Is Poor Leadership Costing You in Higher Turnover Rates? 5 Ways to Turn the Tide (Part 1)

Posted by Susan Cullen on 19 Nov 2018

Is Poor Leadership Costing You in Higher Turnover Rates? - NexaLearningCompanies typically want the same things their employees want: a stable work environment, a well-defined career path, and the opportunity to make a difference. And while it's normal for some employees to move on to new opportunities or to eventually retire, companies generally plan for this workforce attrition by following an established hiring plan. But what happens when new employees decide to leave soon after they're hired, and long-time employees start to pack their bags, too? This trend may point to a more serious issue: a high employee turnover rate. 

What is a high turnover rate, and what does it cost your business?

No company wants to find itself in this position: new hires work for six months and then jump ship; long-time employees start to shop their resumes around; and workers who could have pursued promotions instead leave for other opportunities. Before long, company morale starts to suffer, and a toxic culture begins to spread. Employers know that high turnover comes at a significant cost to their business. Not only must they spend time and money hiring new workers, they must also deal with a shrinking knowledge base as more experienced workers leave. But while it's easy to say that high turnover hurts business, how does one quantify the damage?

Various studies have pegged the cost of losing an employee at anywhere from 150% to 200% of an employee's salary. The impact can vary based on how senior the employee was, what type of role he or she played, and how difficult the person is to replace. In fact, the cost of losing and replacing an employee can be broken down into four key parts:

  • The cost of lost productivity while the role is unfilled
  • The cost of finding and hiring a new candidate
  • The cost of onboarding and training
  • The cost of learning and development

Together, these factors drive the overall cost of losing an employee. For example, a company may find that replacing a mid-level software engineer costs $200,000. And if five software engineers quit unexpectedly over the course of the year, then that company could theoretically lose $1 million. Even worse than the financial impact is the cultural and emotional toll these changes take on others. Employees will feel more stressed out at work, and productivity will suffer.

What role does poor leadership play in driving employees away?

Company leaders are ultimately responsible for the well-being of their workforce. This includes understanding and addressing areas where employees feel dissatisfied and working to improve the company culture so that employees feel invested in their work. For example, employees want to know that their work matters, and that they have a clear path for advancement. This is often overlooked when hiring and training entry-level workers. In fact, one survey of 1,200 entry-level workers found that less than 25% felt highly satisfied with their job, and more than 50% planned to leave within a year. Another major factor in workplace turnover is the miserable work environment created by some managers. A recent Gallup poll revealed the disturbing fact that one in two U.S. adults had left their job in order to get away from a toxic manager. As a company leader, it's imperative to set the standard for leadership qualities at all levels of management and ensure that managers maintain a healthy relationship with their teams.

Five ways to reverse high employee turnover rates for good. 

The good news is that high employee turnover is not necessarily a permanent situation. There are many ways to address the issue, and while none of them are instantaneous, all of them are worth the effort if it means keeping your employees happy at their jobs. 

1. Give managers the tools they need to be better leaders. 

Managers work closely with their team members every day, so negative tactics like bullying, micromanaging, and manipulative behavior can quickly lead to job dissatisfaction. These types of managers can create a toxic environment that saps productivity, stifles creativity, and drives employees away. However, with the right training and support, managers can develop the skills they need to become better managers and better team leaders. This, in turn, will help boost company morale and start to reduce employee turnover. 

2. Improve employee engagement.

Effective employee engagement can mean the difference between a vibrant workforce that drives your company's success, and a lackluster group of employees that just dragging themselves along. But employee engagement doesn't just happen by itself: it takes strong leaders who work to involve the entire company in their vision. By recognizing and applauding employee strengths, company leaders can build an environment where employees feel their work is valued. 

3. Provide a forum for honest feedback.

When employees don't trust their managers, it can become impossible for them to air their grievances and seek a resolution. That's why it's critical for company leaders to provide a trusted forum for honest feedback. In some cases, managers may have an 'open door' policy to encourage open communication from members of any team or department. Other times, the HR department may provide the best avenue for communication. In the end, it's up to company leaders to instill open communication as a company value.

4. Check in with new hires periodically.

New hires are one of the most vulnerable workforce groups because they are so focused on their new job functions that they may not see the big picture as far as company vision or career advancement opportunities. Help new hires stay grounded and connected by scheduling periodic check-ins to discuss their progress and answer any questions. You can also pair them with more senior team members who can act as mentors as they learn the ropes. 

5. Ask for feedback as part of the exit interview. 

Some employees will eventually leave the company, so when they do, take the opportunity to gather some valuable feedback. Exiting employees may have insight into dysfunctional team relationships, inadequate compensation structures, or other workplace cultural challenges. While you may not be able to hang onto this employee, you can use this knowledge to improve the workplace for your other employees. 

At NexaLearning, we know that great leadership can help boost company morale, improve employee engagement, and increase employee retention. That's why we offer the training and support your managers need to become strong, effective leaders. Contact us to learn more about how your team can benefit from our leadership development programs

Download our whitepaper "Techniques for Retaining and Engaging Your Workforce". If your organization is aware of the tremendous cost associated with turnover, and you realize you are losing some of your best people, it is important to assess the symptoms and address methods for enhancing employee retention. 

Download Whitepaper

Topics: Leadership Skills

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