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How Employee Attrition Hurts the Bottom Line

The impact of these scores extended beyond perceived performance to the bottom line. After again controlling for size and other factors, the researchers found that offices with lower customer experience scores had profits of about US$486,000, on average, whereas those earning higher approval scores earned more than $1.9 million. In other words, the authors write, the offices that remained in the good graces of their clients tended to be about four times as profitable as those whose performance was perceived to wane.

“These findings highlight the financial benefits of creating positive [service brand image] in the minds of customers, as well as the importance of controlling employee turnover, and improving customer orientation and service delivery levels,” the authors write. And they believe their findings are likely to apply to many other arenas in which employees must satisfy customers’ individual requirements on a continual basis—such as financial services and healthcare—as well as business-to-business industries.

Just as it takes time for marketing campaigns or service upgrades to register positively for a firm, the negative effects of employee attrition are likely to emerge slowly, the authors write. Although layoffs, in particular, may provide savings in the short term, they can lead to significant long-term financial hits and hidden costs that managers may not anticipate. As employees leave, profits eventually go with them.

Bottom Line:
Continuity is vital in staffing, especially for service-oriented businesses that rely on building relationships with customers and clients. Companies that are hit by waves of turnover—both voluntary and forced—see some of those bonds erode, and the damage to performance and profitability is tangible.

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