With so much volatility in our society and economy over the past year and a half, your business may be losing a lot more employees than usual.

In these periods of high turnover, your business may suffer in terms of productivity and profitability. And if you have a chronically high turnover rate, you may be seeing a significant decline across your organization.

Thankfully, many causes of high turnover can be addressed with specific actions from company leadership and the human resources department.

While there are some social and economic forces that you simply won’t be able to overcome, there’s a lot you can do to mitigate the causes and impact of high turnover for your business.

In this article, we’ll cover what high turnover is, what causes it, and what you can start doing right now to reduce your turnover rate.

What is high turnover?

Turnover refers to the number of employees who leave your company and likely need to be replaced to keep the business functioning.

A high turnover rate is when more employees leave than what is expected for your industry. Nationally, the average employee turnover rate is about 3.5%, so anything above that may be considered a high turnover.

Some industries, though, are more volatile or more stable than others. If your field is one of these outliers, your benchmark for high turnover may be different.

bar chart of top 5 industries with highest turnover, includes transportation and utilities, business services, leisure and hospitality, and education and health services.

There are two different kinds of staff turnover:

  • Voluntary turnover is when an employee leaves a company of their own accord for personal or professional reasons.
  • Involuntary turnover is when an employee is terminated from their position due to company restructuring, poor job performance, or other business-related factors.

Turnover results from a few factors that can often be addressed through human resources initiatives. Performance issues, talent strategies, and employee experience improvement are all things that affect employee turnover that HR can help address.

Keep in mind that some employee turnover is expected. Social and economic forces may cause employees to leave their roles for reasons that are entirely out of your control. Plus, turnover has increased by 88% since 2010 due to the changing generation makeup of the workforce.

It’s also good to remember that turnover can bring fresh perspectives and new ideas into your workplace, improving outcomes across the company.

Why is high turnover bad for your company?

Any time an employee leaves your organization, there will be some level of disruption. Positions may remain unfilled, and work may pile up as you wait for a new hire.

major impacts of high turnover on the company

When your company is constantly in this kind of disrupted state, problems spread out to cause serious issues across your organization.

Here are just a few negative outcomes you may have to deal with when you have high turnover:

  • High cost to replace employees: When you lose an employee to turnover, you’ll need to spend time and resources recruiting and hiring their replacement. This process can take weeks or even months, depending on your industry and organization.

You’ll also have to devote resources to fill in for the lost employee. On average, this adds up to about $15,000 spent for every employee you replace.

average cost of replacing an employee is $15,000
  • Decreased productivity: With more time focused on hiring and training and less time focused on your primary job responsibilities, the productivity of your entire team can suffer. After all, you simply don’t have enough people to perform at full capacity.
  • Deteriorating work quality: When the same amount of work is expected with fewer people, the quality of that work often decreases.
  • Low employee morale: In periods of high turnover, the remaining employees are at risk of disengagement and low morale due to their increased workload and the uncertainty of their team staffing.
  • Poor profitability: It’s probably no surprise that these high-turnover-related problems pile up to impact your revenue, too. With a smaller team dealing with a higher workload, your profits will be the final casualty of your turnover problems.

It’s clear that high turnover impacts every area of a business.

Even if your employee turnover problems are confined to one team, the consequences can spread quickly throughout your organization if you don’t take steps to mitigate turnover.

5 causes of high turnover

So what exactly causes high turnover? It’s important to understand the root issues so that you are best positioned to address them for your team.

Keep in mind that while some causes of high turnover are due to larger economic forces or business decisions at a higher level of your organization, managers can prevent up to 75% of employee turnovers.

By clarifying the causes of turnover, you’ll be better equipped to build a strategy that effectively addresses the unique contributors to your turnover issues.

Let’s take a look at five of these causes:

1. Poor hiring and management practices

Nearly 38% of new hires leave their organization in the first year, with two-thirds of those departures taking place in the first six months after hire.

According to the 2020 Retention Report from Work Institutes, the top reasons for leaving a new position so early include:

  • Job requirements
  • A lack of work-life balance
  • Few opportunities for career development

If you’re seeing a lot of new employee turnover, take the time to review your hiring strategy and job descriptions.

You may find that a few changes to a job description or a more structured hiring process weeds out the people who are more likely to quit before you recoup your investment in their training.

2. Compensation issues

If your team comprises lots of entry-level minimum wage jobs, you might be seeing high turnover due to problems with compensation and benefits.

Unsurprisingly, unsatisfactory compensation is a top reason people look for a new job. Review your organization’s pay structure and identify opportunities for raises, promotions, and other career progression options.

It’s easy to fall into the trap of thinking that offering premium compensation or benefits is too expensive for your company. Constant employee turnover will prove to be even more expensive in the long run.

3. A changing workforce

As baby boomers retire and millennials and Gen Zers make up an increasing portion of the workforce, the needs and expectations of today’s workers will continue to change according to the new generation’s priorities.

For instance, 46% of millennials value flexibility and adaptability, with 36% planning to leave their job in the next two years, according to Deloitte.

