What is Employee Turnover?
Employee turnover is the number of workers who leave an organization and need to be replaced by new workers.
Companies with high employee turnover rates suffer dire consequences like lower productivity and increased workload on remaining workers, which leads to employee burnout, lower work satisfaction, and more.
If unchecked, turnover can turn into a vicious cycle as new workers who are overloaded with work and lack the necessary skills leave for better workplaces. Unfortunately, this cycle leaves your organization right where it started.
8 Causes of Employee Turnover
Companies differ from each other. However, studies show the causes of employee turnover have been the same regardless of organization or industry since the pandemic began in 2020.
Here are the 8 top causes of employee turnover:
1. Toxic Work Culture
An organization’s corporate culture is a leading cause of employee happiness or dissatisfaction. According to research by MIT Sloan Management Review, toxic work culture is the leading cause of attrition across industries. It is ten times more crucial to employee retention or attrition than pay.
While many agree that toxic culture is horrible, there is less agreement regarding what qualifies as toxic. Check out Glassdoor reviews, and you’ll find angry ex-employees ranting about the corporate culture of their former workplace, complaining about varied issues like too much bureaucracy, risk aversion, or even discrimination.
So, what exactly makes a workplace environment toxic? The answer will help HR executives take the first step towards stopping this leading cause of employee turnover. Instead of improving every aspect of workplace culture their employees don’t like, employers should address key issues that cause the most pain to workers and cause them to leave and talk negatively about the employer.
Signs of Toxic Work Culture
MIT Sloan researchers analyzed more than 1 million Glassdoor reviews from 600 US companies to identify what employees consider toxic workplaces.
Here are the signs of a toxic work culture:
- A pervasive fear of failure
- A permeating lack of respect
- A lack of inclusivity
- An absence of ethics
- A cutthroat environment
- An abusive culture
- Constant dysfunction and confusion
Let’s consider each of these in detail.
A Pervasive Fear of Failure
Studies reveal that some workers spend up to 40% of their working day worrying about making mistakes at work. Another survey of more than 2,000 workers uncovered that up to 42% of them are working in fear of making a mistake at work.
These reports suggest that nobody wants to make mistakes at work. However, there's a vast chasm between wanting to avoid embarrassing moments and being horrified and even paralyzed by an environment set up to punish mistakes.
People and organizations suffer when creativity and innovation are stifled. In addition, this lack of psychological safety indicates toxic work environments and company cultures, which can increase turnover rates.
Lack of Respect
Lack of respect is another attribute of toxic work culture. When people feel disrespected by others, whether team members or managers, it harms their wellbeing and willingness to remain in an organization.
The MIT research we cited earlier indicates that “whether you analyze culture at an individual level or organizational level, respect rises to the top of cultural elements that matter the most.”
Lack of Inclusivity
Lack of inclusivity negatively affects workplace culture and can lead to attrition. Representing diverse groups of employees, treating them fairly and warmly, and including them in key decision-making processes make a workplace inclusive. Unsurprisingly, research indicates that this is perhaps the most powerful indicator of whether employees view their employer as toxic or not.
Employers that play favorites or encourage nepotism should expect higher attrition rates than those that treat everyone fairly and equally.
Absence of Ethics
Ethics and respect are similar facets of work culture that matter across individual and organizational levels. An organization's ethical or unethical behavior or practices affect employees' views.
Attrition will be higher than average if an organization is described with terms like shady, dishonest, misleading, and other adjacent words.
A Cutthroat Environment
Although some employees thrive in a high-pressure environment, the ruthless and cutthroat culture can erode wellbeing and cause employee turnover.
A report by the BBC reveals that this win-at-all-cost mentality might benefit companies in the short term but have detrimental long-term effects on organizations and employees.
Abusive culture is ‘sustained hostile behavior toward employees.’ Some examples of hostile behavior include bullying, shouting, insulting language, demeaning behavior, condescension, and talking down to employees.
Constant Dysfunction and Confusion
Another sign of a toxic workplace is that nobody knows their roles or responsibilities. Staff rarely know what direction they're to take.
Due to the lack of trust and effective communication in a toxic workplace, confusion is quite inevitable, and it becomes hard to collaborate. Thus, meetings, stand-ups, and relationships are never appropriately coordinated.
Inevitably, workers that are fed up will walk out of the door.
