of a missing member. You should have this plan for every team in your company. It is also important for new employees to learn so that they feel as though they are growing and valuable to the company as a whole.

By cross-training employees, you can reduce some of the knowledge and information losses of an employee departure. This will also cut down the hidden cost of employee turnover. 


3. High Employee Turnover Can Undermine Team Productivity

When a team loses a player, they are more than just one man down. You have actually lost a cog in the mechanism. You have one less team member working in getting the job done, and until that position is re-filled, the rest of your team has to pick up the slack for the missing person. This takes time away from doing their regular job.  

This hidden cost of employee turnover is a double-edged sword.  Your team becomes smaller while the workload for each team member becomes larger. This punishes your remaining loyal employees and puts more stress and pressure on everyone.  

Once a new hire is onboarded, at least one senior knowledgeable team member needs to spend time teaching the new employee. 

When this happens, the effectiveness of the team suffers even further, and productivity goes down the drain. You can only hope that the new employee works out, or you’ll need to repeat the process all over again. 

There are things you can do to reduce the impact of this, though. 

Take your time to find the right person to fill the vacancy. If you choose a poor replacement, you will be in the same position a few months later. 

Ask for your team’s input when dividing up the extra work. They will feel more in control and they will not be so overwhelmed. 


4. High Turnover Can Stall Employee Development 

Another hidden cost of employee turnover is the slowing down of employee development. 

Team leaders will spend lots of time training and retraining new staff. They won’t have time to keep up with cross-training or personal development on the job. It’s hard to distinguish your own work and productivity when you are doing someone else’s job too. 

Understaffed teams also won’t have time to embrace employer training opportunities, even if they are provided. 

If your team’s development lags, the team members might begin to feel frustrated and stagnant. Then they start looking at other more challenging opportunities.  This could reinforce the cycle of employee turnover, as more and more employees will feel dissatisfied. 


5. High Employee Turnover Disrupts Team Dynamics

Even one employee leaving impacts the way your team operates and works together. This is why cross-training and knowledge-sharing are important. 

It is essential that teams are comfortable working together and across different job descriptions. If the team dynamics are awkward, the team’s productivity can go down. If teams are constantly being changed or shuffled around, team dynamics will be affected. In this case, you will really feel the hidden cost of employee turnover.

Even top performers can often be affected by employee turnover if they’re motivated by teamwork and goal-driven.

The uncertainty of when a position will be filled will also affect the team and will challenge the team’s performance even more.


Ways to Avoid the Hidden Cost of Employee Turnover

To put a stop to these costly turnover loops, you must understand what’s causing your turnover problem.

An effective way to manage the hidden cost of employee turnover is to conduct exit interviews. This will help the organization understand why the employee left. You can also conduct 360  surveys, which will uncover what your current employees think of your company and their peers.

For these tactics to be effective, you have to be willing to actually implement changes based on your findings. Asking for employee input, but not acting on it, will backfire and also contribute towards employees feeling unappreciated, and the hidden cost of employee turnover.

If the employee turnover is costing your company, you should also ask yourself the following questions:

  • Are your employees’ compensation and benefits package competitive?
  • Do employees feel engaged, supported in the workplace, and appreciated?
  • Is there an issue with the vibe at the office?


Show Your Employees That You Care 

Companies can’t always afford to pay their employees what they would like, but there are other ways to improve an employee’s package.

Make sure your team knows you appreciate their work, and the time that they put into your business. A great way to dodge the hidden cost of employee turnover is to make sure your employees are feeling rewarded with great perks. This will make them think twice before leaving. 

Scoop Health can offer you several ways to affordably improve the health benefits you can offer your employees. We even have options that would allow your employees to add their family members to our medical cost sharing community.

Take a look at our Employer Solutions page for more ideas and information. Take real steps to help lessen the hidden cost of employee turnover so that you, your business, and your team, can grow together. 

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