High employee turnover causes demotivation among the remaining workers.
In most companies, favorable job atmosphere motivates employees. Employees find job atmosphere favorable when the company offers good pay and employee benefits compared to the other companies. Consequently, employees resign from companies that offer unfavorable employment terms. Alternatively, companies may fire employees who exhibit poor job attendance and performance .This scenario, known as employee turnover refers to the number of employees who leave the company relative to the total number of employees.
High Recruitment Costs
Acquiring employees for a company is a cumbersome and expensive process. It results in a series of expenses that include the cost of advertising, headhunting fees, human resource costs and new hire training . If the employees keep on resigning and being fired, the scenario raises the recruiting costs as compared to average recruitment cycles and costs.
Productivity Loss
When employees leave, the company loses experienced employees. The fresh recruits take time to adapt and acquire expertise, hence lowering the overall output. Training and orientation also take time from performing work responsibilities.
Inadequate Staff
For labor intensive companies, turnover creates vacuums in the production processes, leading to depletion of needed inventories, slowed order fulfillment and negation of favorable credit terms with clients and vendors.
Customer Dissatisfaction
Customer service quality suffers during high turnover periods. Relationships established with customers by terminated employees are developed over long periods of time. New employees may not meet the standards set by earlier employees. Sales efforts suffer when services or products are not delivered in an efficient and knowledgeable manner.
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