The hidden cost of employee turnover (and how to reduce it in 90 days)
- Andres Zanela
- Oct 3
- 4 min read
Updated: Oct 5
Many companies consider staff turnover to be an inevitable evil. What few calculate is the true economic and human impact it entails: loss of knowledge, low productivity, replacement costs, and a direct impact on the organizational climate.
In this article, you will learn:
How to calculate the real cost of turnover in your company.
What are the most common hidden causes?
A practical 90-day plan to reduce it.
How much does staff turnover really cost?
A common mistake is to calculate turnover solely as the cost of recruitment. However, studies by the Society for Human Resource Management (SHRM) show that replacing an employee can cost between 6 and 9 months of their annual salary.
In Mexico, research by Deloitte and OCCMundial indicates that the cost can be as high as 30% of the annual salary.
Practical example:
Employee with a salary of $30,000 MXN/month.
Annual salary = $360,000 MXN.
Replacement cost = 6 months' salary ≈ $180,000 MXN.
If the company loses 10 similar employees per year, the potential loss exceeds 1.8 million MXN.
The hidden causes of turnover (beyond salary)
Poorly managed leadership
70% of the variation in team engagement depends on the direct leader (Gallup, 2023).
A bad boss increases the likelihood of an employee leaving by +48%. This translates into additional hiring and training costs, as well as lost productivity.
Example: In a company with 200 employees and 20 ineffective leaders, turnover can increase by 10 percentage points, which equates to millions of dollars in annual losses.
Disconnected processes
An inefficient process is not only frustrating, it also doubles costs. Deloitte studies show that companies with fragmented processes spend up to 20-30% more in man-hours.
When an employee leaves for this reason, the new employee also faces the same problem → cyclical turnover.
Lost ROI: turnover linked to poor processes can result in up to six months of low productivity for the new employee.
Lack of organizational purpose
Fifty-three percent of employees in Mexico (Manpower, 2022) say they would change companies for one with a clear purpose.
The absence of purpose not only leads to talent leaving, but also affects productivity by 20-25%, because teams work “just to get by” and not to create value.
Financial impact: a company with a turnover of $100 million may be losing between $20–25 million in ungenerated value each year.
If you recognize any of these symptoms in your company, it's time to take action.
Schedule a brief call and learn how to start an internal transformation process.
A 90-day plan to reduce turnover and hidden cost
Phase 1: In-depth, participatory diagnosis (0–30 days)
Objective: to understand the real causes of turnover from the perspective of those who experience the processes daily.
Key actions:
Conduct confidential surveys on work environment and satisfaction.
Hold 2–3 focus groups per critical area (HR, operations, sales, education, etc.).
Measure current indicators: % turnover, time to fill vacancies, cost per hire, lost productivity.
Practical example: If you discover that 60% of employees who leave mention “lack of growth,” you know that your strategy should not focus solely on salary.
Phase exit KPI: Report with 3–5 root causes of turnover + estimated financial cost.
Phase 2: Process and leadership redesign (31–60 days)
Objective: Eliminate friction in processes and strengthen leadership quality.
Key actions:
Map disconnected processes (e.g., duplicate approvals, payment delays, etc.).
Redesign 1–2 critical processes with multidisciplinary teams.
Implement express workshops on conscious leadership and effective communication for middle managers.
Practical example: A retail company reduced its turnover by 25% by simplifying the permit and vacation process: it went from 5 signatures to just 1.
Phase output KPI: Documentation of optimized key processes + leadership training plan for all team leaders.
Phase 3: Implementation of change pilots (61–90 days)
Objective: Test new practices on a small scale and measure impact.
Key actions:
Create “innovation circles” (monthly meetings where teams propose improvements).
Launch an internal mentoring program between senior leaders and young talent.
Introduce a 360° (two-way) feedback system with quarterly surveys.
Practical example: In an education company, implementing mentoring between senior and young teachers reduced turnover by 15% in the first year.
Phase output KPI: At least 2 active pilots + perception survey on changes implemented.
Phase 4: Scaling and retention culture (90+ days)
Objective: Consolidate what works and make it part of the organizational culture.
Key actions:
Measure the impact of the pilots: what worked best? What needs to be adjusted?
Scale the most effective initiatives across the entire organization.
Establish retention metrics on the CEO's scorecard (e.g., quarterly turnover, engagement score, internal NPS).
Practical example: A manufacturing company adopted its innovation circle as a permanent practice, reducing turnover costs by $3 million MXN per year.
Phase exit KPI: Turnover reduced by 10–20% after 6 months and evidence of improvement in work climate.
Conclusion
Turnover is not an inevitable fate: it is a symptom of internal disconnections. With a participatory diagnosis, adjustments in leadership and processes, and internal innovation initiatives, your organization can transform a hidden cost into an opportunity for growth.
Want to know how much money your company is losing due to staff turnover?
Find out in less than 5 minutes with our Free Organizational Diagnosis.
Frequently asked questions (FAQ)
What is an acceptable turnover rate?
It depends on the sector, but on average, 10–12% per year is healthy.
What factors most influence turnover?
Leadership, work environment, and development opportunities, more so than salary.
How do you calculate the cost of turnover?
It includes recruitment, training, learning curve, and loss of productivity.
Bibliography and sources consulted
SHRM (Society for Human Resource Management). Employee Turnover Costs.
Deloitte México (2022). Tendencias de Capital Humano.
Gallup (2023). State of the Global Workplace.
Carol Sanford (2017). The Regenerative Business.
Donella Meadows (2008). Thinking in Systems.
McKinsey (2023). State of Innovation Report.
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