Here is our list of major causes of employee turnover.
Employee turnover is the rate at which employees leave an organization. Reasons behind employee turnover include lack of growth and progression, inadequate compensation, and inefficient management.
Understanding these reasons helps leaders design employee retention strategies.
This article includes:
- involuntary turnover reasons
- reasons why employees quit
- factors affecting turnover
Let’s get to it.
Main causes of employee turnover
Here is a list of reasons why employees quit companies and ways to deal with staff turnover.
1. Lack of growth and progression
Lack of growth and progression is one of the main factors affecting turnover. According to a report from Gallup, 87% of millennials shared that opportunities for growth and development are one of the most important factors for career satisfaction. Roughly 70% of professionals in other generations echoed the sentiment.
Ambitious professionals are not content to secure a good job and collect paychecks until retirement. Many modern workers have career plans and desires to move up within their fields. Plus, professionals who keep their skills sharp typically spend less time unemployed if unexpectedly laid off.
Calling a career a “dead-end job” is one of the most devastating professional insults. Human beings crave progress and aim for continuous professional improvement. Employees who stop learning, growing, and setting higher goals grow bored, restless, and anxious, and are likely to start seeking new opportunities elsewhere.
How to fix it: Offer career development opportunities such as workshops, conferences, membership in professional organizations, mentorship programs, cross-training and job-shadowing options, and credit towards professional courses. Also, educate employees about promotion opportunities and provide realistic timelines. One of the best ways to support employee learning is for managers to discuss a growth plan during one-on-one meetings.
2. No innovation
Meaningful work is a necessary condition for job satisfaction. Many employees long to contribute to society, solve complex problems, and affect change. Generating new ideas and ushering in the future is an enticing prospect. When companies fail to innovate and evolve, bright employees feel stagnated. Top talent may leave organizations for the chance to engineer a new product, found a company, or launch a service. Not to mention, if companies fail to innovate, then employees may wonder about future job security, as companies who fail to evolve rarely continue to dominate the market.
How to fix it: Innovation is important to retain employees and to remain competitive in the business landscape. Growing and improving is a continual and vital process. You can prioritize creativity and innovation as one of your company’s core values, and read business strategy books to learn how to implement new plans effectively. Holding virtual hackathons is another way to encourage progress.
3. Inefficient management
As the saying goes, “employees don’t leave companies, they leave managers.” According to an employee retention report from TINYpulse, employees who rate supervisor performance as subpar are four times more likely to look for a new job.
Hostile or incompetent management can be a major source of stress for staff. On the flip side, supportive and skilled managers can inspire loyalty and high performance. Leaders play a large role in shaping the worker experience and have a responsibility to make that responsibility as positive and productive as possible.
How to fix it: Provide managers with extensive and ongoing training and support to develop their leadership skills. Conduct regular department reviews with anonymous surveys, and hold leaders accountable to their own bosses or peers.
One way managers can improve supervisory skills is by reading leadership books.
4. Inadequate compensation
Pay is one of the main causes of employee turnover. A study from Paychex revealed that 70% of respondents would leave a job because of low pay. As this Forbes article notes, the average employee can expect a 3% annual increase when staying with the same company, as opposed to a 10 to 20% pay boost for switching organizations. Moving companies gives job seekers the chance to negotiate pay and benefits as part of the interview process.
Salary and hourly wage are not the only forms of pay. Perks and benefits also factor into compensation. For instance, high health premiums could result in lesser take-home pay. In-house daycares or flexible working hours lessen the costs of childcare for working parents. Perks like complimentary meals or internet reimbursement offset staff’s out-of-pocket expenses.
Bare minimum pay and benefits inspires minimal effort and loyalty. Yet even the most devoted employees may leave if presented with a more attractive offer.
How to fix it: Conduct regular compensation reviews to ensure your pay and benefits are consistent with industry standards and comparable to competitors. Give employees regular raises and chances to review and negotiate compensation, and be clear about the timing of these opportunities. If you cannot give higher wages, then make up for the pay gaps through ancillary incentives. Check out our guide to employee perks and benefits for more tips.
5. Absence of camaraderie
Roughly two thirds of professionals would reject a new job offer if they had work friends at their current company, says a survey analysis from the Society of Human Resources Management.
Social ties are important. When a sense of belonging and community exists in the workplace, teammates feel responsibility towards coworkers. Commitment to colleagues inspires a sense of commitment to the company and the job. Conversely, when coworkers feel more like strangers or enemies than collaborators and friends, then professionals have much fewer qualms about seeking new opportunities.
Feelings of distance and disconnection from colleagues can often provide enough motivation to consider switching companies. Remote work is especially prone to inspiring feelings of loneliness or isolation, making virtual team building a must. Team rapport and camaraderie improves employee engagement and productivity as well as raising retention rates.
