Staff Turnover Research: Costs, Effects & Statistics

What the research shows on the impacts of staff turnover

Research gives us even deeper insights into the reasons that lead people to leave their jobs, and the resultant impact and costs to business.

We talk about the visible costs of staff turnover, such as direct hiring costs, but also the less obvious impacts, such as supervision time and loss of productivity.

Through our research on staff turnover we also learned more about the key reasons and factors that lead someone to leave their job, including personality, demographics and leadership.

Watch the next video in the series here:

Part 6 – How to Reduce Staff Turnover: Strategies and Methods

And watch the previous video here:

Part 4 – Why People Leave Their Jobs: Push and Pull Factors

And if you know of anyone who would benefit from this video, please share it with them.

Video Transcript

Research findings on staff turnover

Hi, Andrew from SACS and welcome to video number five in our 6-video sequence about why people leave their jobs.

In the sequence to date, we’ve dealt with issues such as, how do you measure staff turnover and what is an acceptable staff turnover rate?

We’ve talked about making sure that our prospective hires know what they’re letting themselves in for so they don’t get disappointed and leave.

We talked about hiring practises and how they can affect the staff turnover that we experience.

And in the last video we talked about push factors and pull factors and how to identify, through a thing called a post exit survey, why people are actually leaving your organisation.

So in this video, we’re going to share some research findings with you.

These are findings that have been undertaken in direct research by SACS, and some of them have been undertaken from the world in general of organisational psychology.

Estimating the cost of staff turnover

Many organisations have taken different perspectives to trying to work out what the cost of staff turnover is.

And some years ago, I was involved in a steering committee of an Auditor General’s audit into HR practises within the public sector.

And one of the things that they sought to do was to actually cost staff turnover.

Now, if you look at the studies that have been undertaken to do this, some people estimate it as low as 33% of the salary of the person who’s leaving.

So let’s say the person’s paid $100,000, they come on board, and let’s say two or three months down the track they leave.

You would value that, some would say at $33,000. Others would value it much higher. And I’ve seen estimates in certain positions.

Let’s say it’s a position that takes an enormous amount of training.

So let’s say you hire people, you undertake very significant training, and for instance, here in Australia, meteorologists, their first year with the Bureau of Meteorology is to undertake a graduate Diploma in Meteorology.

So you can imagine you invest this enormous amount of training, and let’s say a person leaves one year and one day down the track, well, obviously that’s a big problem.

So the cost of staff turnover will vary from situation to situation, but there are a number of components to that cost.

One is, of course, the sheer cost of hiring. So if you hire a recruiter, they’re going to charge you somewhere between 15 and 33% of salary straight away to recruit that position.

Then you’ve got the training cost, then you’ve got the supervisory cost, then you’ve got the loss of productivity.

And so, for instance, if the person is in some sort of a revenue-generating role, you’ve lost all that revenue.

The hidden costs of staff turnover

So, look, it’s an inexact science, but most people would say, let’s say, between 35% and 80% of salary, so it’s expensive.

Now, in short, much of that is hidden because the costs of supervision and the costs of training are quite often rolled up, and productivity, rolled up into a general day-to-day business kind of an effect.

So you don’t really see them. They don’t appear on any balance sheet or P&L, so it’s way more expensive than simply the recruitment fees. It’s an expensive thing.

Now, we certainly know that work groups that have high staff turnover and have really clear P&Ls, they struggle to get the profit much more than work groups that have got more modest turnover, let’s say 10 to 12% turnover.

So it’s a measurable difference.

The real reasons why people leave

But I want to show you some other really interesting findings on the question of staff turnover.

And I want to familiarise you with a study that we undertook at SACS, where we measured the reasons for leaving, of something like 2000 people across Australia and New Zealand.

And this was a major study into why people had left their jobs.

And also some characteristics which identified, were there differences, let’s say in gender or in background or in salary or something like that, as to why people left their jobs?

So some characteristics of this study – it was Australia and New Zealand wide, we measured over 2000 people, about half and half in terms of male and female and good breakdowns, representative breakdowns here in Australia and New Zealand about the various ages of the participants.

