How Losing Employees Reduces Your Profits

Written for Fempreneurs Africa Magazine


In the world of entrepreneurship, especially in the SME sector, high staff turnover is the order of the day. What is staff turnover? This is when you hire someone, and they work for you, and then leave the organization. High staff turnover is when there are constantly changes in the faces that your customers see in your business because the old employees have moved on. In some businesses, for example the alcoholic bars and restaurants, it is almost expected that waitresses and cashiers last less than 3 months at each outlet. Employers expect this and so they do not give much thought to how important it is to invest time and resources into their employees.


This article seeks to explore why high staff turnover impacts negatively on your business and what you could possibly do to reduce this cost.


The Obvious Costs

When you hire a new employee, the costs that we are all aware of are the cost of recruitment. This is when you pay an employment agency to help you. There are costs of training – the time it takes to bring the new employee up to speed on the job requirements. And of course the salary. You may be forced to pay a higher salary for a new employee in line with prevailing trends, especially if you live in an inflationary environment. There are however some hidden costs that we often do not consider.


Hidden Costs

Work not getting done – during the time that you are recruiting and training a new employee, there is work that’s not getting done. This can result in lost sales, delays in production and failure to launch new products. These all reduce your profits.


Impact on the team – the remaining members of staff will have to do the work that the departing employee left. This may cause them to miss their own performance goals, reducing efficiency and making your business less profitable.


Loss of customers – constantly finding themselves dealing with new faces can cause some of your customers to become frustrated. Customers generally build relationships with your employees and may prefer to deal with someone they know and not a new personality every time they come to your business. These customers may lose interest in dealing with your business.


Lost credibility – your remaining staff members may become demoralized and start making plans to move on. This will increase your costs as above as more and more employees leave your organization.

What To Do


Take an audit of the work environment that you have created. Ask yourself the following questions:

  • Are my employees adequately trained and motivated?
  • Did I deploy my employees in the best possible way?
  • Are my employees adequately remunerated?
  • Do we have enough sales staff?


Let the answers to these questions form the cornerstone of your human resources policies. Keep a constant eye on what your employees expect and endeavour to deliver it. Conduct exit interviews which is where you interview every employee that leaves to establish why they are leaving. Take the feedback seriously and see if you can implement it to retain more of your staff in the future.


It is important for SMEs to work on creating environments that retain employees. This will improve your profitability and ensure that your business grows.


Leave a Reply

Your email address will not be published. Required fields are marked *