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High employee turnover is a growing concern for many companies today. The Great Resignation, Quiet Quitting, and other recent trends have become memes, topics of conversation around the proverbial "water cooler," and, from time to time, fodder for the news.
When a company experiences high employee turnover rates, it can have significant negative effects on productivity, morale, and ultimately, the bottom line. In this article, we'll explore the causes of high employee turnover and why it's bad for companies.
To truly grasp this topic we must begin by understanding high employee turnover - and define why our team members are leaving. Remember that high employee turnover is not a single-cause event, but rather an issue that manifests in different ways for different reasons. Causes of high employee turnover may include:
- Lack of Career Growth Opportunities
Employees want to feel that their work has meaning, that they're valued by employers, and that they're growing professionally. When there are no opportunities for career advancement or development, employees may become disengaged and leave the company looking for new challenges and new ways to grow.
- Poor Management and Leadership
Managers and supervisors play a crucial role in employee satisfaction and retention. "People don't leave companies, they leave managers..." as the saying goes. When managers are ineffective or unsupportive, employees may feel undervalued, leading to high employee turnover.
- Low Pay and Benefits
Compensation is a huge factor as inflation and other living costs skyrocket, and it's a critical factor in employee retention. If employees feel that they're not being fairly compensated for their work, or recruiters are constantly reaching out to them offering significantly more pay for the same role, they may leave for better-paying opportunities.
- Workload and Job Stress
A high workload and job stress can lead to burnout and employee turnover. Through the early days of the COVID-19 Pandemic, people were getting laid off, and employees had to take on double the work with little to no additional pay. When employees feel overwhelmed or unsupported, they may seek employment elsewhere.
Some of the challenges listed above are just the price of doing business in a rapidly shifting world, while others can be eliminated with better hiring practices, employee training, and tools like interview intelligence software that will help you identify people who may present challenges once hired. These factors all have negative effects on a company's performance, productivity, and culture, and they're why high turnover is bad for companies - something we'll talk more about later.
We covered the reasons for high employee turnover in the previous section, now let's dive into the causes of employee turnover and strategies to reduce it.
Employee turnover causes and effects can be divided into two categories – tangible and intangible. Tangible causes of employee turnover include salary, workload, benefits, location, and other tangible elements of life that affect their employment contract. Intangible causes are related to the organizational culture, management style, job satisfaction, career advancement opportunities, and other factors that affect the overall atmosphere of a workplace.
If you can get to the core cause of an employee's reason for leaving, you can understand what's triggering your turnover. If you ask your employees during exit interviews when they first remember thinking that they should leave, this will give your HR team a helpful window into what's causing your high turnover.
Now, let's talk about Strategies to Reduce Employee Turnover. Reducing employee turnover requires identifying the causes and implementing strategies to address them. Here are a few strategies that employers can use to reduce employee turnover:
- Offer Competitive Compensation and Benefits
This should go without saying but offering competitive compensation and benefits packages can help retain employees. If you're asking your team to perform a role to the best of their abilities, but only paying them half the roles market value, they're not going to stay long. Employers can also offer bonuses or other incentives to encourage employees to stay with the company if they can't cover high salaries.
- Provide Opportunities for Career Growth
Providing employees with opportunities for career growth and development can help retain them. We've found that it's helpful to start an employee on a career mapping path as part of (OR) soon as they've finished onboarding. Employers can offer training programs, mentorship opportunities, and clear paths to advancement, and the clear vision that comes with a career map grounds employees.
- Improve Work Environment
Employers can improve the work environment by fostering positive company culture, promoting work-life balance, and reducing stress levels in the workplace. For instance, high-pressure micromanagers, outdated tech, toxic office people or office environments, all of these things, and more contribute to a poor quality workforce.
One of the CEOs I worked for used to say constantly, "Hire great people, pay them well, empower them with the tools to do their job well and expect greatness from them..."
It's hard to measure the exact impact of high employee turnover, but it can have significant consequences for both companies and employees. Understanding the reasons for high employee turnover, identifying the root causes, and implementing effective strategies to reduce it can help employers retain their employees and create a healthy and positive work environment.
