Does A High Employee Turnover Rate Contribute to Lower Employee Morale?

A High Turnover Rate May Affect Long Term Goals in Employee Retention

According to new labor statistics, the employee turnover rate is at an all-time high, soaring to an 88% increase from just a decade ago. The roles hit the hardest? Workers with just a little under a year of experience. This should trouble many as it suggests that organizations are failing to retain and engage their newest employees, who are often the most enthusiastic and eager to learn. And while staff turnover isn't a new problem, employers should be wary of the factors contributing to involuntary and voluntary turnover. 

The Terrible Twos and Involuntary Turnover

The "Terrible Twos" is a phrase many of us are familiar with in our personal lives, but it aptly describes the tumultuous two-year period of a company's growth and development (especially in startups) when it is transitioning from startup to established business. During this period, companies often experience high levels of both involuntary and voluntary turnover among employees. 

Involuntary Turnover

Involuntary turnover may come in the form of downsizing or restructuring due to financial difficulties or strategic changes. But too much “downsizing” can signal a lack of trust in employees, leading to a drop in morale overall. While leadership may view layoffs as an easy fix to company problems, these frequent purges can exacerbate already dwindling rates of productivity, employee engagement, and innovation. In fact, a high involuntary turnover rate is the number one reason groups of Millennials and Gen-Z workers are shying away from tech startups altogether. According to a Future Workforce Study by the great minds at Adobe, only 16% of respondents said they would consider taking a job with a startup or a small-sized company; many believing large, established companies have better chances of weathering any economic storms that the near future may bring.

Managing involuntary turnover is challenging, but fixable. HR leaders need to ensure they are focusing on employee development and training as well as recruitment. Training costs for existing employees are far lower than what it costs to recruit a new employee. Invest in career development options for existing staff if you want to easily boost your retention rate, reduce turnover costs, and maintain employee morale. 

The Frightful Four of Voluntary Turnover

Voluntary turnover is a bigger beast that comes in an increasingly tight labor market. Voluntary turnover happens when an employee chooses to leave a job of their own accord. This can happen for a variety of reasons, but the common ones surround remote work, low wages, lack of employee benefits, and burnout.

1. NOT Offering Remote Work

Contrary to popular belief, remote work can actually help to improve employee retention rates. Remote workers often feel more flexible and accepted, which helps to build loyalty within the organization and research shows that working remotely can increase job satisfaction, allowing employees to take on more responsibility and control over their own work schedules. Additionally, remote workers may have access to better resources than those in an office setting, such as access to cloud services and other online tools.  Remote working opportunities also cut down on common contributors to employee disengagement.

Not offering remote work, and flexibility for jobs that can make the switch is one of the biggest contributors to high turnover rates post-pandemic. People want to have the flexibility to create and maintain relationships both outside and inside of work.

2. Low Wages and High Employee Turnover Rate

Low wages have been a significant contributor to the employee turnover rate, particularly in industries with low-skilled jobs, such as retail and hospitality. Low wages often lead to employee dissatisfaction and disengagement, as well as a lack of motivation to perform at a high level.

Paying your workers below average for their expected level of performance can dramatically shift power dynamics between workers and leadership, which in turn has a dramatic effect on your company's morale, productivity, and retention rate. More than 85% of job seekers rated pay/compensation as “extremely important” when looking for a job. These same respondents say their pay rate directly impacts their job satisfaction. And amongst all job seekers “higher pay” is the most frequently cited reason people quit their last job. At this point, simply offering a competitive salary or paying your workers in line with their level of skill and greatly combat high turnover.

3. Lacking Employee Benefits

Employees may be reluctant to stay with an organization if they do not feel valued and supported by their employer. Employee benefits packages, such as a well-rounded health insurance plan, career developmental options, or flexible PTO policies, can be the difference between a motivated and dedicated employee base, or an environment of high turnover. Not only are employers losing out on valuable resources when employees move on to greener pastures, but they also incur considerable costs associated with hiring, onboarding, and retraining new staff. Organizations should take their employee benefits packages seriously as it could be the key to retaining talent and fostering a positive workplace environment.

4. A Company Culture of Burnout

There are typically two arguments when it comes to addressing the high turnover rate caused by burnout. Some argue that high employee turnover is a symptom of burnout,  rather than a contributing factor. The reasoning is that burnout leads to decreased job satisfaction, disengagement, and ultimately, a desire to leave the organization. In this case, high turnover rates serve as an indicator that employees are experiencing burnout. And usually, the root cause comes from emotional factors relating to company culture.

