Employee Turnover: The Costs are Higher Than You Think
By John Tschohl
Employee turnover is higher—and more costly—than you think it is. The average turnover per year in the United States is 25 percent. In some industries—such as restaurants, hotels, telecoms, and retail—it can run as high as 50 percent.
The numbers can be staggering. According to the Bureau of Labor Statistics, 3.5 million people quit their jobs in February 2024. If that doesn’t scare you, it should.
And yet, very few companies know, or measure, the cost of employee turnover. When employees making $20 an hour leave you, the cost of replacing them can be as much as 100 to 150 percent of what you were paying them annually. Those costs include recruiting, hiring, and training.
Employee turnover has hidden costs, as well, including decreased productivity and low morale. When an employee leaves the company, other employees have to take up the slack. Remaining employees often resent the employee for leaving and resent management for asking them to do more as it searches for a replacement.
It’s critical that you invest in strategies that will help you retain employees and save money at the same time. In order to develop those strategies, you must identify why employees are leaving you. That means conducting exit interviews and asking those employees to be brutally honest with you when sharing with you their reasons for leaving.
Listen to what they say and learn from it. Then take what you’ve learned and address those issues with other employees.
Most managers think employees leave because of low pay; they couldn’t be more wrong. I think there are three reasons they leave. They don’t feel valued, loved, and appreciated. There is friction in the workforce, so employees don’t work as a team. And, finally, they haven’t been trained in customer service. If your employees don’t have strong customer service skills, customers—especially those who have a problem with a product or your company—will chew them up and spit them out.
Other reasons employees give for leaving their jobs include a lack of growth opportunities, unclear business goals or directions, and uncaring managers. They cite leaders who micromanage, don’t communicate well, aren’t motivating and aren’t empathetic. Employees who have quit their jobs also blame managers who don’t recognize the efforts of their employees, and don’t provide continuous training to help them build their skills and succeed.
Since high employee turnover can be the result of poor management, it’s important that you hire and retain good managers. Those managers should be people with great communication and coaching skills. They should be people who genuinely care about their employees and do whatever they can to ensure their employees are successful.
It’s critical that you recognize why your employees are leaving you and then take whatever steps are necessary to address those issues. Just as you want your customers to be loyal to you and your company, you must do whatever it takes to ensure that your employees are loyal to you and will stay with you.
For more information on John Tschohl and the Service Quality Institute,
visit www.customer-service.com.
John Tschohl is the founder and president of the Service Quality Institute—the global leader in customer service with operations in more than 40 countries. He is considered one of the world’s foremost authorities on all aspects of customer service and has developed 18 customer service training programs—including Coaching For Success: Motivating and Managing and Even Firing For Improved Employee Performance—that are used by companies throughout the world. His monthly strategic newsletter is available online at no charge at www.customer-service.com. He can also be reached on Facebook, LinkedIn, and Twitter.
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