So far, we've only focused on the negatives, but high employee turnover can have both positive and negative effects on a company. In this section, we'll explore the effects of employee turnover, including the causes and effects of employee turnover, and what a high turnover rate says about management.
Employee Turnover Causes and Effects:
Employee turnover can be caused by several factors, as we discussed in the previous section. Poor management, limited career growth opportunities, inadequate compensation and benefits, and a toxic work environment can all contribute to high employee turnover.
When employees leave a company, it can result in a loss of productivity, institutional knowledge, and morale. This changes the energy within teams and the company culture as a whole, it also increases recruitment and training costs, as new employees need to be hired and trained. However, employee turnover can also have positive effects, such as bringing in fresh perspectives, new skills, and diverse experiences to the company.
High employee turnover can have several negative effects on a company. These effects include:
- Reduced Productivity
High employee turnover can lead to reduced productivity, as new employees take time to get up to speed on their job duties, and onboarding and training new employees leads to lag times in sprints and project deliverables.
- Loss of Institutional Knowledge
When experienced employees leave the company, they take with them institutional knowledge that may be difficult to replace. This is one of the biggest negative impacts that's rarely accounted for. If someone designs a process that's extremely effective for you and then leaves to join a competitor, you've lost not only the employee but also the knowledge that allowed them to build that effective system.
- Increased Recruitment and Training Costs
Hiring and training new employees can be costly and time-consuming, particularly if turnover rates are high. I read recently that replacing a software engineer in your company could cost up to $326K, a huge hit to a small startup, or VC-backed company.
- Decreased Morale
High employee turnover can create a sense of instability and uncertainty among remaining employees, leading to decreased morale. People bond, build relationships and grow as friends, when someone leaves it feels like this bond is broken and work never feels the same after that.
On the other hand, high employee turnover can also have positive effects, including:
- Fresh Perspectives and New Ideas
New employees can bring fresh perspectives and new ideas to the company, helping to drive innovation and creativity. This also comes with diversity hiring - bringing new people to the table and confronting them with challenges always brings fresh ideas and perspectives.
- Diverse Experiences
New employees can bring diverse experiences and skill sets to the company, helping to create a more diverse and inclusive workplace. If you've ever wanted to see how your biggest competitor solved a problem, hire one of their top people, you may not see the actual solution for confidentiality but you can see how they think, and solve problems, and those frameworks go a long way.
What Does a High Turnover Rate Say About Management? A high turnover rate can be an indication of poor management or poor hiring decisions. If employees are leaving the company at a high rate, it may suggest that they feel undervalued, unsupported, or unappreciated. It may also suggest that the company is not providing adequate opportunities for career growth and development or a healthy work environment.
If you'd like to make better management hires, check out Pillar. We built a video interview platform that's powered by Ai to help you interview and hire great managers - over the last 12 months, our software has helped companies lower turnover by more than 50%.
High turnover can have a huge impact on the company's bottom line, but how can you tell if your company is experiencing high turnover rates? Here's the biggest sign to watch out for:
Lack of Employee Engagement:
If your employees seem disengaged or unmotivated, it could be a sign that your team isn't feeling valued, or led well. Maybe they don't have to tools or training to reach their objectives or feel like they're constantly fighting a losing battle. Employees who feel undervalued or unsupported are more likely to leave the company, creating a cycle of turnover and disengagement.
Reducing high turnover rates requires a multi-faceted approach. Providing adequate compensation and benefits, creating opportunities for career growth and development, and promoting a positive work environment are all essential strategies. By addressing the underlying causes of high turnover rates, companies can create a workplace culture that promotes employee retention and engagement.
If you're currently experiencing high turnover rates, let our team help you create a better hiring process that brings in top performers and puts them into the best roles for their skills. At Pillar, we're committed to helping companies make better hires and our interview intelligence was built to save your HR team time and money. Schedule a demo to see it in action!