Why Not Focusing on Employee Retention Will Harm Your Business

Employee retention says many things about a company. This index is one of the most important metrics business owners need to consider. It measures the amount of talent that kept working for you during a given period of time.

It is usually represented by a statistic, known as retention rate. But it stands for more than that. Many experts argue that retention should be thought of more as a strategy than an outcome.

Low performing people that show no signs of improvement are a bad thing for your business. But any company must make efforts to retain its top performers. They are the ones that matter. If you’re not focusing on employee retention, you’ll lose a lot. Let’s look over how your business can suffer.

It’s a Valuable Waste of Time and Knowledge

A high employee turnover rate can be extremely expensive to your business. It affects the knowledge base in your company. As old and experienced employees leave, the new ones will not possess the same strengths.

That means that the rest of your employees will have to teach the new ones. The process takes time and that is a resource we can’t afford to waste.

It Sends a Negative Message

Imagine if many of your top performers left during the same period of time. Would you expect the rest of your team to feel secure in their positions? Probably not, because a clear negative message has been sent to the rest of the team. It will make the ones that stayed feel replaceable and insignificant.

That is a bad situation for any business owner that can quickly spiral into other complications. With a negative message sent, employees can experience a lack of motivation. That will turn them into low performers, and they will be one step away from leaving. The ripples will affect the entire company.

If you think about how easy it is to share our thoughts these days, you’ll find another important lesson. Top talent leaving your business has an adverse effect on the hiring process.

Just think about this: It is easy for an ex-employee to write a Glassdoor review about his/her negative experience. These visible reviews might be shared among the community, and you’ll get a bad rep.

Low Employee Retention Rate Keeps Your Company from Growing

If you’re not focused on your top talent turnover rate, you may find your business trapped.

You will not be able to make your company grow. You will be forced to invest a lot of time and money in training. Your business can not get bigger without experienced employees.

Consider the costs as well. A low employee retention rate is expensive for your business. Studies show that the cost of directly replacing an employee can start from 50–60% of the employee’s annual salary.

But the total cost of turnover can reach as high as 90–200% of that. Why? Because you spend money and time on:

  • Candidate views
  • New employee training
  • Recruiters’ salary
  • Separation processing
  • Job errors
  • Lost sales
  • Reduced morale

So, if you don’t nurture your top performers to keep them in your company, you’ll get stuck in this loop.

It Negatively Impacts Customer Service

A high turnover rate will also harm your business’ capability to retain customers. Clients are happier when they talk to the same employee. A connection is usually established between them, and the outcome is good for both parties.

But low employee retention rates will harm that as well. Small businesses have to take advantage of customer loyalty. But if your employees keep on being replaced, the relationship will never be as strong as it could be.

New employees will not have the adequate knowledge to solve customer problems fast. Clients will have to wait longer for a solution. There is a higher chance of errors and mistakes.

It Lowers Productivity

Workers that have gained a lot of experience can solve problems fast. They know what to look for, and they don’t need to waste time asking around. They also have the ability and confidence to make decisions.

A low employee retention rate means you will constantly have new employees. You or your managers need to keep an eye out for them. It takes time to learn the company’s policies and goals. It will take some time for them to gain confidence and skill.

If your company is small, the danger is higher. In small businesses, employees tend to fulfill multiple roles. Replacing one of them is really hard. In most cases, the replacement will be inexperienced and less productive.

It Harms Your Company’s Profit

In the end, low employee retention rates can have ripple effects. These can impact even your company’s profits. And it makes sense.

Anything that generates high costs and low productivity translates into “bad for business”.

Small companies tend to take a couple of years to generate profit. A high turnover will make them take even longer.

How to Avoid a Low Employee Retention

What you’ve read so far are the adverse effects high turnover rates have on your business. But nobody wants to reach that. So if you understood how important it is to focus on retention rates, let’s look at what you should do.

Here are a few simple and efficient solutions to avoid a low employee retention:

  • Maintain and encourage initiative — Let your employees feel comfortable offering suggestions or concerns. Cultivate a culture of quality feedback.
  • Promote from within — Let your workers know that performance is rewarded. Offer them a clear path towards higher positions in the company.
  • Create a relaxing work environment — Make sure your employees feel good at work.
  • Build a clear vision/mission for your company — Make your workers feel like their work is actually making the world a better place.
  • Offer professional development — Give them the opportunity to gain new skills and grow professionally.
  • Provide incentives and recognize outstanding work — Offer your employees a free lunch. Include health insurance and transportation as benefits of working for you. Thank them when they do a great job. Recognize and praise performance.

Employee retention is an issue many companies face. If you think strategically about your role as an employer, use proper tools to engage your people and implement smart initiatives, retention can be a badge of pride, instead of a metric to hide.


Written by Matthew Nicholas, (The better) half of the Sift growth team.

Sift is an employee engagement and transparency platform that allows organizations to better understand and engage their workforce.