And we measured the push factors – in a previous video, we explained a push factor is something that pushes people away from their job and pull factors – things that tempt people to leave their jobs.

We ask them 49 questions. I’m not going to go through them in detail in this presentation, but they’re there if you want to check them out in a little bit more detail.

And here’s what we found (refer to the video).

By the way, you’ll notice that these percentages add up to way more than 100, because it turns out that most people don’t leave a job just for one reason alone. They leave a job often for two or three reasons.

So when we ask people why they left their jobs, they quite often gave us multiple reasons as to why they left their jobs.

But usually there was one or two that were most dominant.

The single greatest reason for staff turnover

And the single greatest reason for leaving jobs in Australia and New Zealand was, I moved to a more exciting opportunity. So you would call that a pull factor.

So it’s great, isn’t it, because nearly 35% of people in Australia and New Zealand had left their job because they found something more wonderful. That’s great.

Not a great deal that you can do about that, you might say. Although I would raise the question about whether that’s true.

You know, as we’re talking about reducing staff turnover, one of the most powerful things that you can do to overcome this characteristic of, I found a more exciting opportunity, is to create a greater possibility of finding exciting opportunities within your own organisation.

I often like to think of organisations in terms of internal career markets.

An organisation that has a good internal career market doesn’t have many restrictions about whether I can move from this division to this division, let’s say, or from this type of role, with training, to this type of role.

And some organisations have set themselves up to try to be helpful. They gazette opportunities internally, maybe on an intranet or something like that.

They encourage internal candidates to apply for these jobs. Some will even say, we look at internal candidates before we look at external candidates.

All of those things create an internal career market and that can be excellent to cause people not to have to leave your organisation to find their next exciting opportunity.

So consider in your own organisation the barriers that you have and the encouragements that you have to create a really open internal career market.

Why good feedback really matters

Then there’s absence of clear performance feedback.

Well, clearly that is a leadership capability, isn’t it? I didn’t give this clear performance feedback, so they quit.

Now, in a previous video, I said, People join a job and leave a leader. Well, this is clearly a leadership characteristic, isn’t it?

So are your leaders taking the opportunity to make it clear to people what they’re doing well and to guide and coach and support them to do their job better?

Human beings love to learn and if you support people to advance their learning and careers, then they’re much more likely to stay with you.

“A better paying job.” Really?

The next one is, I moved to a better paying job, so that’s the third reason. And so very often clients have told me that’s reason number one.

But when you conduct a post-exit survey with a third party, you may well find that it drops down to number three.

And this is where every organisation should undertake remuneration reviews.

You know, what’s the problem with going out and paying somebody to find out whether you’re paying people appropriately?

If you are actually underpaying people, then you’re going to lose more people to comparable jobs that pay better.

Seven more reasons people leave

#1 – The next one is a bad relationship with my supervisor. So once more, we have a leadership aspect here.

In the very next video, we’ll be talking about things that you can do to reduce staff turnover, and I’ll be explaining a style of leadership that works well from a retention point of view.

#2 – Then we talk about the fact that the job turned out to be different from what I expected.

In an earlier video, we addressed the question of whether people know what they’re letting themselves in for when they join your organisation.

If we can get people to experience what it is through work sampling, but also reference checking us before we hire them, yes, we will reference check them, but get them to reference check us.

So when they join us, they’ve made a wise decision about the fact that they’re confident they will fit into what we’re doing and they’ll like it. That will reduce staff turnover as well.

#3 – The organisation was perceived to be unsettled / negative environment.

18% of people in Australia and New Zealand left for that reason, or at least that was a contributing factor.

People don’t like chaos, do they? It makes sense.

I guess the guide there is, try not to be a shambles as an organisation if you want people to stay.

#4 – The work was not meaningful. Again, that kind of relates to the earlier question of whether the job turned out to be different from what the person expected, because people love to do meaningful work.

But that’s one of the reasons people do work.

Yes, they want to get money, but if they’re getting money by doing something meaningful and something that contributes in some sort of an important way, of course, that’s far more attractive.

#5 – And then the job was too demanding or stressful.

#6 – Negative experiences with colleagues is another contributor, and a very small contributor is where people were leaving for personal reasons not related to the job.