How to fix it: Plan ongoing formal and informal team building activities, such as meeting icebreakers, team meals, and group games. Provide opportunities for colleagues to connect on and off the clock, for instance by creating a dedicated break room, or hosting company wide events like cook offs or happy hours. Be sure to take steps to include teammates who may not naturally gravitate towards their peers.
6. Diversity deficiencies
Diversity and inclusion are important factors in the office atmosphere. All employees want to feel safe, accepted, and empowered to do their best work. Discrimination puts significant stress on employees, and can contribute to burnout. Not every identity will be equally respected in the workplace. However, there should be equal respect for different backgrounds, perspectives, or ideas. No employee should feel targeted, disadvantaged, or left out at work.
Having to demand equal opportunities and fair treatment can take a toll on staff. Without a genuine show of support from the company, employees may opt to leave quietly instead of fighting a seemingly unwinnable battle. Not to mention, word can spread throughout the hiring pool, affecting future recruitment.
How to fix it: Practice fair and equitable hiring practices in your recruitment process. Consciously cultivate a culture of inclusion by inviting discussion and celebrating unique perspectives. Provide employees with support systems like employee resource groups. You can also read books on inclusion and diversity to better educate yourself and your staff.
7. Life events
Occasionally, employees leave organizations because of extenuating life circumstances, and not due to any fault of the employer. Reasons for these departures may include moving, having children, caring for an ill family member, tending to medical conditions, enrolling in school, or starting a new business. The employee may simply need to take time to rest, or may desire a career change. Continuing to work while tending to such situations may not be a viable option.
How to fix it: While you cannot prevent major life events from occurring, you can take measures to make your company more accommodating. Offering extended PTO, maternity and paternity leave, remote work options, and flexible working hours can help employees manage life transitions. You could also consider instituting temporary leave options so that employees can reduce hours or take short leaves of absence instead of permanently resigning.
8. Organizational restructuring
Organizational restructuring is one of the main involuntary turnover reasons. Conditions such as changes in leadership, organizational sale or merger, financial hardships, global events, or company pivots could trigger layoffs. In this case, the company decides to terminate employees instead of workers leaving of their own volition.
How to fix it: Handling this situation can be tricky due to the influence of factors outside of your control. You may not be able to prevent your employees from being let go, however you can part on good terms and try to maintain the relationship. For instance, offer staff severance and volunteer as a reference. Showing compassion increases the likelihood of the employee rejoining the organization in better times.
9. Transfers & promotions
In the best case scenario, positions open because the employees level up and accept higher roles within the organization. While transfers and promotions are cause for celebration, they are also catalysts for hiring. Depending on how an organization calculates the rates, these instances may not officially affect employee turnover statistics. However, from the outside, there may be an appearance of high turnover if a company grows quickly and promotes primarily from within.
How to fix it: During the hiring process, make a point to mention why the position is open if the candidate does not ask. Celebrate transfers and promotions internally with parties and special announcements. Also, be transparent with current employees about realistic timelines and give accurate expectations. Lastly, implement succession planning and cross training when possible to avoid overwork during transitions in staff.
10. Inflexible work environment
According to a recent survey from Flexjobs, 82% of respondents claimed that they would feel more compelled to stay with an employer who offered flexible working arrangements.
The worldwide coronavirus crisis forced a majority of the office-workforce to work remotely for an extended period of time. Many workers found themselves asking why they should return to the office full time if they could do their jobs from home. In fact, a study from PwC found that 83% of workers wanted to continue working from home at least one day a week.
If a loose working structure does not impact productivity, work quality, or budget, then employees are bound to question why the company refuses to make concessions, and may leave for a more accommodating organization.
How to fix it: Avoid micromanaging and monitoring when possible, and display trust in your employees. Offer flexible working conditions such as selectable schedules or hybrid office plans when these options do not interfere with individual or team performance. Consider implementing a work from home policy to provide employees with liberty and structure.
11. Poor workplace culture
Poor workplace culture is one of the biggest drivers of employee turnover. Factors that can contribute to toxic culture include:
- Unclear or insufficient communication
- Failure to address conflict
- Unfriendly coworker competition
- No accountability or ownership
- Unequal work distribution
- Lack of support from management
- Inappropriate and unprofessional conduct
- Emphasis on punishment over growth
- Micromanagement and arbitrary rules
There are many other factors that either constitute a harmful office culture, or prevent a cohesive culture from forming. However, there are many steps organizations can take to ensure the work environment is positive and welcoming to all employees.
