Dysfunctional Turnover

May 13, 2022

Employee turnover is an increasingly common challenge facing many workplaces, with signs of the Great Resignation seemingly everywhere.

A simple employee turnover definition is the act of replacing employees who have left their jobs. There are two different types of turnover: functional and dysfunctional. Functional turnover is normal, even expected, while dysfunctional turnover can damage your business.

Both types of turnover can feel scary to company owners and managers, especially those without years of corporate experience. Losing valuable talent you spent months or years recruiting and training can be puzzling and disheartening to even the most understanding managers. 

Recognizing what’s driving turnover at your company is the first step to tackling the problem.

Dysfunctional Turnover: What Is it?

Some amount of employee turnover is beneficial to a company. It helps weed out underperformers and poor fits and allows space for new ideas. 

Dysfunctional turnover is the term for describing employee turnover where the costs outweigh the benefits. It typically refers to situations where a high-caliber employee leaves to seek employment elsewhere. Often, the replacement is less qualified than the original employee, and sometimes, the departed employee is never replaced.

Dysfunctional turnover hurts companies in several key ways. First, recruiting and training efforts cost money. But more importantly, the remaining employees may need to absorb unfinished projects on top of an already demanding workload. 

Functional Turnover vs. Dysfunctional Turnover

Dysfunctional turnover is a challenge, but what is functional turnover? 

Functional turnover can be beneficial because it weeds out underperformers who won’t grow with the organization while making room for new people with fresh ideas. It can help revitalize your team with unique insights into problems and opportunities that they might not have been able to realize otherwise.

On the other hand, dysfunctional turnover is bad for business because it can stem from poor leadership or other internal company issues. Losing too many employees too fast can impact performance because there won’t be enough experienced workers to fill critical roles.

Functional turnover can be beneficial to the firm, whereas dysfunctional turnover can be costly while decreasing the organization’s overall performance. 

Both types of employee turnover cost money and time.

How Does Dysfunctional Turnover Impact a Business?

Dysfunctional turnover creates a higher workload for your remaining employees and can lead to mistakes and lower productivity, harming your bottom line. It also affects the morale of your employees, which can increase absenteeism and decrease productivity even more. 

Onboarding is typically the most expensive stage in the employee lifecycle, during which training costs are high and productivity is low. As new hires become familiar with their jobs, they continuously make a more significant contribution to the company’s bottom line. Short tenure means more employees are in the early stages, which can be expensive.

Dysfunctional turnover can be particularly challenging for companies with low budgets that spend less money on employee training and recruiting than other organizations. 

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What to Do About Dysfunctional Turnover

Even in relatively flat hierarchies, not everyone can be promoted. It’s simply impossible to please all employees all the time, so, naturally, some will leave for other opportunities.

But dysfunctional turnover is different from the standard staff turnover definition. It can signal genuine problems within the organization and occurs when top performers leave because they’re tired of the company culture, don’t enjoy working with their managers, or don’t see potential for advancement.

Good employees are the ones who help companies grow, so losing them can be detrimental to the business’s overall trajectory. Although dysfunctional turnover can be expensive and time-consuming to deal with, in many ways, it’s also preventable.

When an employee quits, the company should at least make an effort to learn from the departure. Although getting transparent answers from a departing employee can be a challenge, exit interviews can be an effective way of discovering the key drivers.

But it’s not only after good employees leave that businesses should act. Implementing proactive policies to identify and improve underperformers (and getting rid of those who don’t) can raise the level of your entire staff. Further, employees who excel should consistently be given new challenges and opportunities in the form of promotions, incentives, and even special projects.  

Examples of Dysfunctional Turnover

Turnover can be an organization’s most expensive problem. But awareness can help you take steps to make your workplace more attractive to employees.

Here are some examples of dysfunctional turnover:

  • Good employees are unwilling to remain with the organization because they don’t see opportunities for advancement. Low performers stay because they aren’t motivated to search for something else.
  • Employees don’t feel valued or appreciated by their managers or supervisors. They feel under-utilized and that their work is not important enough to continue working for the company.
  • A high-performing employee has a personality conflict with their direct manager and leaves because of an inability to resolve the dispute in a way that both parties consider satisfactory.
  • The employee is dissatisfied with the pay and benefits packages offered by the organization, so they seek employment elsewhere that is better suited to their needs.

Best Practices for Minimizing Dysfunctional Turnover

Dysfunctional turnover is costly but preventable. Best practices for minimizing dysfunctional turnover include: 

  • Budgeting for employee training and learning opportunities. 
  • Ensuring that employees have the resources to do their jobs well. 
  • Creating a positive work environment with open communication avenues.
  • Avoiding micromanagement and instead empowering employees to be autonomous. 
  • Providing regular performance reviews and feedback.
  • Identifying high and low performers, then rewarding and challenging high performers while making improvement plans for low performers.
  • Ensuring that you distribute organizational rewards fairly and on a merit basis.

Create a Better Culture Today 

Bad hires cost the company money, resulting in low morale, loss of productivity, and potential dysfunctional turnover of other high-performing employees. If left unchecked, dysfunctional turnover can domino through your company, disrupting even the best teams.

Creating a healthy and robust company culture requires a willingness to make tough decisions. When you find yourself with an employee that doesn’t fit in or has lost their enthusiasm, it’s time to take action. Put in the effort to discover the root cause of the problem and seek remedies to prevent it from recurring in the future.

  1. About the Author:

  2. About the Author:

    As Principal with Valesco, Patrick Floeck’s primary responsibilities include business development strategy and investment origination. Patrick received his Master of Business Administration from the Southern Methodist University Cox School of Business, with a concentration in Finance.

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