#7 – And the personal reasons not related to the job might be my spouse relocated or I had some issue where I had to go and rejoin a family member or something of that nature.

Differences between industries

Here we’ve got health and community services, and here we’ve got personal and other services, and in fact, these were just two of about a dozen sectors that we compared in terms of their reasons for leaving.

And you can’t really see this in great detail, and I don’t want to dwell on it in great detail.

So what we’ve got is quite similar orders for why people left with the most important thing being moved to a more exciting opportunity, and the least important being leaving for personal reasons not related to the job.

And I guess the key message that I wanted to give in all of this is that we didn’t actually find massive differences between sectors. So the reason you leave, let’s say banking, is often very similar to the reason that you would leave a manufacturing organisation.

They’re human reasons rather than industry-based reasons.

Gender differences?

Gender observations. Do women leave jobs for different reasons from men? And the answer is clearly and emphatically no.

In fact, the similarities between male and female results are very stark. So women leave their jobs for very similar reasons to men and vice versa.

So it’s not a gender-driven kind of a characteristic either. Again, similar sort of ranking as to what’s important and what were the main reasons.

But even the magnitudes you can see in this diagram are relatively similar.

Does age play a factor?

Then the question of age. Now we do get different reasons for age move to a more exciting opportunity.

Sadly, as we age, we get less likely to do that. And absence of clear performance feedback, we’re seeing a decline there.

And in fact, I’m not entirely sure what’s going on.

There is evidence, by the way, empirical evidence that younger people need more feedback than older people, largely because I guess by the time you get to a certain age, you’ve sort of decided whether you’re good or bad at what you do and you don’t rely on feedback so much, so that declines.

But organisation was perceived to be unsettled that actually increases as we age and so maybe we become a little bit more sensitive to disorganised organisations as we get older.

Perhaps a little less tolerant. You may have heard of a thing called the grumpy old man, grumpy old woman effect.

It is a statistical and psychological fact that that happens. So maybe as we age we just get a little bit less tolerant to what goes on around us.

If we think it’s disorganised, then the job turned out to be different from what I expected and you see that that, in fact increases somewhat across age until we get to 51 years or older and then it declines.

Move to a better paying job again kind of gloomy, but older people tend to do that far less than younger people.

Bad relationship with my supervisor. Well, in fact, older people tend not to have that so much.

And I guess one of the things that could be a driver there is that we found the type of supervisor that we like to work with by the time we’re 50.

Work was not meaningful. Hey, older people find their work more meaningful and I guess once more it may well be because younger people are still in the act of discovering the job that they’re going to love.

And then we move on to the job being too demanding and stressful. Interestingly, younger people perceive that more often than older people.

Negative experiences with colleagues. Line ball I guess the middle rank is slightly higher.

And I left for personal reasons not related to the job.

And not surprisingly that increases as one ages because I guess you run into health problems or maybe you’re with a partner who has health problems or friends who have health problems, because of the fact that you’re elderly.

The influence of salary on staff retention

Salary observations. Top of this set of bars, we have the lowest paid and at the bottom we have the highest paid.

Move to a more exciting opportunity, well, line ball in the middle. Certainly low when you’re lowly paid, but people who are highly paid often move for more exciting opportunities.

Absence of clear performance feedback. You’ll notice highly paid people very rarely do that in comparison with the rest of the population and I don’t know whether that’s that they’re getting more feedback or they need it less.

Organisation perceived to be unsettled. Slight tendency there to, as you’re more highly paid you’ll be more likely to do that.

Job turned out to be different from what we expected.

Highly-paid people tend not to have that experience and I guess that may well be because of the intensity of the recruitment process and the number of recruitment interviews that take place. So it’s hard to misunderstand.

Move to a better paying job. No great result there.

Bad relationship with my supervisor. Interestingly, the people from 70 to 100 seem to have more of that than people who are lowly paid and higher paid. So that’s an interesting distribution.

Work wasn’t meaningful. Well, the more highly paid you are, I presume that your work is more meaningful.

Job too demanding and stressful.

Interestingly, people who are at the highest salary level do that, leave their job for the perception that it’s too demanding or stressful, much less than people who are lowly paid.

