The High Cost of Employee Turnover & 5 Ways You Can Stop It

by | Mar 9, 2023

“For businesses to thrive in today’s economy, finding and retaining the best employees is important,” says Zane Benefits. That’s because good employees are a company’s most valuable asset.

“When a company has a truly great employee, that employee carries value that simply cannot be replaced. They carry deep institutional knowledge of the organization. They have extensive product, systems, and process knowledge. They hold client relationships that have been built over many years. They carry tremendous experience on what has worked and what hasn’t worked for the company in the past. And great employees have camaraderie and influence with their coworkers, which when lost, has an impact on the corporate culture.”

Source: CCG Resources

According to Zane Benefits, “Frequent voluntary turnover has a negative impact on employee morale, productivity, and company revenue. Furthermore, “The ripple effect of losing a great employee is tremendous and it goes well beyond what is easily quantified,” says CCG Resources.

The High Cost of Employee Turnover

While some studies indicate that to replace a salaried employee costs businesses as much as 6 to 9 months’ salary on average, other research indicates that losing a salaried employee actually costs more than 2 times their annual salary. Even replacing an employee who only earns $10 per hour could wind up costing businesses nearly $3500.

The problem is, predicting the true cost of employee turnover often involves many intangible and untracked costs. Based on a Linkedin article, businesses should consider the following factors in calculating the real cost of losing an employee:

  • The advertising, interviewing, screening, and hiring costs of hiring a new employee
  • On-boarding costs associated with hiring a new employee, including training and management time
  • Loss of productivity (it can take up to 2 years for a new hire to reach the productivity of an existing person)
  • Reduced engagement resulting from other employees witnessing high turnover
  • Errors & decline in customer service (new employees typically take longer to accomplish tasks and are less proficient in problem- solving)
  • Cost of new hire training (over the course of 2-3 years, businesses will likely invest 10-20% or more of an employee’s salary training which can not be recovered)
  • Cultural consequences (when employees leave a company, others start questioning “why?”)

So, what can companies do to improve employee retention and keep their top talent from seeking out greener pastures?

Avoid “Horrible Bosses” Syndrome

In the black comedy, Horrible Bosses, three friends feel driven to murder their respective bosses who are abusive and overbearing. As Absurd as that may seem, the sad reality is that bad managers are a key factor in employee turnover. There’s even a saying that’s becoming quite common in conversations regarding employee retention: “People leave managers, not companies.”

In the Inc. article 5 Reasons Top Employees Leave Their Companies, the CEO of Gallup made the following statement:

“The single biggest decision you make in your job — bigger than all the rest — is who you name manager. When you name the wrong person manager, nothing fixes that bad decision. Not compensation, not benefits –nothing.”

Based on this profound statement, Inc. goes on to say, “Everything rises and falls on the strength of leaders.” This assertion is also reinforced by a Forbes article which states, “…the central relationship between manager and employee plays a critical role.”

Inc. suggests 5 things managers can do to keep their employees happy and engaged:

1. Recognize the Talents and Strengths of Valued Team Members

Employees are more than just a job description. Neglecting to recognize their unique skills, strengths, and achievements is a real motivation killer.

Managers should show appreciation and positive feedback for the contribution each employee makes to the organization, suggests Jeannie LeMesurier, Ph.D. “It’s important to recognize how an individual’s ideas, work and time contribute to the efficiency and success of the organization,” says Dr. LeMesurier.

Good leaders will develop close relationships with employees by finding out what their strengths are, and leveraging those talents to bring out the best in their team members and the company.

When managers strive to develop the strengths and natural talents of their employees, they are more than twice as likely to engage them.

2. Communicate More

Another common mistake that drives employee turnover is the lack of communication. Managers who hold regular meetings with their team members are almost three times as likely to engage them compared to managers who don’t hold regular meetings with their employees.

However, keep in mind that perfunctory work-related conversations between managers and employees won’t suffice. That’s because employees value communications with their managers that go beyond job details and include discussions about their lives outside of work.

According to Inc., research shows that employees who feel that their managers are invested in them as people are much more likely to to be engaged.

3. Share Information

Hoarding information may seem like a good idea to managers, but it will lead to employee turnover, especially when it’s done repeatedly and intentionally.

Leaders generally withhold information because it gives them a sense of power and control. Unfortunately, that control will squash trust. In fact, a 2005 study found that 27 U.S. companies recognized as being the “most transparent” beat the S&P 500 by 11.3%.

Managers who share information with their team members demonstrate vulnerability and cultivate an environment of mutual trust—a leadership game changer.

4. Don’t Micro-manage

“A negative atmosphere in the workplace is not only stressful but it’s also harmful on the morale, well-being and health of workers,” says Dr. LeMesurier, Ph.D, “It can decrease both employee retention as well as clients and customers retention.” One way negative environments are created in the workplace is through managers who micro-manage their employees.

Micro-management leads to a breakdown of trust. Employees will begin to view their manager as a despot who cares about only one thing—ensuring that the job gets done his way. When this happens, companies can expect to see a loss in productivity, as well as an increase in employee exits.

Managers can quell micro-managing behavior by putting the spotlight on their team members and focusing on their development. They can show that they truly value their employees by offering feedback and listening to imput in return. Lastly, managers can let employees express their creativity and give them the opportunity to make decisions on their own.

5. Really Listen to What Employees Have to Say

Popeye’s Louisiana Kitchen’s CEO, Cheryl Bachelder, once said:

“The biggest distinction of a leader who serves others versus themselves is the ability to listen. When you listen, you hear peoples’ objections, anxieties, and fears — and you also hear the solutions”.

“When new ideas go unsupported in the department,” says Dr. LeMesurier, “both creativity and connection decrease. With time, people disengage and risk of desertion increases.”

Managers who fail to listen to their team members foster an environment in which employees don’t feel cared for, respected, or valued. Furthermore, leaders who don’t invite the opinions of others—especially in the face of change—weaken the bonds of trust and decrease morale.

“Great leaders are present and in the moment,” says Inc., “They don’t need to talk over others to get their point across.” To be a good leader, managers need to not only allow others to give input to important initiatives, but they also need to put forth the effort to listen receptively.

Managers should evaluate their personal communication style and make changes that will invite open discussions, build relationships of trust, and boost morale.


In a Forbes article on how companies can retain their top talent, Former COO of GE, Lawrence Bossidy, stated:

“I am convinced that nothing we do is more important than hiring and developing people. At the end of the day you bet on people, not on strategies.”

According to Josh Bersin’s article on Linkedin, the most successful and enduring businesses share the following characteristics:

  • They possess a common sense of mission
  • They deeply respect their employees
  • They invest time, energy, and money into building a highly engaging environment
  • They carefully select the “right people” through lots of hard work
  • They take the time to make sure [employees] have development opportunities to move up the value curve

By appointing good leaders who embrace, embody, and inspire these values, organizations will be better equipped to recognize employees as important company assets, thereby improving engagement and increasing retention.

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