The real cost of losing an employee

If you want your company to grow and thrive in today's environment with so many variables (hybrid work, remote work, multicultural teams, hiring international workers, etc.), it's crucial to understand the importance of not only hiring, but also retaining staff. However, retention can be challenging, especially for small businesses and nonprofit-organizations. Two factors come into play here: competition with corporations with high budgets and the frequent lack of competent retention policies and strategies. 

Failure to understand the reasons why employees, especially new ones, leave a company can be disastrous for growth. The absence of strategies to engage employees reduces the chances of healthy communication between employer and employee. 

Companies often realize this mistake too late, but even more often, they do not understand how damaging the consequences of losing an employee can be during the adaptation period. This article will examine why employee turnover matters, how it can damage your organization's brand and reputation, and strategies to prevent it.

Why does employee turnover matter?

Anthony Klotz first used the term "The Great Resignation" in 2020, predicting mass layoffs in the United States due to the effects of the COVID-19 pandemic. Since then, the term has gained popularity; more than that, the prediction has started to come true. Apple noted in 2021 that 59% of employees worldwide were less satisfied with their company and working conditions, and 56% were dissatisfied with their work-life balance. This is especially noticeable in industries such as professional and business services, manufacturing and retail.

Moreover, 70% of senior managers are tired and burned and would like to leave their jobs, according to Deloitte. Such serious figures make one realize why turnover is a challenge in the modern corporate world. Such indicators of voluntary staff turnover negatively affect all processes in an organization.

Turnover affects the atmosphere of the team

One of the first changes you will notice when you lose an employee is a decrease in the morale of the remaining staff, and if turnover rates increase, the remaining employees may also consider leaving.

According to OfficeVibe research, 70% of employees say that having a friend at work is the most important element of a happy work environment. Moreover, 50% of employees who have a best friend at work reported that they feel more connected to their company.

If one employee leaves, the engagement of the remaining employees and their role in the company can be severely affected.

Turnover reduces team effectiveness

The loss of employees leads to a decrease in work productivity because you simply have less team to do the work. While the team makes up the difference and finds a specialist to replace them, the stress level of those employees who will be made to perform tasks that are not theirs will increase.

Secondly, the decrease in employee productivity also deals a financial blow to your organization. A report by HubSpot found that lost productivity can cost a company anywhere from 30% of the departing employee's income to 200%. No matter how you calculate the loss of productivity, the company will still lose money.

Turnover causes additional expenses

This is perhaps the biggest problem associated with employee turnover: the financial cost of attracting and training new employees to replace those who leave. Studies show that every time a company replaces an employee, it spends resources equivalent to nine months of its salary to find a new employee. For a manager earning $60,000 per year, this is $45,000 in recruitment and training costs.