The business world is competitive and leaders often obsess over customer churn rate, but there is another metric that may be just as critical to your bottom line and it is employee churn rate. To put it simply and answer a question like — what is employee churn rate — it is the percentage of employees who leave your company during a specific period.
While some turnover is natural, a high churn rate is a warning sign that indicates underlying issues with company culture or management. Understanding this key metric is important because your employees are the face of your company and when they leave, they take valuable knowledge and customer relationships with them, which directly impacts your ability to serve your customers and create a memorable customer experience.
How to Calculate Employee Churn Rate
To gain a clear picture of the stability of your workforce, you need to know how to calculate employee churn rate. The formula is relatively simple. Divide the number of employees who left during a specific period of time by the average number of employees during that same period, then multiply by 100 to reflect the employee turnover rate as a percentage
For example — if your company had an average of 100 employees last quarter and 5 employees left, your employee churn rate would be 5%.
Employee Churn Rate = (Number of Employees That Leave / Average Number of Employees) x 100
How Does Employee Turnover Affect the Customer Experience?
The link between employee experience and customer experience is undeniable.
When asking how employee turnover affects the customer experience, the data paints a stark picture. High employee turnover rates can lead to a 31% decline in repeat customers, as that instability in your workforce erodes the quality of customer service. In addition, businesses with unstable teams will often see lower satisfaction ratings on review platforms, highlighting that a revolving door of staff is a major barrier to customer satisfaction.
Inconsistent Customer Service
When experienced staff leave a company, they are most often replaced by new hires who are still learning, which leads to unavoidable gaps in service quality. Research has shown that high-turnover companies can see a 22% increase in service times, leading to frustration for customers who expect a seamless and efficient interaction every time they engage with your brand.
Loss of Customer Loyalty and Trust
Customers build relationships with people, not just brand logos. When a popular customer service representative leaves a company, that personal connection is severed with customers. This disruption can dissolve trust, as customers may feel they are starting over with a stranger, making them significantly more likely to leave themselves and find a competitor with a more consistent experience.
Decreased Personalization of the Customer Experience
Personalization relies on deep knowledge of customer preferences, customer history, and context. This knowledge takes time to build and is lost when an employee resigns or leaves a company. New employees simply do not have the context to offer personalized recommendations or anticipate customer needs, resulting in a ho-hum experience that fails to make the customer feel valued or understood.
Negative Impact on Company Focus
High churn forces managers to shift their focus from optimizing the customer experience to crisis management. With the average time to fill a position taking an estimated 44 days, managers are forced to spend long hours reviewing resumes and interviewing candidates, leaving them with little time to coach their existing team or develop strategies to improve client satisfaction.
READ MORE: 5 Best Practices for Customer Service
Asking and defining what employee churn rate is, is the first step toward stopping the leak in your business. By investing in your employees and the employee experience, you are directly investing in the quality of your customer experience.
Contact boostCX today for a demo of our customer experience management platform and find out how we can help you measure and improve the experiences that matter most!
