Dysfunctional turnover: What it is, its causes, and how to fix it

Dysfunctional turnover can be a silent killer, draining your company of talent, morale, and money. Many organizations face this challenge, and fortunately, there are proven ways to tackle it head-on.

In this article, we explore what dysfunctional turnover is and why it happens, plus share actionable strategies to keep your top talent from leaving.

What is dysfunctional turnover?

Dysfunctional turnover happens when your best employees leave the company at a higher rate than other staff. This creates a talent gap that can drag down the whole operation, leading to:

• Lower morale

• Reduced productivity

• Extra costs needed to hire and train new employees

Even worse, it makes other high performers think of leaving, too.

Functional turnover is the opposite of dysfunctional turnover. It occurs when low-performing employees leave — but it can make room for better talent.

How to measure dysfunctional employee turnover

You can't improve what you don't measure, so here's a simple way to track how many top performers are leaving.

1. Determine what high performance looks like in your organization. This could be based on performance reviews, productivity metrics, or key achievements.

2. Keep a record of which high performers left over a specific period — typically a year. This helps you see patterns and identify potential issues.

3. Finally, use this formula to calculate your dysfunctional turnover rate: Dysfunctional turnover rate = (number of high-performing employees who left / total number of high-performing employees) × 100

This rate shows how many valuable employees you’re losing so you can take steps to improve retention.

Common root causes of dysfunctional turnover

To tackle avoidable turnover, you need to know what's causing your top talent to leave. Here are some common possibilities:

Poor management practices

34% of employees quit because of uncaring and uninspiring leaders. Poor management also means a lack of transparency, not understanding the company’s goals, and having no direction. Since 70% of employee engagement depends on good management, bad managers can make your best talent feel unappreciated and frustrated, leading them to quit.

Lack of career development opportunities

When employees feel stuck in a job with no chance to move up or learn new skills, they look for better opportunities elsewhere. However, less than a third of employees know how to advance their careers over the next five years. As a result, 45% are leaving their current jobs for better professional growth prospects.

Inadequate compensation and benefits

35% of employees leave a company due to inadequate compensation and lack of benefits. When employees feel their contributions aren't matched by fair pay and comprehensive benefits, they begin exploring opportunities with organizations that recognize and reward their value.

Investing in equitable compensation and benefits can boost retention, enhance employee satisfaction, and solidify your reputation as an employer of choice.

Unhealthy work environment

58% of people who work in a place full of stress and conflictsay they plan to find a new job within the next year. 26% of employees say employers do not respect their personal boundaries, and 40% feel their time off isn’t respected.

Employees who can't balance their work and personal life or disagree with their company culture will hunt for a more flexible job. To keep top talent, take proactive steps to cultivate a culture where employees feel heard, valued, and empowered.

Signs of dysfunctional turnover

Spotting the signs of staff turnover early can help you address minor issues before they escalate. Here are some signs of dysfunctional turnover:

• High turnover rate among top performers: Are your best employees leaving more often than others? That’s a big red flag. Frequent departures of those with high performance ratings or critical skills signal potential problems with your organization.

• Decline in team performance: When key players leave, the team's performance often takes a hit. Projects drag on, the quality of work drops, and targets get missed. It’s like losing your star player mid-game — it impacts everyone on the team.

• Increased workload and stress: When top performers walk out, their workload doesn’t just disappear. It falls on the remaining team members, leading to higher stress and potential burnout.

• Negative feedback during exit interviews: If high performers consistently mention, for example, poor management when they leave, you've got some underlying issues to address. Exit interview feedback highlights areas that need attention to boost retention and workplace satisfaction.

Why is dysfunctional turnover harmful to organizations?

When top performers leave, you lose their invaluable skills, knowledge, and experience. These are the people who drive your projects and fuel innovation, so their departure hurts productivity as others struggle to fill the gaps.

Finding and training suitable replacements takes more time and resources, further driving up costs and straining your budget.

High turnover among top talent can also damage your organization’s reputation, that makes other employees want to leave your company too. This makes it much harder for you to attract and retain the kind of talent you need to succeed.

How to prevent dysfunctional turnover

Dysfunctional turnover is preventable if you continuously motivate your top performers. Here’s what you can do to make this happen:

Improve management practices

Train your managers to actively listen, provide meaningful support, and act with fairness. You can train people to be good managers through focused leadership training. For example, ask your managers to schedule regular 1:1 meetings with team members to discuss career aspirations, offer constructive feedback, and address any challenges. These conversations not only demonstrate strong managerial qualities but lead to employee engagement, trust, and collaboration.

Career development opportunities

Only 21% of organizations excel at upskilling employees. That’s a missed opportunity because helping employees expand their skills boosts individual performance and organizational effectiveness. Plus, investing in on-the-job learning increases retention by 7%.

You can offer your employees regular training and professional development through workshops, in-house training programs, and professional development stipends. Most importantly, make sure you create clear career paths so that employees can see their future with your company.

Provide competitive compensation and employee benefits

87% of US workers believe companies should prioritize fair pay for current employees. Make your salaries competitive to retain top talent. To do this, you can use salary benchmarking sites like Remote's salary explorer.

You can also set up a system for regular performance-based raises to reward high performers. A strong benefits package that includes health insurance, retirement plans, bonuses, and stock options, is another good way to show that you value your employees.

Conduct exit and stay interviews

When you have a team member leaving your company, offer exit interviews to gather feedback on their experience with your business. Stay interviews can help you understand what keeps employees engaged and what can improve their job satisfaction. Plus, they allow you to address smaller issues before they become reasons for employees to leave.

Provide work-life balance and flexibility

Make sure your team knows that they are encouraged to take time off. You can support work-life balance by:

• Offering flexible schedules and remote work options, including hybrid setups, to encourage a healthy work-life balance

• Stressing the importance of taking breaks and vacations since overworking can lead to poor performance

• Providing sufficient paid time off, and making it realistic for employees to break from work rsonal days.

Prevent burnout

Your best performers are likely resilient people, but even they can reach a breaking point if pushed too far. Here’s what you can do to prevent employee burnout:

• Make sure that workloads are reasonable and tasks are distributed fairly.

• Mix in lighter tasks or reassign duties to prevent long streaks of demanding work. This simple change can reduce quitting rates by 22%.

• Offer mental health support, like counseling services or stress management programs, to help employees cope with stress and stay engaged.

Conquer dysfunctional turnover with Remote

You’ve seen how dysfunctional turnover can drain your team’s productivity and morale. Luckily, there are a number of ways to increase employee retention. By improving your company culture, encouraging personal development, and providing competitive compensation, you can encourage your top talent to grow with your company.

Remote helps you keep your top performers through a single platform with built-in controls for maximum security. With Remote HR Management, you can centralize all your employee data to manage legal agreements, offer feedback, and run accurate payroll. Your top talent can also self-serve to manage their documentation, expenses, and leave to track their growth with your company.

To see how Remote HR Management can help you attract and retain top talent, create your free account today.

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