Employee Turnover in Leadership: Understanding the True Cost and How to Reduce It

Why Employees Leave & Employee Retention & Recognition: a three part series

The Real Cost of Employee Turnover

One focus of Human Resources Departments, Owners of Organizations and Departments Heads is employee turnover. When there is employee turnover, the people leading that organization need to identify why employees are leaving because there is a high cost to employee turnover. The monetary cost of losing employees is just one facet (and includes variables such as overtime to cover duties of the leaving employee, lost production, costs associated with training new employees, advertising for the position, interviewing, pre-employment screening, etc.) But, it’s also important to recognize the non-monetary costs associated with an employee leaving (that can possibly lead to monetary costs): potential loss of confidence in the company by customers associated with the employee that left (or worse yet, losing those customers to the competition), lower employee morale (especially when several employees leave), and the experience, the knowledge and the creativity of the person/people that leave. You cannot measure some of what is lost when employees leave.

This month I want to talk about Employee Turnover and in the following months I will cover the topics of Why Employees Leave, and finally, Employee Retention & Recognition. Employee turnover statistics vary by field, but in every field there is a cost associated with losing an employee. If you want to look at the average statistics specific to your industry, you can visit the US Department of Labor website at https://www.dol.gov.

Average turnover rates are good to know as a comparison to others in the same industry, but the most important number for you to focus on is what you and your organization set as a goal for employee turnover. LIA is an advocate for pushing to be better than average, and in the area of employee turnover, we believe the goal should be little to no turnover – strive for excellence in this area too!

Monetary and Non-Monetary Losses

In my own research of the cost of employee turnover I came across a great tool to help calculate the cost of losing an employee. I calculated one as an example. If you have an hourly employee making just $30,000 per year, the actual cost of the turnover is $43,733 once you calculate associated costs of losing that employee. Part of the responsibility of being a business owner or department head is realizing the associated costs of employee turnover, and the real cost of losing an employee. If you’re not a numbers person, you have to become a numbers person when it comes to the cost of employees.

Practical Steps to Reduce Turnover

What’s important, then, is to minimize employee turnover and focus on employee retention and moving those employee turnover costs from their place on the expenses side of your balance sheet to income on the bottom line. First things first, hire correctly. Put the right person in the right position. Make sure they have the skills to be productive. And second, make sure you create an environment that attracts and retains employees. Be that company everyone wants to work for!

Turning Turnover into Retention

Next month we’ll talk about Why Employees Leave, so in the meantime – your homework assignment – calculate the percentage of employee turnover in your company just for last year, and then calculate the total cost of your employee turnover. If you’ve never checked, those numbers may well be staggering. (I’ve worked for companies that have as high as a 52% turnover rate! Imagine the cost savings if they just turned their attention to Employee Retention!) This is the first step toward working through Employee Turnover and turning it into Employee Retention.

Employee turnover isn’t just a human resources challenge — it’s a leadership challenge. Every resignation is a message about culture, engagement, or communication that deserves attention. Leaders who take time to understand the why behind turnover can transform costly losses into lasting loyalty.

Before the next employee walks out your door, take a closer look at your team. Are you creating an environment where people feel valued, challenged, and supported? Small improvements in leadership can lead to big savings — financially and culturally.

Explore more leadership insights like this in our LIA Learning Hub, where we share practical tools and microlearning resources to help you strengthen your team and retain top talent.