Employee turnover is an inevitable aspect of business operations, but when key talent departs, the repercussions extend far beyond just filling a vacancy. The departure of experienced employees can result in the loss of valuable knowledge and experience along with disruption to team dynamics.  Then there are the costs associated with recruiting and training replacements which takes both time and money.  However, such changes also present opportunities to reassess organisational structures, promote internal talent, and infuse new perspectives into the team.

The cost of employee turnover

Replacing an employee is a costly endeavour. Studies indicate that the true cost of replacing an employee does vary but it can be anywhere from 30% to 150% of their annual salary – sometimes even higher! That may seem an extreme claim but consider all the costs associated with a departing employee and onboarding a new one and the list is long as you will have both direct expenses like recruitment (even when conducted in house) and training, and indirect costs such as lost productivity and the disruption to client work.

Beyond financial implications, the departure of experienced employees leads to a loss of critical knowledge and experience. This knowledge is often built over years and is not easily replicated, potentially hindering operational efficiency and innovation. When a long-term employee leaves, they take with them an in-depth understanding of company operations, client relationships, and industry insights—knowledge and understanding that is difficult to capture within handover notes and can be very difficult to rebuild in the short term.

Four key reasons people leave and how you can fix it!

Understanding why employees leave is crucial for developing effective retention strategies. There are many reasons that employees leave and some are uncontrollable by the business, but the top four reported reasons, which are controllable, are:

1. Work conditions and environment

A significant portion of employees state that unsatisfactory work conditions and environments are a primary reason for leaving. Factors such as inadequate resources, uncomfortable physical settings, and lack of necessary tools can lead to frustration and decreased productivity. Additionally, excessive workloads, unrealistic expectations, and lack of flexibility can push employees towards burnout and disengagement.

Retention strategy

Regularly assess and improve the workplace environment. Ensure employees have access to the resources they need and foster a culture that promotes well-being and safety. Implementing flexible work arrangements if possible, such as hybrid or remote work options, and considering employee feedback can also enhance job satisfaction.

Realistically, you won’t be able to deliver on everything people want – be it for financial reasons, the nature of the work, differing preferences of employees or external factors that place different pressures on your business.  However, understanding the key trends regarding what are viewed as favourable conditions or benefits among your people and actively seeking to deliver on some of these (or suitable alternatives) is advised as a strong retention strategy. People want to work in an environment they enjoy.

2. Organisational changes and restructures

Changes within the organisation, such as restructures or shifts in company direction, can create uncertainty and dissatisfaction among employees, prompting them to seek stability elsewhere. When employees feel disconnected from the change process or are uncertain about their future within the company, engagement levels drop, and the likelihood of resignations increases.

Retention strategy

Communicate transparently about organisational changes. Involve and engage employees in the transition process and provide clear information about how changes will affect their roles. Offering support and being available to answer questions and training during transitions, can help alleviate concerns and build trust. Employees are more likely to stay if they feel informed and valued during times of change.

3. Lack of career progression opportunities

Employees are more likely to stay with organisations that offer clear pathways for advancement. A lack of development and progression opportunities often drives employees to seek growth elsewhere. If employees feel stuck in their roles with no prospects for learning new skills or taking on more responsibilities, they will likely start looking for opportunities outside the company.

Retention strategy

Create and communicate clear career development plans for employees. Offer training programs, mentorship, and opportunities for skill enhancement. Providing employees with the chance to upskill, take on leadership responsibilities, or move into new roles within the organisation can significantly improve retention rates.

The caveat to all of this is that sometimes there simply isn’t a pathway to promotion, however, there can still be the ability to offer training and development to strengthen skills that are relevant to the role that could also benefit the business. You can also provide opportunities for employees to take on additional responsibilities, learn new skills, be part of committees or work on special projects. These activities keep employees engaged and interested in their role.

4. Management and leadership issues

Last but by no means least, the truth is that often people leave their manager not their job.  Effective leadership is pivotal to employee retention. Poor management practices, lack of support, and inadequate communication can drive employees to leave. Micromanagement, a lack of recognition, and failure to provide constructive feedback are all factors that can lead to dissatisfaction and disengagement.

Retention strategy

Recruit or promote with intent – will this person deliver the leadership that your team needs?  Initiate leadership development programs to enhance managerial skills because let’s face it, not everyone comes pre-programmed with great leadership skills and even your leaders need ongoing development to hone and build on their talents.

Encourage open communication between team members and management and establish regular feedback mechanisms that are productive – there’s nothing worse than a talkfest that goes nowhere. Recognising and addressing management issues promptly can improve employee morale and loyalty. Additionally, fostering a culture of appreciation and recognition goes a long way in ensuring employees feel valued and motivated.

Resignation? Embrace the change

When challenges hit us in the face, sometimes it is difficult to find the silver lining but sometimes it is hiding in there somewhere, you just need look for it!  Perhaps today’s challenge is that you’ve had a key team member hand in their resignation.  What now?

Stop. 

Don’t panic and do something reactionary as this could be a chance to evaluate and enhance organisational structures.

Try to avoid entering into a salary war – offering more money for someone to stay. This always leads to issues down the track, whether it results in lack of salary parity in your business, or the specific employee understanding that in future all they need to do is threaten to leave to get a pay increase or more favourable treatment. Word gets out, and you have a completely different challenge n your hands! (of course, this is a different situation to one where the employee genuinely is underpaid across the business or industry, and taking corrective action to retain someone is an important strategy you may choose to employ).

As unsettling and stressful as it might be to receive a resignation, this may be the perfect time for you or your business leaders to take a step back and identify skill gaps, realign roles to better utilise existing talent, and provide growth opportunities for current employees through internal promotions. If you do need to hire someone external, they may come with fresh ideas and perspectives, fostering innovation and driving the company forward.

A resignation may also present the opportunity to reassess whether the vacated role is still necessary in its current form. Could it be restructured to better serve business needs? Could responsibilities be redistributed among current team members, enhancing efficiencies? These are valuable questions for leaders to consider before rushing to replace a departing employee.

That may seem contradictory to our point earlier about people leaving due to restructures, but it isn’t when you manage it well.  Remember the point about communication and engagement? A restructure can reignite flagging motivation, especially when your people see the open opportunities for advancement or a new role that delivers a chance to spread their professional wings.

Final thoughts

Employee turnover, particularly among key talent, presents significant challenges but also opportunities for organisational growth and improvement. By understanding the primary reasons employees choose to leave and implementing targeted retention strategies, leaders can create a more stable, satisfied, and productive workforce. In the dynamic Australian employment landscape, proactive and thoughtful approaches to employee engagement and retention are essential for long-term success.

Leaders who invest in their people—through supportive management, career development, fair remuneration, and a positive work environment—are far more likely to retain top talent. While some turnover is inevitable and even beneficial, businesses that focus on employee satisfaction and engagement will ultimately build stronger, more resilient teams that drive success in the long run.

If you are looking for support in managing retention, initiating training specific to your team or even a structural review of your business, contact the HR Staff n’ Stuff team for a chat.