In the world of business, turnover is an ever-present reality. Employees come and go for various reasons, including career advancement, personal growth, or even dissatisfaction with their current workplace or environment. While turnover is a natural (and arguably a very healthy) part of an organization’s life cycle, its impact on a company’s culture should not be underestimated, especially if turnover rates are high.
Turnover does have benefits, including:
- Organizations should seek to continually grow their employees. Sometimes this means growing employees into new positions and more senior roles, but sometimes this means that an employee will outgrow an organization, or have interests that are not aligned with that of an organization.
Of course there is disruption with having a high-performing employee leave, but at the end of the day we should be happy with employees leaving our organization after they have made an impact and grown, and leave the organization in good terms
- Turnover, and subsequent new promotions or hires, bring with them a fresh set of eyes and ideas that are invaluable to an organizations’ success. In most industries, we very likely do not want the same set of individuals to be making decisions decade after decade, because that will ultimately hinder growth and innovation.
Managed turnover and the subsequent opportunity to fill a vacant role, can change an organization’s perspective and enhance creativity and innovation within the team
On the other hand, turnover does come with some downsides which, if not managed correctly, can cause severe impact to an organization and have a domino effect causing additional employees to seek employment elsewhere. Specifically,
- Disruption of Stability: When key employees leave, especially those who have been with the company for a significant period, it can disrupt the stability within the organization. These departures may lead to a loss of institutional knowledge, disruption of workflows, and increased stress on remaining employees who have to shoulder additional responsibilities. This sudden change can create an atmosphere of uncertainty and diminish the overall sense of stability within the company, leading to a domino effect of additional turnover.
- Reduced Morale: High turnover rates can significantly impact employee morale and engagement. When employees witness their peers leaving, it can lead to feelings of demotivation, increased stress, and decreased job satisfaction. Additionally, the departure of peers will ultimately lead an employee to ask themselves the question of “If (s)he can find something better, why can’t I”?. A continuous cycle of turnover can create a negative feedback loop, where low morale leads to more departures, further exacerbating the problem. This can result in reduced productivity, increased absenteeism, and a decline in overall employee well-being.
- Erosion of trust: Turnover can erode trust among employees, particularly when departures are perceived as negative or unexpected. When colleagues leave, it may cause remaining employees to question their own job security, and this can breed a sense of distrust and undermine the team’s cohesion. Furthermore, constant turnover can give the impression that the organization lacks stability, doesn’t care about tenure, organizational/tribal knowledge, is unable to retain talented individuals, or has a mindset of ‘cheaper is better’, potentially damaging its reputation both internally and externally.
- Loss of organizational knowledge and expertise: Every employee brings unique knowledge, skills, and experience to the table. When high turnover occurs, valuable institutional knowledge is at risk of being lost. This loss can hinder innovation, slow down decision-making processes, and impede the transfer of knowledge to new employees. Additionally, frequent turnover can hinder the development of mentorship relationships, which are crucial for fostering growth and development within an organization.
- Influence on Company Values, Identity, and Reputation: A company’s culture is built upon shared values, beliefs, and behaviors. When turnover is high, it can dilute the company’s identity and impact its core values. New employees who join may not be fully aligned with the existing culture or may introduce different perspectives that clash with the established norms. This can create tension and disrupt the cohesiveness of the organization, making it challenging to maintain a consistent and strong company culture. This can also damage a company’s reputation. Remaining employees may be asked to do things they are not yet well versed at (none of us have ever seen this happen at consulting companies), and negative sentiments can travel very quickly over social media, Glassdoor, and even in the traditional word of mouth sense.
We know that turnover is an inevitable (and not necessarily a bad) aspect of every organization’s life, but its impact on company culture should not be overlooked or underestimated. Organizations must take proactive measures to manage turnover effectively, such as implementing robust recruitment and retention strategies, fostering open communication channels, and investing in employee development and engagement initiatives. When an employee wants to depart, we should make it easy for them to make a decision by telling them what we can and cannot do with the intention of keeping a robust network of alumnus. We should want employees to be hungry for growth, and at some point this will mean that they will depart the organization. It also means that they could consider coming back to the organization at a point in the future when there is an opportunity to suit both sides. It’s so important for us not to forget the human aspect and remind ourselves that the world we live in, as large as it is, is often very, very small.
Some industries such as retail are known to have high turnover rates, often exceeding 100%. While high turnover rates in the retail world are generally accepted, even a slight decrease in turnover can have a big impact on an organizations’ financials and culture. We have all of the tools at our disposal to manage employee experience and retention. Actions are louder than words, and employees expect organizations to listen to them and provide them with a thriving work environment, which is more than just a salary and a free lunch in the office once a week. When we invest in our employees and culture, we will simultaneously have a positive affect on the organization’s ability to thrive and generate money.