Now we measured resilience of people across Australia and New Zealand, thousands of them, and we correlated that with income.

And certainly one of the things I think you’re paying for when you pay people a lot, you’re paying for resilience.

So people who are highly paid are often more resilient and perhaps it’s because they’ve had to work their way up through the levels of seniority.

Then we talk about negative experiences with colleagues and that seems to decline as you get paid more.

And left for personal reasons. Now that happens when people are extremely lowly paid, but I suspect that’s because they’re part-time and it may well be that work is not their only issue in life.

I mean, maybe their parents or maybe they’re associated with caring or something like that.

So it’s probably not surprising that people who have these other significant issues in their lives leave for that reason.

Personality traits and values that matter

I want to talk about the relationship between personality and values and reasons for leaving.

When we look at the reasons for leaving that people have, you will find, if personality and values has nothing to do with it, you will find no mathematical relationship between a certain reason for leaving and a person’s personality or values.

In other words, if there was no mathematical relationship which says a certain type of personality quits for this reason more often, then you’d be able to conclude, well, this happened to them.

Let’s say I had a bad relationship with my supervisor and there was no personality characteristic there.

What that would mean is that the supervisor was just bad.

It wasn’t to do with the person’s perception of badness.

If there is a relationship between personality and values and these reasons for leaving, that says that if we’d hired people with slightly different characteristics, they wouldn’t have perceived that it was necessary to leave and they may have stayed more.

That’s why we were looking at this issue.

Now what do we mean by personality? I won’t go into this in great detail. There’s plenty of information about this on the web.

This is the HEXACO model of personality. And all I want to say is we’re using the HEXACO model of personality in this particular study.

Then values, we’re using the Schwartz Individual Values models. He calls it the Schwartz Portrait Values questionnaire.

So we’re measuring values using the Schwartz instrument. And Shalom Schwartz is one of the greatest researchers in the world on the topic of values.

Multiple publications, many, many citations, data based on literally millions of people. It’s big data research and impeccable high-quality research.

So when Schwartz gives us an outcome about someone’s values, I think it can be relied on.

Using a stepwise multiple regression process, what we’re able to do is to identify the key characteristics of people who left the job for personal reasons not related to the job.

Now, over here you see this adjusted R squared. You can call that a percentage accuracy figure.

So this is 23% of the variance in people leaving the job for personal reasons not related to the job was due to these personality and values characteristics.

So what does that mean?

It means that if you have 1000 people, 23% of them may leave that job for personal reasons or their perception that there are personal reasons that cause them to need to leave the job.

23% is a lot because the accuracy of your average interview is 12%, the accuracy of your average reference check is about 7%.

So don’t ignore 23%. That’s big in the world of recruitment.

The predictors of job success

And if we look at the predictors, and what it shows is that people who are low in perfectionism were more likely to perceive that they had to leave the job for personal reasons.

What does low perfectionism mean? It means people who are not very good at dotting the i’s and crossing the t’s.

So people who might be a little bit scrambled or disorganised in the way that they do things, they’re the people who are most likely to leave the job based on a perception they had personal reasons.

Stimulation. Stimulation is of value and it means, I believe it’s good to do new and different things.

Well, even though they perceived that they were doing it for personal reasons, a fair slice of them were doing it because they were simply seeking more stimulation.

Sentimentality. Sentimentality is all about feeling the feelings of other people, and you can imagine that if somebody near to you needs care, a person who has high levels of sentimentality is going to feel deeply about that person, and so that may have led them away.

Then tradition. Highly traditional people are much more likely to have left the job for reasons of a perception of personal reasons.

And also low liveliness. Low liveliness is where people are gloomy, pessimistic, not very cheerful people.

So interesting, isn’t it?

Now, of course, we’re explaining 23% of the variance based on personality, and so there’s what 75% to 80% of the variance explainable by other things.

Of course, people who have extremely positive and favourable personality characteristics are going to leave a job purely and simply because they have to look after somebody else or something like that.

But it is worth noticing that if you recruit people who have these characteristics, highly emotional people, for instance, people who are perhaps a little disorganised, then don’t be surprised if that would increase your staff turnover across a population.