2. Job Insecurity
Research by Glassdoor revealed that business outlook is a significant driver of employee attrition. Companies with a good outlook are more likely to retain their workers because they offer workers an expanding set of opportunities. On the other hand, struggling businesses will have difficulty keeping their workers.
This research is corroborated by Winckworth Sherwood’s report, which surveyed 1,004 employees and discovered that 51% of them see job security as a fundamental reason for staying with their employer.
Job security is one of the critical things employees consider when assessing an organization's culture. Employees are more likely to be dissatisfied with the organization if their job is insecure.
Therefore, it’s not surprising that job insecurity is high on the list of causes of employee turnover. If an organization is prone to reorganization and layoffs, workers will feel like they're standing on shaky ground. This feeling will cause them to be on a constant lookout for better opportunities. Furthermore, previous layoffs leave more work on the shoulders of remaining workers, easily leading to work overload and burnout.
3. Lack of Flexibility
Even before the pandemic, work redesign initiatives revealed a positive relationship between flexibility and voluntary turnover. For instance, Best Buy implemented flexibility in working hours, which reduced turnover by up to 90% and increased productivity by up to 41%!
COVID-19 caused massive disruption to our work, prompting almost all organizations to switch to remote work. Although many have returned to the office, the disruption isn’t over as more workers clamor for hybrid work—a model where workers can choose to work out of the office or from home.
According to Microsoft’s Work Trend Index, flexible work is here to stay, and an approach to hybrid work is crucial for attracting the best talent and retaining existing workers. With more than 70% of workers preferring flexible work options, any current employer that fails to provide these options sees an increase in worker attrition.
Flexible working arrangements are even more crucial for workers that are parents. McKinsey reports that working parents are among the record number of employees quitting or thinking of leaving.
This group is critical, considering parents tend to be mid-tenure employees who are vital managers and individual contributors. They are leaders, and organizations must work hard to keep them or risk losing institutional knowledge, managerial capabilities, and mentors.
4. High Levels of Innovation
Studies reveal that highly innovative companies have a high rate of leavers.
On the outside, it seems like innovative companies are the perfect workplace. Their employees are paid highly and get to perform challenging tasks. However, it has been noted that these companies have relatively high attrition rates.
Although they talk positively about innovation in their organizations, workers at these companies—think Tesla, SpaceX, Meta, and Nvidia—are more likely to leave.
Working at these high-innovation companies requires more from workers. They have to work longer hours, work at a break-neck pace, and endure more stress than other companies.
While there’s no denying the excitement that comes from working at such companies, the chances of burnout are pretty high.
With more people considering the toll work takes on their physical/mental health and relationships, it’s no surprise that more people are leaving relatively great jobs for more slow-paced options.
5. Lack of Employee Recognition
Employee recognition is the timely formal or informal acknowledgment of a worker’s behavior or effort that aligns with the goals and values of the organization. Recognition has plenty of benefits.
Everyone wants a pat on the back for a job well done, and workers respond positively to such commendation and the accompanying recognition.
So, it’s unsurprising that bad managers who fail to recognize employees’ efforts and hard work have high turnover rates.
Aside from recognizing good performers, employers also need to lift workers who aren't performing their best. With tools like Nectar, you should be able to spot potentially underperforming workers, give them the support they need, and see more great performers on your team.
6. Poor Response to the Pandemic
The MIT report also adds that workers considered their organization’s response to the COVID-19 pandemic when deciding whether to leave or stay. Organizations that reacted positively by looking out for employees in this period had lower attrition.
The best organizations sought to understand the impact of the pandemic on people and their priorities. To that end, they had clear plans on how to deliver assistance to their workforce and improve resilience despite the challenging conditions.
The best companies responded well to the pandemic by helping the workforce maintain productivity while working remotely. Additionally, happy workers reported that their manager checked in on their health and wellbeing during the crisis.
On the other hand, companies that failed to treat staff well or respond proactively to the challenges of the pandemic experienced an increase in turnover.
7. Lack of Opportunities for Growth
The British Accounting Review journal published a study that shows that career growth opportunities are a vital benefit to employees in firms. When firms provide this benefit, workers reciprocate with stronger loyalty to the company, which leads to lower turnover.
Ambitious workers aren’t content to get a job and collect a salary until they retire. Instead, they often look for opportunities to move up within their profession. As a result, companies that fail to offer promotion opportunities will often lose their key employees to those willing to provide new roles and responsibilities.
