Impacts of Staff Turnover on Company's Revenue (Essay Sample)

Impacts of Staff Turnover on Company’s Revenue
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Outline
1 Introduction
2 Low productivity
3 Cost of staff turnover
4 Knowledge management
5 Collapse of companies
6 Impacts of new staff
7 Conclusion
Impacts of staff turnover on company’s revenue
Introduction
Turnover is an accounting term that is used to explain the amount of money an organization makes in a given period from its customers. However, "the same word is also used in non-accounting sense to refer to the rate at which people come and go, and it is normally applied in referring to staff and customers," (Fraser-Sampson 50). "Turnover can also be described as the voluntary and involuntary permanent withdrawal from an organization," (Robbins 18). Employees’ turnover has both positive and negative effect on a given organization’s revenue. However, high staff turnover depict poor self-esteem or observance of unsound practices within an organization. On the other hand, "high customer turnover portray customers’ dissatisfaction with products and services offered by a given company," (Fraser-Sampson 50). This paper aims at providing detailed information as to why staff turnover is bad for the company’s revenues. It will expound on issues such as increase in recruitment and training costs as a result of staff turnover.
Low productivity
High staff turnover may have a negative impact on a given organization. It may lead to the decline of the rate at which an organization’s produces its products if potential workers withdraw. "In the United States contest, the average total national turnover is about 4% per month, which leads to about 48% turnover per year," (Robbins 18). Unfortunately, over 90% of the people that leave their respective jobs in the U.S have been found to be better than their superiors. Thus, it is evident that when turnover is high, a company loses competent workers and as a result lowering the company’s revenue.
Cost of staff turnover
"When taking into account the expenses (such as time taken in selecting and recruiting employees, and the lost productivity in a given company), the cost of staff turnover is very high," (DiJulius 14). According to DiJulius (14), the cost of replacing an employee in any organization is approximately 145% of a working employee. This clearly outlines what organizations face financially when the rate of staff turnover is high. "For instance, for an organization with only 2,000 employees, an average salary of $60,000, and a turnover rate of 10%, the annual cost of turnover is $12 million," (Eldridge 75). On the other hand, reducing the rate of staff turnover by a slight percentage of about 1% would save $120,000 per year. This is because of the amount of money incurred in advertising new positions, training new employees, and loss of income as a result of underutilizing some equipment. Thus, it is evident that staff turnover contributes to the reduction of a company’s revenue.
Knowledge management
"Knowledge management refers to how organizations create, retain, and share knowledge," (Eldridge 75). It is one of the key factors that organizations pay attention to very much. This is because of an increase in competition among organizations as a result of technological advancement. Additionally, most organizations perceive staff members as personal assets because of their great understanding of theoretical foundation of the organizations. Unfortunately, the arrival of new staff members and leaving of others contribute to the loss of company’s information. Such periods also exerts great challenge to a company during critical moments such as periods of crucial structural changes. Moreover, the knowledge lost from the leaving employees is a long-term problem that contributes not only to emergence of other problems, but also inefficiency of a company. The leaving staff have the potential of taking with them relevant knowledge required to run company activities.
Collapse of companies
Staff turnover has also a great relationship with collapse of companies. In most occasions, it portrays that a company is either failing in its selection of employees or is providing an environment that is not conducive for long-term commitment of employees. This leads to most investors loosing trust on the companies and as a result loss of not only investment, but also decline in revenue.
Impacts of new staff
Sales department for any business organization is usually sensitive to staff turnover. This is because the incoming salesperson(s) may not be acquai...