When High Turnover Signals Leadership Challenges

Great leaders don’t just ask, “Why are people leaving? But rather, “What must we change to make them stay?”

What is a High Turnover Rate?
Top 3 Employee Incentive Programs
Warning Signs: When Turnover Points to Leadership Problems
Common Leadership Issues Driving Turnover
What’s the Impact of a High Employee Turnover Rate on the Company?
What Can Companies with High Turnover Rates Do?
What Does a High Turnover Rate Say About Management?

In any organization, turnover is often seen as a natural part of doing business.

People leave for various reasons, such as relocation, career changes, or personal growth. However, at some point, the turnover rate can become concerning.

Plus, a high turnover rate is not just an HR metric.

Instead, it’s a red flag that signals deeper issues – issues that often point back to leadership.

In this article, we explore the dynamics between high turnover rates and leadership challenges.

What is a High Turnover Rate?

To start, we need to clarify what a high turnover rate is and why it is important to companies.

Employee turnover is the number of employees who leave an organization, either voluntarily – when employees leave for personal reasons or a new job, or involuntarily – when employers force employees to leave through termination or layoff.

In a nutshell, the number signifies how happy and satisfied employees are with their roles, work culture, or leaders. Many companies track this HR metric closely because it is an early warning system for deeper organizational problems.

A high turnover rate typically means that a company is consistently losing valuable workers, leading to disruptions in productivity, increased hiring costs, and potential damage to company morale.

Top 3 Employee Incentive Programs

Nectar

Assembly Recognition Software

Guusto

What is Considered a High Turnover Rate?

While a certain amount of churn is good for bringing new perspectives and ideas to a company, a high employee turnover rate is not a favorable KPI.

To calculate turnover, companies divide the number of employees who voluntarily left by the average number of employees during a set period.

For example, a company with 100 employees that loses 15 people in a year has a 15% turnover rate.

So, what is considered a high turnover rate?

Hourly roles: Anything above 30% is considered high.
Salaried office jobs: Anything over 10% raises concerns.

Recent data from Mercer’s 2024 US and Canada Turnover surveys reveal that voluntary turnover in the US was around 13.5% last year.

However, context matters.

Industries like retail and wholesale businesses experienced the highest rate, 24.9%, while the chemicals industry maintained one of the lowest rates, just 9.1%.

Beyond percentages, the real question is whether a company is losing employees faster than it can replace and develop them. If experienced employees are frequently walking out the door, it’s a sign that something isn’t working.

Understanding the Leadership-Turnover Connection

Over the last year, the news of mass layoffs from tech companies and retail giants has dominated headlines. However, while layoffs generate more buzz, employee resignations far outnumber job cuts.

In fact, employees are quitting at three times the rate of layoffs.

So, what’s driving employees to quit?

Is there any truth to the popular saying, “People don’t leave jobs; they leave managers”?

Key Statistics

One recent workplace survey found that the leading reasons employees leave their jobs are:

Toxic or negative work environment (32.4%)
Poor company leadership (30.3%)
Dissatisfaction with their manager or supervisor (27.7%)
Poor work-life balance (20.8%)
Unsatisfactory pay (20.5%)

A common misconception is that employees leave for money, and yet data shows that employees increasingly prioritize their mental health and a healthy work-life balance.

In fact, unsatisfactory pay ranks sixth, well below toxic environments, poor leadership, and management troubles, which top the list for employees’ departures.

Similarly, Gallup’s report found that 50% of employees have quit a job at some point in their careers to “get away from their manager.”

Direct Leadership Impacts

The strong link between leadership and turnover is well-documented and, truthfully, should come as no surprise.

From the moment an employee walks through the door, much of their experience is shaped, both directly and indirectly, by those at the top. Leaders establish the workplace culture, set expectations, and influence day-to-day interactions.

Their impact reverberates throughout the company, affecting engagement, productivity, and, ultimately, retention.

Warning Signs: When Turnover Points to Leadership Problems

Companies can spot certain warning signs that can reveal leadership failures.

Department-Specific Attrition

Turnover concentrated in a single team or department is rarely a coincidence.

For example, if a sales team experiences 40% annual attrition while other departments are at 10%, the discrepancy probably means there is poor management within that group.

Leaders in these high-turnover teams may lack coaching skills, fail to advocate for their employees or create unsustainable workloads.

Recurring Exit Interview Themes

While many departing employees may be reluctant to give genuine feedback about leadership during exit interviews, recurring phrases like “toxic culture” or “lack of support” are red flags.

If these themes happen regularly, they demand a more in-depth investigation into managerial behavior and team dynamics.