Among Gen Z workers, the planned turnover is even higher, with 53% planning to leave their job in the next two years.

pie charts showing 36% of millennials and 53% of Gen Z, and 11% others plan to leave their job in the next two years

Ask your younger workforce what they hope for and expect from their jobs. Don’t be afraid to ask specific questions about turnover, such as what would cause them to leave and what would entice them to stay.

With this data, look for patterns that suggest ways your entire workforce can evolve as you look toward the future.  

4. Few opportunities for employee recognition

Everyone likes to feel acknowledged for their work. You want to be recognized for your contributions to the company.

When this is lacking in a workplace, turnover often increases. Employees that feel unappreciated or unimportant are quick to leave.

This problem extends to performance reviews as well as broader employee engagement too. If employees feel as though they and their work don’t matter, it’s easier for them to find a reason to leave.

5. Lack of work-life balance

Too much work and not enough time off is sure to send even your hardest-working employees running at some point.

If your organization expects employees to regularly work more than a typical 40-hour workweek, be ultra-responsive on weekends, and check email even on vacation, you may have a work-life balance problem.

Employees want to be seen as people rather than machines. Be sure you’re encouraging regular breaks and time off to allow the rest they surely need.

7 ways to reduce high turnover

Now that you better understand the root causes of turnover, it’s time to look at some actionable solutions you or your HR team can implement right now.

7 Ways to Reduce High Turnover

1. Expand your flexible work policy

Post-COVID, remote work expectations are rapidly increasing across industries and demographics. In fact, 40% of employees may be at risk of leaving their jobs if they’re required to return to the office full-time.

If the nature of your work allows, give workers as much flexibility as possible in the times and locations of their work. This way, you don’t lose valuable talent if an employee needs to relocate for family or economic reasons.

Flexible work opens up your talent pool, too. If you can accept applicants from a broader geographic area, you have a better chance of finding a good fit who will stay with your company long-term.

2. Develop a holistic talent strategy

Because poor hiring is a major cause of employee turnover, particularly in the first few months after hire, think purposefully about who you want to recruit and how you want to recruit them.

Companies with internal hiring strategies have a 41% longer employee tenure on average than those that don’t.

When developing an overall talent strategy, remember to think beyond recruiting and interviewing to onboarding and retention, too. Expand your initial training period to better equip new hires for their roles.

You’ll also want to start thinking about the employee experience from your very first point of contact with a prospective hire.

77% of companies focus on employee experience to increase worker retention, and that experience starts from the beginning of the hiring process.

3. Offer training and professional development opportunities

One great way to improve the employee experience and reduce staff turnover is to invest in training courses, mentoring, and more. This shows an interest in your employees and helps you develop workers who can fill future employment needs.

Training and other upskilling strategies are so effective that 41% of organizations say they increase employee engagement.

Try offering or funding courses like the High Output Management course from Pareto Labs. Or, look for conferences or industry-standard training that will enhance your employees’ skill sets.

4. Review compensation and benefits packages

In a competitive job market, employees may leave your company for better compensation, benefits, or perks at a competitor.

If you suspect this is a problem for your organization, start with a company-wide salary review to ensure everyone is being paid at or above the market rate for their work in your area.

Then, see if you can raise salary points, create or expand benefits options, and more to stay ahead of your competitors.

Don’t forget to look for small benefits and perks, like employee lunches or happy hours, which could be a cost-effective way to boost your employee engagement.

5. Create a formal employee recognition program

If you don’t have a widely-known way to recognize employees for their accomplishments, consider implementing a system to do so. This helps employees take pride in their work and motivates them to do their best in order to achieve recognition.

Your employee recognition program can be as simple as naming an employee of the month, or it can include awards, raises, bonuses, or other perks.

Be sure you recognize a wide range of people throughout the organization. And, you should empower managers to recognize their teams too.

6. Invest in management training for supervisors

Because poor management is such a huge contributor to employee turnover, invest specifically in helping managers be effective leaders.

Mentor managers to be effective at communication, address performance issues and other important management tasks. As a leader, be sure to model the behaviors you hope to see from your management team.

7. Plan for the future workforce

98% of executives are planning to redesign their workplace for the future workforce, populated by millennials and Gen Z.

The work expectations of these generations have already made waves across industries, but those changes are only accelerating. Listen to your younger workers and work with them to future-proof your workplace and reduce employee turnover now and in the future.

Start reducing your high turnover rate today

High turnover is usually caused by poor management, less-than-competitive compensation, and social and economic forces.

To combat employee turnover in your organization, review your talent strategy and employee engagement policies, as well as the other tips we’ve included here, to identify your specific causes of turnover. You can also learn from Pareto Labs’ courses to help address high turnover issues and develop important workplace skills.

Pareto Labs offers engaging on demand courses in business fundamentals. Built to help you elevate your game at work, our courses distill complex business topics — like how to read financial statements, how to manage people, or even how to value a business — into digestible lessons. No business background required. Our library of 200+ lessons will teach you exactly what you need to know to use it at work tomorrow. Sign up for a free trial today to start watching.