7 ways employee attrition rate affects business advancement
The success of any business organization largely depends on its employees’ uninterrupted contributions in steering the organization forward. Needless to say, as an employer, when you invest in new talents, you want them to stay with you for the longest and add value to your business. However, contrary to that, large employee turnover rates have become a big concern for employers all across the globe. This explains why employers are always on the lookout for effective retention strategies to navigate the losses inflicted by high turnover rates.
In fact, employee attrition is one of the most sensitive issues business organizations are concerned about. According to the U.S. Bureau of Labor Statistics, 4 million Americans quit their jobs in July 2021. To elucidate, attrition rates are particularly high among millennial and Gen Z employees who are often referred to as the ‘job hopping’ generations. While millennials are emerging as the largest working generation, high attrition rates among them concern most organizations.
Having said that, such scenarios call upon business organizations to take steadfast steps to address the issue of employee attrition. After all, high employee attrition rates can shut down a business given the massive costs of employee turnover. But, how catastrophic are they? This is an important question that companies and HR professionals should ask. This blog finds effective answers to this question and highlights the major downsides of high employee attrition.
7 ways high employee attrition hinder business performance
1. Destroys your company or brand’s reputation
Did you know that one of the most important things that candidates check before applying to your organization is your company’s reputation? Why so? Poor reputation acts as a red flag that tells them that there is something wrong with your company. If it hadn’t been so, why would you have a poor reputation?
Further, according to research, 50% of candidates say they wouldn’t work for a company with a bad reputation even if they get paid higher. Given that, it is extremely important for your organization to have a good reputation and your employee retention rate is a key performance indicator of your company’s stature. Now, think of what happens to your company’s reputation if you have a high attrition rate? Also, think of what your former employees will say about your company to others? A high attrition rate indicates that your employees have a lot of issues with your organization. Consequently, they’ll only spread a bad word about your company.
This will pose a huge risk to your company’s reputation and make it difficult for you to find the right replacements. Moreover, if you have a high turnover rate, you are also more likely to suffer from negative employee reviews. Today, candidates check the reviews of a company before applying for a job position. According to research, 61% of Glassdoor users seek company reviews and ratings before making a decision to apply for a job. Again, high employee attrition can damage your company’s reputation and make it challenging for you to find the right replacements.
2. Regular disruptions in workflow management
This is one of the biggest disadvantages of high employee attrition. It slows down your company’s progress. Why does it happen? Research has shown that it takes around eight months for a new hire to become fully productive. Needless to say, new employees will require their own share of learning and training to develop competencies that will add to the organization’s progress.
Having said that, when there is constant rehiring in the organization due to high attrition, the workflow management will suffer. Consequently, you will concede the advantage to your competitors and have a hard time trying to match strides with them. In times of such massive competition, that is something you would not want to do for sure. Hence, it is wise to put your best efforts to improve employee retention in your company.
3. Lowers employee morale
With high levels of morale, organizations can achieve new milestones and capture new markets. However, organizations begin to doom when employees lose morale and begin to disengage. Having said that as a leader, you ought to look after your employees' morale and motivation at all times.
However, when employees see their colleagues leaving the organization, it does take a toll on their morale. The more frequent the resignations from the company the greater the slump in the overall organizational morale. To explain, it leaves other employees questioning the reasons for a large number of resignations. Your employees may not express these insecurities directly but it will affect them for sure.
In fact, some might even think that there are better opportunities available outside or your company has some serious problem that is not yet in their grasp. Eventually, their morale will begin to drop and large rates of disengagement will begging to creep in. The prolongation of the same will hurt the organization in the long run and will inflict heavy losses.
4. Diverts your funds from true business growth
According to Gallup, the cost of replacing an individual employee can range from one-half to two times the employee’s annual salary. This includes expenses on hiring and training the new hire. Now, add to it the cost of the old employee’s lost efficiency and you’ll find that replacing a single employee is an expensive affair. If you have a high attrition rate, it is likely that a lot of your funds are being utilized on finding suitable replacements and training them. If you did not experience high turnover, you could utilize these funds on business growth. You could upskill your workers, invest more in marketing endeavors and take your business to the next level. So, loss of funds is another devastating impact of a high attrition rate.
5. Deteriorates customer experiences
One of the most obvious disadvantages of a high attrition rate is that it deteriorates product or service quality. A new hire takes around eight months to match the level of the experienced employee who left. Given that, your product or service quality certainly gets impacted. When your customers don’t get the quality they expect from you, they lose their trust in your products and services.
Consequently, they develop an inclination towards your competitors. As you already know, losing your customers is one of the worst things that can happen to your business. Having said that, high attrition rates can take your business downwards on the graph of growth by leading to the loss of your precious customers. If you aspire to grow your customer base, it is crucial that you put your efforts to keep your employees with you in the long run.
6. Hinders the potential of HR managers
When your organization suffers from a high attrition rate, HR managers have to focus more on hiring which prevents them from focusing on your existing employees. Consequently, they feel ignored. Loss of employee engagement, lack of employee growth and development, and loss of employee happiness are some obvious effects of such happening. This further contributes to even higher attrition rates. Having said that, high turnover can stimulate even more turnover by making your existing employees feel ignored.
7. Increases instances of employee burnout
When a team member is absent even for a day, others suffer. They have to shoulder his work responsibilities as well. Such things are okay in the short term but they become catastrophic in the long run. High attrition rates push your existing employees to shoulder the work responsibilities of those who have left until a suitable replacement is found or the new hire becomes capable enough to shoulder his responsibilities properly.
Overworked employees experience high-stress levels and become prone to burnout. Employee burnout has immense negative effects on an organization. When your employees experience burnout, they experience physical, emotional, and mental exhaustion. This exhaustion makes them physically sick, causes anxiety, and sends them on the path of disengagement. Consequently, their productivity drops and your company suffers. This is another way in which high attrition rates take a toll on your organization.
As discussed throughout, high employee turnover or attrition rates can have significant negative impacts on your business’s growth. Given that, it is crucial for you to make reducing employee attrition one of the most important goals of your organization. As you reduce employee attrition rates, you’ll naturally give a boost to your business’s growth. Wish you All the very best.
- Kiara miller