Small businesses face multiple challenges as they grow. They encounter a tough marketplace with heavy competition for a certain audience, they have limited resources, low brand recognition, and possible employee turnover. The last one can be a costly problem. You spend money to hire, train and mentor an employee. This is an investment that takes time to get a return. However, for whatever reason, they might look for greener pastures and send in their resignation letter.

What are the costs of employee turnover? Your strategic human resource management team should look into the following.

Sunk Costs

You spend time and money on hiring and training employees. They learn new skills or improve their current ones. Then for some reason, they decide to leave for another company. The expenses you incurred become sunk costs you might never get back. Employee turnover may happen because of poor management, lack of communication, low compensation and few benefits, long working hours, no growth, and others. Improve your compensation package and managerial style, and human capital management to retain talented employees.

Drop in Productivity

A high turnover rate has a negative effect on your staff’s productivity. The remaining employees will have to take the tasks of their colleagues that resigned. Some projects may stop because of the vacancy. Your team might have to stretch themselves thin and work longer hours doing work they lack the experience or skills in. This might cause burnout in some employees and maybe the reason for their resignation. This lowers productivity and affects different aspects of your small business’ operations.

Negative Impact on Your Brand

A reputation for churning out employees on a regular basis tarnishes your company in the eyes of possible applicants. They may believe that your organization doesn’t take care of its workforce. They automatically ignore emails for interviews or online job postings. The talented and qualified applicants will seek employment elsewhere. Your small business might only receive applications from individuals who don’t care about the job and are only looking for short-term employment. You’ll miss out on high-caliber potential employees because of a bad reputation.

Low Morale

Seeing colleagues leave over and over again takes its toll on your employees. They might feel uncertain about their own jobs and the direction of the organization. Their morale drops along with their productivity. It ruins the dynamic and may leave projects unfinished and tasks delayed. They might consider resigning as well when they see their colleagues leaving.

More Resignations

Your strategic human resource management team should look out for more resignations with the high turnover rate. This happens because of the workload left behind by employees that left. This has a negative effect on morale and the work culture. Seeing colleagues leave for different reasons will make your remaining employees think about their work and future with the company.

These are the costs of employee turnover you should factor in your calculations when hiring or letting employees go. A high turnover rate is expensive, reduces your possible profits, and has a negative effect on your cash flow. When hiring an employee, consider their fit with your company culture.

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