Research supports this perspective, as studies have found a positive correlation between burnout and turnover intention. Studies show that emotional exhaustion, a core component of burnout, was a significant predictor of turnover intention. 

From this perspective, organizations need to emphasize work-life balance throughout company culture.

However, there's a second argument to consider: Perhaps it's an already high turnover rate that is exacerbating burnout and contributing to a never-ending cycle of employee turnover. This proposition states that high employee turnover rates exacerbate burnout, rather than being a symptom of it. The argument is that when employees are constantly leaving an organization, it creates an environment of instability and uncertainty that increases stress levels and ultimately contributes to burnout.

Research also supports this perspective. Studies show that job insecurity, a potential outcome of high turnover rates, was a significant predictor of burnout. The study found that job insecurity leads to emotional exhaustion, cynicism, and decreased personal accomplishment, all core components of burnout.

From this perspective, organizations should focus on reducing employee turnover rates to mitigate the effects of burnout. This can be achieved by implementing strategies such as talent retention programs, employee recognition programs, and competitive compensation and benefits packages.

While there are compelling arguments on both sides of the controversy, the reality is that high employee turnover rates and employee burnout are complex issues that may have a reciprocal relationship. Thus, it is not a matter of choosing one perspective over the other, but rather finding a balance between the two.

What to do if your company is experiencing a high employee turnover rate?

Leadership and HR managers have a crucial role to play in addressing high employee turnover rates. 

Step 1: Conduct a Burnout Assessment

Before implementing any strategies, it is important to understand the extent of burnout in your organization. Conducting a burnout assessment can help leaders and HR managers identify the areas of the organization that are experiencing burnout, the root causes of burnout, and the impact of burnout on employees and the organization as a whole.

The assessment can be done through surveys, focus groups, or one-on-one interviews with employees. The goal is to gather data on employee workload, job demands, job resources, and work-life balance, among other factors that contribute to burnout.

Step 2: Address the Root Causes of High Turnover Rates

Based on the findings of the burnout assessment, leaders and HR managers can implement strategies that address the root causes of burnout. These strategies may include:

• Workload management: Ensuring that employees have manageable workloads that do not lead to overwork and burnout.
• Organizational culture changes: Creating a positive work environment that supports employee well-being, collaboration, and work-life balance.
• Employee support programs: Offering employee assistance programs, counseling services, and wellness programs that address the physical, emotional, and mental health needs of employees.
• Employee engagement programs: Creating opportunities for employees to provide feedback and participate in decision-making processes to increase their sense of control and engagement at work.

Step 3: Implement Talent Retention Programs

To reduce turnover rates, organizations need to create a positive work environment that attracts and retains talent. Talent retention programs may include:

• Competitive compensation and benefits packages: Offering competitive salaries, health insurance, retirement plans, and other benefits that meet or exceed industry standards.
• Professional development opportunities: Providing employees with opportunities to develop new skills, take on new responsibilities, and advance their careers within the organization.
• Employee recognition programs: Recognizing and rewarding employees for their contributions and achievements.
• Career pathing: Helping employees see a clear path for advancement within the organization.
• Expand the benefits you offer: Offering flexible work schedules, telecommuting, and other benefits that are important to employees.

Step 4: Monitor and Evaluate Progress

To ensure that the strategies implemented are effective, leaders and HR managers need to monitor and evaluate their progress. This may involve regularly checking in with employees, analyzing turnover rates, and assessing the impact of the strategies on employee well-being and organizational performance.

Employee turnover is a complex issue that requires a multifaceted approach to address. Remote work, employee disengagement, and low wages have been significant contributors to high turnover rates in recent years. To reduce turnover rates, organizations need to implement strategies that address these issues, such as promoting social interaction and collaboration among remote workers, offering competitive wages and career advancement opportunities, and communicating transparently with employees about the company's plans for the future.

Furthermore, recent tech layoffs have created an environment of uncertainty, leading to reduced worker confidence and increased turnover rates. To address this issue, organizations need to communicate openly and transparently with their employees, provide support services, and offer opportunities for career advancement and professional development.

By taking these steps, organizations can create a positive work environment that supports employee well-being, and engagement, and ultimately, reduces turnover rates.