When employees stop learning and growing, boredom sets in, which causes restlessness and anxiety. With this heady cocktail, the chances become pretty high that workers will jump ship.
8. Relatively Poor Compensation
As we've discussed so far, job retention and turnover depend on several factors, and one of the top reasons for employee turnover is relatively poor compensation. Whether you like it or not, pay is an essential motivator. While the opportunity for growth, flexibility, and bonuses are great, all of the goodwill these perks build can be washed away if employees feel they work harder than others who receive higher compensation.
They are also likely to leave if they discover that they could earn significantly more at other organizations. Highly-paid workers are more likely to remain in their jobs.
Solutions to Reduce Employee Turnover
So far, we’ve identified eight common reasons for employee turnover. Now, we’ll identify the steps to help your company retain its best workers.
Here are five steps to reducing turnover:
- Deal with burnout
- Invest in employee development
- Improve flexibility
- Improve recruitment
- Recognize employees
Resignations and layoffs continue to happen. As a result, employers must be innovative and thoughtful to retain the best talent, attract the right people, and develop the skills to fill gaps. Let’s discuss how these turnover-reducing solutions can help you.
1. Deal with Burnout
Many team members are dealing with problems ranging from loss to grief and burnout related to the pandemic. It has been difficult to maintain mental health, and coping mechanisms have been affected by stances such as social distancing.
Others have had to deal with more responsibility, like juggling work responsibilities with filling caregiver roles at home. This is especially true for women. As the effects of burnout increase, more people leave work, which puts a strain on remaining workers that have to do the work of two or more people.
Therefore, companies must address all these problems, or they’ll lose some of their best workers.
Companies can take a page out of Nike’s book in this regard. The sportswear brand gave its staff a week off for mental health break. This made headlines and indicated that Nike places a lot of emphasis on the wellbeing of its workers.
2. Invest in Employee Development
Investing in employee development has many benefits, and it can't be overlooked as a solution to turnover.
For one, building staff skills reduces the cost of sourcing talent outside the company. Aside from the benefit to the company, reskilling and upskilling your employees signals that their development matters and they are essential to the company.
Workers who feel wanted and valued are less likely to jump ship. Therefore, invest in development opportunities whenever you can.
3. Improve Flexibility
Flexibility is crucial for many workers. Offering remote work options or flexible hybrid options can be the difference between retaining workers or having them walk out of the door.
While there hasn’t been conclusive evidence that flexible working options significantly impact turnover or retention, the evidence is that improving work-life balance has a modest effect on turnover. More so, it can increase engagement and productivity by up to 87%.
It's important to note that most companies now offer flexibility, which has become table stakes for many workers. You cannot rely on it as the only way to attract new talent. Instead, you have to differentiate yourself using other strategies, like the ones we've provided.
4. Improve Recruitment
You need to look beyond the traditional talent pool to improve your hiring process.
First, identify the knowledge, skills, abilities, and experience required for roles. Look beyond the typical qualifications or places where you look for talent. Doing so can offer you a new pool of potential team members who might just lack formal education or be older/younger than you'd usually hire.
Additionally, when hiring new people, presenting them with an honest overview of what they'll be doing on the job is essential. Offering such insight will likely improve the retention of those job seekers that still decide to work for you.
5. Recognize Employees
Employee recognition is an easy win that allows you to reduce turnover. People stay where they are valued, so you should work extra hard to recognize your employees for their work.
Organizations that praise staff signal that their work is valuable and noticed. By offering positive feedback, workers feel reassured that their work serves a purpose and can significantly increase productivity and employee engagement.
Furthermore, peer-to-peer recognition and honest feedback improve togetherness at work and increases retention over time. Therefore, supervisors and managers should actively seek opportunities to praise the team and individuals. Using a peer-to-peer recognition platform like Nectar also makes it easy for colleagues and managers to acknowledge the good work done by others. Book a demo to see how easy it is to build a recognition culture with Nectar.
Identifying the top causes of employee turnover can minimize the cost of turnover and help organizations retain staff. In addition, when companies understand why workers are leaving, it’ll be easier to take the necessary steps to plug the gaps.
The employee retention strategies we’ve provided can help retain top workers, improve worker morale and productivity, improve worker skills, etc. We hope that it helps your organization successfully navigate the Great Resignation and come out stronger and better.