How to think about the cost of employee turnover

How to think about the cost of employee turnover

It’s time to start thinking critically about how to increase employee retention.

Get the book
All Resources How to think about the cost of employee turnover

Alright, so we know it’s expensive. But what can be done?

First and foremost, acknowledge that there are some problems that you can solve by throwing money at them, but employee satisfaction isn’t one of them. Multiple studies show that while under-compensation can definitely contribute to employee churn, over- compensation won’t make up for a bad workplace. Your well paid but unhappy employees will simply leave you and make their money somewhere else.

‘‘ Instead, focus on growth, impact, and care ’’

So view market-rate compensation simply as table stakes, and spend your energy focused on the next level of Maslow’s hierarchy of employee happiness: opportunities for growth, the ability to have impact towards a purpose, and a caring environment that makes them feel valued.


Growth is fundamental to human happiness; the hedonic treadmill was built into all of us, and humans constantly seek growth and change.

The craving for growth is especially visible for the younger generation that is coming to dominate the workforce. Younger workers are more easily able to prioritize things like personal growth and career opportunity over income and job security.

Giving your employees authentic opportunities for growth is something you have to build into the fabric of your company. Here’s a few questions to ask yourself to check whether you’re on the right track or not:

  • Have you had conversation with your employees about their long-term personal goals?
  • When a capable person on your team wants a role bigger than her past experience, do you give her a shot or do you simply hire someone with more experience?
  • When people need to acquire new skills to advance their careers, what does your company do to help them?
  • If you don’t build a culture that deliberately provides good answers to these questions, it’ll be a matter of time before your employees start looking for a workplace that does.

2. Impact

Impact applies at two levels; the impact your company is having on the world, and the impact an individual is having on your company.

People want to know that what their company is working on matters. Articulating a clear and purposeful company mission is important not just because it help people prioritize their work, but because it helps them keep going through hard times and know they’re part of something that matters.

To give a tangible sense of impact, they need to know that what they’re working on is contributing to a mission that matters. If someone builds and launches a new product they will certainly feel some satisfaction, but if they can say, “I built a new product which is going help our company accomplish a much broader mission” that will mean much more to them.

3. Care

Finally, and just as critically, is creating a workplace that cares.

Feeling cared for and recognized addresses another basic human requirement; the need for human relationships and for others to acknowledge to us that we matter to them.

You need to build a culture where people respect and appreciate each other. A culture of care and appreciation doesn’t mean throwing around constant, meaningless praise. Instead it’s an authentic care for others’ best interest, which can’t be faked and has to be built over time.

An environment where people feel like their coworkers have their best interests in mind comes with all kinds of benefits. Critical feedback will be more easily accepted. Frank conversations about what’s required for employees to make it to the next level will happen more naturally. Managers will want to see their teams succeed and work hard to empower them.

And, of course, employees will feel happier on a day to day basis knowing they are surrounded by people who don’t just want something out of them, but want something for them.