How to fix it: Take regular employee engagement surveys to measure staff sentiment and detect potential problems. Be sure that results are anonymous so to encourage honest feedback. Form a culture committee and hold regular team building events and socials. Task HR and organizational leaders with nurturing company culture, and form concrete quarterly and annual culture goals.
For more information, check out our guide to improving company culture.
Overwork is one of the major reasons why employees quit jobs. A recent Deloitte survey uncovered that 77% of respondents experienced burnout at their current job and 42% had left a position for this reason. Even more specifically, 84% of millennials self-reported burnout. Over half of these respondents cited this burnout as a reason for quitting. Younger generations increasingly demand more sustainable work-life balance.
Occasional hustle and increased workloads are not completely avoidable. Busy seasons or bigger projects may require employees to put in extra hours. However, extended periods of overwork leads to staff dissatisfaction and burnout. Constant overwork is often a sign of understaffing, poor planning and human capital management, and an undesirable work culture.
How to fix it: Encourage employees to take breaks and vacations. Also, actively help team members find coverage for their time off. For instance, TeamBuilding scales down sales representatives’ workloads in the weeks leading up to paid leave. When possible, pace the hiring cycle to minimize time lapses. Such an approach involves constantly nurturing hiring pipelines, posting open positions in a timely manner, and streamlining the training process.
13. Lack of recognition and appreciation
Recognition is a large part of the employee engagement puzzle. Organizations that praise workers send the message that hard work is meaningful and does not go unnoticed. Positive feedback reassures the staff that individual efforts contribute towards larger goals, making the job more meaningful and enjoyable. A culture of appreciation banishes doubt and boosts productivity. Most folks are grateful for an occasional pat on the back and an acknowledgement of great performance. Not to mention, rewards and recognition show the staff that the company considers the workers as more than just numbers or tools.
How to fix it: Hold regular reviews. Award high achievement. Seek out opportunities to praise the staff, and encourage a culture of peer-to-peer praise, for instance, by starting a staff shoutout chat. Celebrate staff with events like Employee Appreciation Day and gestures like messages of gratitude.
Retirement lurks at the end of the employee life cycle. Every career must eventually come to an end. Even if a worker spends the bulk of a career at one company, they will inevitably age out of the workforce. Organizations should be mindful as workers reach retirement age, especially if large sections of the staff are likely to resign at the same time. However, even the retirement of a single team member can throw the office off-kilter if managers fail to prepare. The time to find replacements and train new staff arrives long before the retirement party. Otherwise, companies and departments are vulnerable to losing valuable knowledge and expertise accrued by seasoned staff.
How to fix it: Practice mindful succession planning. Decide who will assume the retiree’s duties, and give the successor time to train, transition, and ask questions. In a perfect world, your new crew will not start from zero as soon as the retiree leaves. Ideally, there should be a slow shift of responsibilities.
You can see your colleagues off by throwing a virtual retirement party.
According to a study by the Society for Human Resource Management, replacing an employee takes an average of 42 days and $4129. Every year, companies in the US and around the world spend billions of dollars recruiting, hiring, and training new employees.
Understandably, companies want to minimize these costs and retain staff. By identifying the reasons behind staff turnover and taking steps to fix or prevent issues, organizations can extend average employee tenure. Less time spent recruiting means more time and energy spent on furthering the company mission.
Next, check out this list of books on recruiting.
FAQ: Employee turnover
Here are answers to the most common questions about employee turnover.
What is employee turnover?
Employee turnover is the pace at which workers leave organizations or industries. When measuring turnover, experts typically analyze the average period of time between hiring and replacing an employee, or the percentage of employees who leave within a set period of time, such as one year.
What are the main causes of staff turnover?
The four main causes of turnover are lack of growth and progression, inefficient management, inadequate compensation, and poor workplace culture.
Why might an organization have high turnover levels?
High turnover levels can be a sign of organizational mismanagement and poor workplace culture. However, turnover also varies by industry. For instance, the hospitality industry tends to have high turnover rates in part because of low barriers to entry, abundance of jobs, and ease of switching companies.
Before assuming that turnover is the sign of bad business, compare the company turnover rates to competitors’ rates and speak to current and former employees. Even if industry turnover is high, organizations can improve personal retention rates.
Why should companies care about turnover rates?
The cost of hiring, training, and replacing employees adds up. According to Gallup, turnover costs US businesses an average of one billion dollars per year, and can cost individual businesses anywhere from thousands to millions of dollars. Improving employee retention rates benefits the bottom line. Not to mention, lower rates of turnover typically mean less overwork and less stress for remaining employees, resulting in a better work environment. Also, when staff leave an organization, chances are high that they move to a competitor. Losing star employees to rival companies can put organizations at a market disadvantage.
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