8 Ways a High Employee Attrition Rate Can Devastate Your Company

Employee attrition can be costly for organizations in more ways than one. 

Experts estimate that the cost of losing an employee ranges between tens of thousands of dollars to 1.5-2.0 times an employee’s annual salary.

While the direct costs associated with finding and hiring new employees are well understood, the other effects of attrition can have an even more significant impact on a business’s bottom line in the long run.

Read on to find out what kind of consequences high employee attrition can have on a company. 

1. Decline in revenue

Attrition not only incurs costs in recruiting, hiring, and training, but it may also impact a business’s revenue generated from its client base. For example, if an employee in sales resigns and takes a new position with one of the competitors. In addition to losing the revenue that the sales associate would have otherwise brought in, the clients from the previous organization may follow the employee.

2. Employee burnout

An employee’s exit often leaves an organization unprepared to find a replacement immediately. In this scenario, the organization must find a way to continue operating with fewer employees than planned while achieving the same productivity goals. The extra workload on existing employees might result in working longer hours and increase the risk of burnout in the long term.

3. Decrease in productivity

The departure of a seasoned employee impacts workplace productivity. When existing employees get stretched thin, their quality of work goes down, and so does their morale and engagement.

4. Loss of tribal knowledge

Employees who quit take a lot of accumulated knowledge and expertise with them. Often known as tribal knowledge, this information is complex to pass on to another person. Others on the team need to learn it, and it needs to be effectively documented in a way that can be easily referenced. The loss of this kind of knowledge can significantly impact any organization as employees waste time and effort rebuilding it to perform productively in their roles.

5. Disrupts team dynamics

Teams have often built rapport with one another. When one employee (or more) leaves the team, it can sometimes lead to an adjustment period throughout the department.

6. Unhappy customers 

With most of the time spent training new hires, the product or service may not get delivered in a timely and quality-driven fashion. This results in unhappy customers, who may turn to competitors for better service.

7. Harms brand reputation

A brand’s reputation is one of its most significant assets. Suppose customers and other businesses notice high employee attrition. In that case, they may wonder if there are problems within the organization and, as a result, worry about the quality of the brand’s offerings and services.

8. Applicant pool shrinks

The pool of suitable candidates may shrink if an organization’s reputation declines. Job seekers tend to shy away from employers who can retain good people only for a short time. A Glassdoor survey reveals that more than two-thirds of American employees won’t choose to work at an organization with a bad reputation, even if it means continued unemployment. 

The final word

Employee attrition is more expensive than you think. Sometimes, it cannot be avoided, but businesses should minimize attrition and mitigate its impact by doing the right things for their employees. Adopting employee retention practices can save significant time and cost. Additionally, it can enhance workplace morale, productivity, and overall organizational success.

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This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.