Timing of Resignations

Spikes in turnover after leadership changes, such as a new CEO, management, or new company policies, can also signal distrust in management. Employees may interpret these changes as threats to their roles, work-life balance, or career paths.

Common Leadership Issues Driving Turnover

The reality is that turnover isn’t just a personal decision—the work environment largely shapes it, and that puts leadership at the center of the issue.

According to a recent SHRM study, 58% of employees who quit due to a negative company culture pointed to management as the primary reason.

So, what does a high turnover rate say about management?

The same SHRM report pointed to management issues like ineffective communication, unwillingness to listen, lack of accountability, and vague expectations as the main drivers of dissatisfaction.

Over five years, SHRM estimates that turnover linked to these leadership failures has cost businesses approximately $223 billion.

In short, when employees don’t feel supported, valued, or engaged, they leave. If leaders fail to address these underlying issues, turnover will continue to rise.

In fact, a recent meQuilibrium report found that employees who feel unsupported by their manager are 4.5 times more likely to consider leaving their job, with 17.4% at risk of quitting compared to just 3.8% among those who feel supported.

On the other hand, employees thrive when their efforts are acknowledged.

Meaningful recognition, whether through constructive feedback, employee incentive programs, or formal rewards, reinforces their value to the organization.

Initiatives like ‘Employee of the Month’ programs, performance-based bonuses, and other awards or employee incentive ideas can boost motivation and strengthen commitment.

What’s the Impact of a High Employee Turnover Rate on the Company?

Unwanted turnover can affect the company in many ways.

To start, turnover is costly. Employees are an investment, and for each role, there is a learning curve and training associated with it.

From hiring costs to advertising the positions to training new employees, unwanted turnover affects the financial performance of a company. According to SHRM, replacing a worker costs an average of about $4,683.

Even more worryingly, when tenured employees leave, institutional knowledge disappears. Relationships that employees have built with clients, vendors, and stakeholders are disrupted, resulting in a broader loss of organizational trust.

Furthermore, companies with high turnover rates send a message of instability, which would make it harder to attract and retain top talent in an already competitive job market.

Finally, employee exits damage the morale of the workforce.

One third of our lives is spent at work, so losing work friends and colleagues, especially those who have been around for a while, can lead to disappointment and uncertainty among remaining employees.

What Can Companies with High Turnover Rates Do?

High employee turnover is a major concern for companies of all sizes. So, how can companies hang on to their staff?

1) Leadership Development

Investing in managers always pays off.

One great example of that is Google’s Project Oxygen, which found that teams with well-trained leaders experienced lower turnover.

Launched in 2009, Project Oxygen used data-driven analysis to assess management’s impact. The research revealed that even minor improvements in leadership quality improved employee performance, satisfaction, and retention.

Google identified eight key behaviors of effective managers, including empowering teams, coaching, clear communication, and career development.

Since then, they’ve integrated these behaviors into training, performance evaluations, and rewards.

Aligning leadership development with incentives also ensures managers grow alongside their teams.

2) Structural Changes

Beyond leadership, structural changes can reduce turnover by addressing systemic issues that drive employees away. Competitive compensation, flexible work arrangements, and clear career pathways create a workplace where employees feel valued and motivated to stay.

Companies can redesign recognition systems and employee incentive plans to reward not just performance but also collaboration, innovation, and long-term commitment, making employees feel valued beyond just their output.

3) Measuring Progress

A Gallup poll found that 52% of employees who left their jobs believed their departure could have been prevented if their managers had taken action.

Many said that, in the months before they resigned, leadership never checked in on their job satisfaction or discussed their future within the company, which left them feeling overlooked and disengaged.

As a result, companies should track leading indicators, not just turnover rates.

Conducting “stay interviews” can help identify friction points early and give leaders the opportunity to resolve issues before employees decide to leave.

What Does a High Turnover Rate Say About Management?

A high turnover rate mirrors leadership’s strengths and weaknesses.

Organizations can transform attrition from a liability into an opportunity by investing in empathetic, growth-focused leadership and systemic cultural shifts.

Ultimately, the question isn’t just “Why are people leaving?” but rather, “What must we change to make them stay?”

Leaders who listen, adapt, and prioritize their people don’t just reduce turnover—they build organizations where talent thrives.

Disclosure: Some of the products featured in this blog post may come from our partners who compensate us. This might influence the selection of products we feature and their placement and presentation on the page. However, it does not impact our evaluations; our opinions are our own. The information provided in this post is for general informational purposes only.

Written by Ivana Radevska

Senior Content Writer at Shortlister

Sources

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