12 Causes for Employee Turnover 2023 & Why High Turnover Is Bad

The effect of employee turnover on an organization’s success is undeniable. What you may not realize, however, is just how bad high levels of turnover can be. Employees are the lifeblood of a company; when they leave, it costs time and money to replace them, leading to lower morale and reduced overall productivity.

That's why CFOs and finance leaders alike need to understand the primary causes of employee turnover in 2023 so that they can take actionable steps to decrease their own organization’s churn rate and maximize long-term success. In this article, we’ll take a deep dive into what exactly makes people quit - from burnout culture to wage exploitation - we cover 12 top factors that could accelerate employee departure so you don't have to worry about workplace disruption sabotaging your profits.

High staff turnover can be detrimental to any organization, particularly when it comes to productivity, team cohesion, and profitability. When employees leave, it creates a staffing gap that needs to be filled, resulting in extra costs for the company in the form of recruitment and training expenses. High turnover also reduces team cohesion and makes it difficult for businesses to establish a company culture, which can contribute to a lack of morale among employees. This can result in lower levels of engagement and productivity, ultimately affecting a company's bottom line.

A good employee turnover rate is a critical metric for any business's success. While many organizations view a zero percent turnover rate as ideal, this is not always realistic or even necessarily advantageous. A moderate turnover rate can stimulate innovation, increase diversity, and help companies avoid the dreaded "groupthink" mindset.

In general, a turnover rate between 5 to 10 percent is considered a healthy range that allows companies to retain their best talent while still bringing in fresh perspectives and skills. However, it is important to remember that every industry and business is unique, and what may be considered a good turnover rate for one company may not be for another.

Employee turnover can be a major problem for businesses, affecting productivity and profit margins. Research has identified 12 common causes of employee turnover, ranging from inadequate compensation to a lack of growth opportunities. But businesses can take steps to reduce turnover by addressing these issues head-on.

First, we must understand the root causes of employee turnover to be able to take the necessary actions to reduce it and set the business up for long-term success.

The #1 issue for turnover is employees need to feel a sense of purpose in their work (or a lack thereof). Unfortunately, many organizations fall short of providing that crucial feeling. When employees lack a sense of purpose, productivity decreases, turnover rates increase, and overall morale can suffer. Every job, no matter how small, plays a vital role in the functioning of a company. Employers who neglect to recognize that fact risk losing their most valuable asset: their employees. Providing clear goals, tasks, and growth opportunities can help employees feel purposeful in their roles. Companies that prioritize employee purpose will see benefits in the long run, such as increased productivity and more positive work culture.

Closely related to employee purpose (but not the same thing), when employees feel that there are no chances for growth or development in their current positions, they may become disengaged or even seek opportunities elsewhere. Employers who acknowledge the importance of employee growth and development are more likely to retain their talent, as well as attract new talent. Providing opportunities for training, mentorship, and advancement not only benefits the employee but also the company as a whole. It fosters a culture of learning and innovation, increases employee satisfaction and motivation, and ultimately leads to increased productivity and profitability. Employers can take simple steps like offering regular performance feedback, encouraging employees to pursue professional development opportunities, and creating career paths for employees to showcase their skills and talents. By investing in their employee's growth and development, employers can cultivate a strong and committed workforce for years to come.

Poor management is a detrimental issue in any workplace. It's one of those problems that can affect every aspect of a company's performance, from customer satisfaction to employee morale. Poorly managed teams can result in wasted resources, decreased productivity, and even legal troubles. The consequences of poor management aren't limited to the work environment, as unhappy employees may take their dissatisfaction home with them, leading to increased stress levels and absenteeism. Ultimately, organizations with inadequate management will struggle to retain talent and stay competitive. Therefore, leadership needs to recognize the signs of ineffective management and take action to address them promptly.

Being overworked is a common issue faced by many individuals in the workforce. It can lead to physical and mental exhaustion, which can not only affect their job performance but also their personal lives. When an individual is overworked, they may experience burnout, causing a decline in job satisfaction and motivation. Employers need to recognize the signs of overworking and implement strategies to alleviate the workload. This can include hiring additional staff, providing support for employees, and setting realistic goals and deadlines. Individuals must prioritize their well-being and communicate with their employers when feeling overwhelmed. Taking breaks, setting boundaries, and asking for help when needed can ultimately lead to a more productive and healthier work environment.

Employee recognition and rewards play a crucial role in keeping employees motivated and engaged in their work. Unfortunately, many workplaces suffer from a lack of recognition and rewards, which can lead to decreased morale and productivity. Employers need to understand that recognition doesn't have to be expensive or complicated. A simple "thank you" or acknowledgment of a job well done can go a long way in boosting an employee's confidence and sense of purpose. By making recognition and rewards a priority, employers can create a positive work environment where employees feel valued and motivated to perform at their best.