Like if you’re recruiting 50, 20, 100, 200, 1,000 people.

Bad relationship with supervisor, and the R squared here is only about 14%. So 14% is not nothing.

But actually what it means is that most people are leaving because they actually have a bad supervisor, or at least think they have a bad supervisor.

Now, the characteristics that cause people from a personality and values point of view to feel that they have a bad supervisor.

One is low stimulation causes people to perceive that they have a bad relationship with a supervisor.

So low stimulation means I believe it’s better to do things that I’m used to and to not have much risk, and so that causes people to be more likely to leave.

Highly traditional people. And by the way, you see, tradition pops up a bit.

So if we’ve been brought up to believe this is the way that things should be done, maybe the supervisor is asking us to do something in a slightly different way, we quit.

Liveliness. So cheerful people tend to perceive that they have bad relationships with their supervisor.

I reckon I know exactly what’s going on there.

People who are cheerful sometimes have to report to leaders who are gloomy pessimistic and cynical and cheerful people hate that. So they quit.

Social boldness, people who are socially bold may well be more confident to quit because of the fact that they have that social boldness.

And if they are confident and they feel that their relationship with their supervisor is bad, that may well drive them away.

And also people who are high in greed avoidance, and so they’re not greedy people, they will perhaps think, all right, well, I’ll leave the supervisor purely and simply because I want to go on and experience better things in my work life.

Why meaningful work is important

So let’s talk about the perception that work is not meaningful.

And I think that this is a meaningful set of results because the effect size here is close to 30%.

And so you can imagine a thousand people, 300 of those, might leave their jobs because they perceive the work is not meaningful, not because of the work, but because of their personality and values characteristics.

So let’s look at the key drivers of that.

Number one is fairness. People low in fairness tend to perceive their work not to be meaningful.

So they’re people who are dispositionally not inclined to equal solutions, not inclined to just solutions.

So it’s almost like this unjust perspective says, well, I feel I’m somehow being wronged, and that’s why I’m going to leave my job.

Interestingly, people who are low in greed avoidance tend to be more likely to stay because that’s what this means.

High greed avoidance means that they’re likely to perceive their work not to be meaningful.

And the effect there, I think what’s going on there is that if a person is a greedy person, a person who really wants to get ahead commercially, well, maybe the meaningful work perception is not so important there and they’ll stick with it because it pays well, for instance.

But then sincerity. So people who are low in sincerity tend to find that their work is not meaningful.

So low in sincerity means people who are inclined to say what they think will get them ahead in life, who will be manipulative.

They’re more likely to perceive their work not to be meaningful.

Low in liveliness. Well, that’s perhaps not surprising, because people who are low in liveliness tend to be people who are not very cheerful, not very optimistic, not very chirpy.

And well, you know, the perception that my work is not meaningful is being driven partially by a kind of a pessimistic outlook on life, which, as mentioned earlier, has a pretty strong genetic component to it.

And then finally organisation. Highly organised people can find their work not to be meaningful.

And I guess if you’re a highly-organised person, then if the place is shambolic or the way that the work is being run is shambolic, maybe that’s a little bit more difficult to cope with.

Making sense of it all

Now you notice that some of these things seem to be positive and some of them seem to be negative.

As an old boss of mine used to say, human beings are unrepeatable miracles, and so don’t be surprised when you get these results, which are all tending to staff turnover, but some of them are kind of what you might consider to be socially positive things like being organised and others are negative things like being pessimistic or gloomy or cynical.

There’s some research findings about why people leave their jobs and the next one is a kind of a wrap up of the six videos where we’ll be talking about how to reduce staff turnover and increase retention.

So it’s a real focus on a “how to”, a kind of a checklist of the things that you might like to consider if you want to reduce staff turnover in your organisation.

Click on the links below to follow the next in the sequence.

Watch the next video in this series to find out more about managing staff turnover:

Part 6 – How to Reduce Staff Turnover: Strategies and Methods

And watch the previous video here:

Part 4 – Why People Leave Their Jobs: Push and Pull Factors

And if you’d like some help to improve your staff retention rates, contact us to discuss our Psychometric Testing and Workforce Planning services.