5 Effective Tips to Reduce Employee Turnover

Jonathan Whistman

Employee turnover costs the U.S. economy and employers over $1 trillion annually. So it’s no surprise that improving employee retention has been a significant priority of organizations across industries for decades. 

The problem is, most organizations just aren’t good at plugging the leaks. So instead, they endure an ongoing cycle of endless onboarding, short tenures, and painfully high recruitment and hiring expenses. 

The average turnover rate in the United States typically falls between 18 and 20% in any given year, enough to cause trouble for most organizations. And that’s excluding anomalies like COVID-19, which propelled turnover to a shocking 57.3%.

Unfortunately, many industries suffer even higher employee turnover than the national average. For example, turnover at sales-focused organizations averages 35% or more annually. It also costs sales organizations one and a half to two times the lost employee’s salary and takes over six months to fill the position.

“Employee turnover costs the U.S. economy and employers over $1 trillion annually. “

How to Calculate Employee Turnover Rate

Calculating employee turnover rate is simple. First, divide the number of departures by your overall number of employees. Then, you’ll multiply the result by 100 to get your employee turnover rate percentage. 

For example, to find the employee turnover rate for an organization with 75 sales reps and loses 24 in a year, you’ll divide the 24 departures by the total number of sales reps.

(24) / (75) = .32

Then, multiply the result by 100. 

(.32 ) x (100) = 32% turnover rate.

Losing nearly a third of their salesforce may seem high, but this example is actually conservative for real-world sales turnover rates. 

Harmful Effects of a High Employee Turnover Rate on Your Business

The effects of high employee turnover separate into three categories: hard costs, soft costs, and opportunity costs. 

Let’s break down these three categories for a deeper understanding of how poor employee retention may be harming your business:

Hard Costs

Hard costs are expenses companies incur due to employee turnover that directly impacts cash flow. Examples include:

  • Temporary Worker Expenses
  • Outsourcing Costs
  • Advertising and Recruiting Fees
  • Background Check and Drug Test Expenses

Soft Costs

Soft costs cover the expenses incurred due to internal resources you must divert to recruitment, hiring, and onboarding efforts. 

Opportunity Costs 

Opportunity cost refers to potential revenue loss as a direct result of employee turnover.

Examples include missed or delayed project deadlines, loss of revenue due to customer churn as an organization seeks a replacement, and the loss of projected revenue contributions from the departing employees’ sales quotas. 

With the average quota for high-tech sales totaling more than $2 million, opportunity costs can quickly reach dizzying heights if positions remain unfilled. 

How to Reduce Employee Turnover and Turn Things Around- Five Strategies to Implement in 2022

1. Make Strategic and Data-Driven Hiring Decisions

Modern business tools like PerceptionPredict’s Performance Fingerprints are revolutionizing how organizations recruit, onboard, and retain employees. 

Performance Fingerprints are unique candidate profiles created using cutting-edge predictive analysis that enables organizations to hire candidates with personal and professional traits and qualities associated with high performance, exceptional productivity, and long-term tenures

2. Fire Team Members that Cause Friction

A company is only as strong as its weakest link. Employees that display undesirable professional attitudes and habits and have frequent interpersonal issues with members of their team drag down the rest of your workforce

Even worse, they can drive away positive employees that significantly contribute to the success of your organization. 

Letting someone go is never easy. But it’s the best intervention to prevent a downward spiral that can permanently damage your company culture, drive top-performers to seek employment elsewhere. 

3. Keep an Eye on Employee Engagement

Employee engagement is critical to boosting retention rates. And while a wide variety of factors influences engagement, research has found the relationship employees have with their immediate manager accounts for 70% of employee engagement variance

This means training your managerial staff to recognize and re-engage discouraged, burnt out, or disengaged employees can significantly reduce employee turnover rates. 

4. Invest in Your Onboarding Process

A strong onboarding process can transform your employee turnover rate overnight. 

“Employee engagement is critical to boosting retention rates. And while a wide variety of factors influences engagement, research has found the relationship employees have with their immediate manager accounts for 70% of employee engagement variance. “

Organizations with engaging and strategic onboarding processes can improve employee retention by 82%. If that isn’t enough to convince you of onboarding’s importance, the same study found companies with top-tier onboarding processes also increased average productivity by a quota-busting 70%. 

Optimizing your onboarding process also increases buy-in to company culture, leading to greater team cohesion, motivation, and innovation. 

5. Gather Employee Feedback and Take Action

Train your managers and organizational leadership to elicit regular, honest feedback from your workforce. For the best results, employees should feel comfortable providing feedback about every aspect of operations and culture without fear of reprisal from their superiors. 

Allowing employees to leave workplace feedback anonymously is a great strategy for encouraging honesty. This can be as easy as putting a suggestion box in the office.

However, organizations should remember that providing an outlet for frustrations but failing to take action after receiving feedback can backfire, making employees feel the organization doesn’t value their opinions. Conversely, companies that enact changes based on employee feedback can boost morale, engagement, and loyalty while reducing employee turnover.