Everyone talks about how to improve employee retention rates and reduce turnover, especially in this low unemployment environment. After all, we all know how time-consuming and expensive it is to replace employees when they leave. We know how much more efficient it is to keep good employees in place rather than having to constantly be on the lookout for new hires for key roles.
But what about the other side of the coin—what about the negative aspects of low turnover and high retention? There are actually some significant downsides to this situation, as well. Let’s take a look.
Downsides to High Employee Retention
Here are a few of the downsides employers may find when they have high retention and low turnover in the workplace:
- It’s more difficult to implement change when the people stay the same.
- Negative employees stick around longer, which means they have more opportunity to spread the negativity.
- Employees who are underperforming or not meeting goals also stick around longer. Not only does this mean the organization is not at top productivity, but the company also likely has to spend more time in discipline and administration for these employees.
- It can be more difficult to foster a diverse organizational culture if there isn’t enough turnover to allow new hires in.
- Minimal turnover can lead some people to become less invested in improving their work because they feel no need to when the organization is not growing and changing.
- Innovation may stagnate due to a lack of outside ideas.
- Keeping long-term employees actually can begin to increase the salary budget quite considerably, as more employees will have significant years of experience and thus warrant increasing levels of pay. This also goes for the cost of providing benefits—many such costs increase as employees age.
- High retention means fewer opportunites to bring in new talent that has the latest skills and experience with the latest technologies. Bringing in new people can also encourage friendly competition and create incentives for others to improve.
- High retention means the organization is more likely to keep processes as they are without looking to improve efficiency because everyone is used to them.
- Employee morale can be damaged if employees stay (or are not let go) when there are problems or when some of them are underperforming or causing issues.
- Employees may be more likely to become complacent. It could also mean that the employees who remain are less likely to be proactive and push the organization forward. (Hence, they’re also less likely to be job searching.)
- HR may be less likely to put succession plans in place because it isn’t urgent, which could result in a lack of preparedness when a key employee leaves.
Of course, none of these are unavoidable—it depends a lot on the organization, its culture, and many other factors.
Has your organization found itself in a situation when high retention has caused some concerns or issues? What actions have you taken to mitigate the issues?
Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.