A toxic workplace culture is an environment where employees regularly experience high levels of stress, low morale, and a lack of support from their colleagues and management. It can stem from several factors, such as poor communication, ineffective leadership, and a lack of work-life balance. This type of culture can have severe consequences for both the employees and the company, resulting in decreased productivity, high turnover rates, and damage to the organization's reputation. Leaders play a critical role in shaping workplace culture, and it is important to prioritize creating a positive and supportive environment for all employees. By doing so, companies can improve their bottom line and create a more fulfilling workplace for their employees.

Job insecurity is a growing concern in today's workforce. As companies restructure and downsize, more and more employees are finding themselves without job security. This uncertainty can lead to increased stress, anxiety, and financial instability. It can also impact employee productivity and motivation. In addition, job insecurity can affect an individual's personal life, as they may struggle to make long-term plans such as buying a home or starting a family. Both employers and employees need to recognize the impact of job insecurity and work towards finding solutions to alleviate this issue. By improving job security, companies can create a more positive work environment and promote employee well-being.

Work engagement plays a crucial role in the productivity and success of any organization. However, lack of work engagement is becoming a prevalent issue in workplaces. Employees who are not engaged in their work are less motivated, less productive, and less committed to their roles, leading to decreased organizational success. Employers need to recognize the importance of work engagement and find ways to create a positive and engaging work environment. This can involve offering employee development opportunities, providing feedback and recognition, and promoting a culture that values employee well-being. By taking steps to address work engagement, organizations can create a more motivated and productive workforce, leading to increased success and growth.

When communication and feedback are limited, it can create a challenging environment. Without open communication, misunderstandings can arise, and trust can diminish. It's essential to have clear lines of communication, so all parties involved feel heard and valued. Feedback is also critical to ensure growth and improvement. Without it, individuals may not know what areas they need to work on, and progress can stall. Ensuring open communication and soliciting feedback regularly can help mitigate these issues and promote a more productive and positive environment.

When it comes to relocating, there are many factors to consider, especially if your employees have a family. One of the most important things is in terms of schools, healthcare facilities, recreational activities, and other community amenities. Employees usually consider the safety of the area and the cost of living. Understanding family needs and being as flexible as possible with time or money to an employee can be the difference between an employee staying or leaving for a different position.

Friendship is an essential aspect of human life, and it provides important benefits such as emotional support, companionship, and a sense of belonging. Unfortunately, lack of friendship can be a significant issue for many people, particularly those who are introverted, shy, or have difficulty connecting with others. It can lead to feelings of loneliness, isolation, and depression, which can hurt physical and mental health. Additionally, social isolation can lead to a lack of understanding, empathy, and tolerance among individuals, thus contributing to societal issues. Therefore, organizations such as yours need to take steps to overcome barriers to friendship, such as offering social groups, engaging in hobbies and interests, and holding activities outside of the office that doesn't have work as the central focus.

Compensation and benefits are a crucial part of any employment package. Unfortunately, not all employers provide the same level of benefits to their employees. For some workers, limited compensation and benefits can feel like a major disadvantage. These workers may have to deal with lower pay, fewer vacation days, and less incentive to keep the business going. However, it's important to note that the value of compensation and benefits can depend on individual priorities. In some cases, employees may be willing to forgo certain benefits in exchange for a more flexible work schedule or other incentives. Ultimately, the decision about what compensation and benefits package is best for your employees will align with your mission, values, and how you look at incentivizing them.

1. Creating a positive and supportive work environment that fosters growth, development, and job satisfaction
2. Effective communication
3. Opportunities for career growth
4. Providing regular feedback, recognition, and rewards for employees' accomplishments
5. Offering flexible schedules, accommodating remote work arrangements, and investing in training and development programs
6. Competitive salaries, and benefits packages, as well as vesting cash bonuses

By implementing and prioritizing these retention initiatives, businesses can create a workplace culture that values their employees, decreases turnover rates and, ultimately, leads to success. Learn how to calculate employee retention here.

Employee turnover is a major challenge for many businesses, with the average cost per hire for a new employee estimated to be over $4,000. Fortunately, more and more organizations are recognizing the need to address this problem proactively by examining potential causes and taking actionable steps to reduce them.

High turnover is an issue that can have negative impacts on not only the bottom line of an organization but also on employee morale and company culture. Understanding why high employee turnover is bad for a business, as well as what constitutes an ideal rate of employee turnover, provides insight into how managers can prioritize activities aimed at reducing unnecessary departures from their workforce.

Learn more with the Ultimate Guide to Employee Retention & Strategies here.

Keep Financial offers a vesting cash bonus that can help incentivize employees to find a shared purpose and commitment to the organization that helps keep top talent on board. 

To learn how Keep Financial can help you deliver valuable, flexible compensation that fits the needs of today’s workforce, schedule a demo today!