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Employee Turnover: The Hidden Cost & How to Reduce It

Updated: Dec 15, 2023

By FutureLab | 08 December 2023

Image by tirachardz on Freepik

Have you ever considered the domino effect when a high-potential employee decides to step away from their role within the company? Well, it goes beyond just a position unfilled; it also represents a loss of years of experience and expertise.

In order to mitigate this loss and reduce the cost of replacing high-potential employees, companies need to implement effective employee retention strategies. In this article, we will uncover the cost impact of replacing high-potential employees and explore how leveraging mentoring programs and establishing mentor mentee relationships can be an effective retention strategy.

Why Employee Retention Matters?

Employee retention is a critical aspect of running a successful business. When employees leave the company, it has several financial and operational consequences that can negatively impact the organization.

High Turnover Affects the Company's Bottom Line

The cost of recruiting, hiring, and training new employees can be substantial. This includes expenses such as job postings, recruitment agencies, interviews, background checks, and onboarding programs. There are significant indirect costs associated with new hires, including the loss of productivity as new employees adapted to their roles. This period, often underestimated and can impact the overall team’s efficiency and delay project timelines.

Drop In Workplace Productivity

When a highly skilled and experienced employee leaves, there is a knowledge gap that needs to be filled. Mentor mentee programs can help transfer this knowledge from experienced employees to newcomers, ensuring a smoother transition. Other employees may need to bear additional responsibilities, resulting in increased workload and potential burnout. This can lead to a decrease in overall productivity and quality of work.

A Negative Impact on Morale and Engagement

When employees see their colleagues leaving, it creates a sense of uncertainty and instability. They may question their own job security and become disengaged from their work. This can create a toxic work environment and hinder collaboration and teamwork. Consequently, addressing employee departures and their impact becomes crucial for maintaining a healthy and productive work atmosphere, and fostering mentor mentee relationships can play a role in mitigating these challenges.

The High Cost of Replacing High-Potential Talent

Replacing high-potential talent extends beyond the direct recruitment and onboarding costs. The hidden expenses associated with talent churn have far-reaching implications for organizations. Companies that can identify and retain high-potential employees have a competitive advantage in the ever-evolving business landscape.

To proactively reduce the expenses linked to employee turnover and promote long-term success, companies must gain a comprehensive understanding of the various cost factors involved. When it comes to replacing a high-potential employee, there are several cost considerations to keep in mind:

Direct Cost

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  • Recruitment Costs

When a high-potential employee leaves, the company needs to invest time and resources in finding a suitable replacement. This includes advertising the job opening, screening resumes, conducting interviews, and performing background checks. All of these activities incur direct costs that can quickly accumulate.

  • Onboarding Costs

Once a new employee is hired, the company needs to onboard them and provide them with the necessary training. This includes familiarizing them with the company culture, introducing them to their team members, and providing them with the skills and knowledge required for their role.

  • Training Cost

Training plays a crucial role in developing an employee's skills and competencies. When a high-potential employee leaves, all the time and resources invested in their training are essentially lost. The organization will need to invest in training the new employee from scratch, which can be a significant expense. Over the course of two to three years, a business may spend 10% to 20% or more of an employee's salary on training alone.

Indirect Costs

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  • Lost Productivity

When a new employee joins an organization, it takes time for them to become fully productive and perform at the same level as their high-potential employees. This period of adjustment can result in decreased productivity, as the new employee is still learning the ropes and getting up to speed. As a result, the organization may experience a temporary decline in efficiency and output.

  • Lost Knowledge Sharing

High-potential employees who have been with the organization for a long time possess valuable knowledge about the specific processes, procedures, and insights unique to the organization. When these employees leave, knowledge sharing is lost, and efforts must be made to capture and transfer this knowledge to prevent the consequences of operating without it.

Intangible Cost

  • Lost Engagement and Impact on Employee Morale

High-potential employee turnover not only results in lost engagement and reduced morale among remaining employees but also has a significant cultural impact. When the high potential employees leave, it can lead others to question the company's ability to retain top talent. This may result in remaining employees becoming less committed to the company's values and goals, potentially fostering a culture of high turnover

As you can see, the cost of losing a high-potential talent can be significant. It encompasses not only the direct expenses of recruiting and training but also the indirect costs associated with decreased productivity, lost engagement, and potential customer dissatisfaction.

Given the high financial impact of turnover among these promising individuals who participate in mentor mentee programs, companies must invest in strategies to retain them and reduce turnover rates within this vital professional dynamic. Implementing and nurturing mentor mentee programs can be an effective way to enhance their engagement, improve retention, and minimize the hidden expenses of turnover within these valuable mentor mentee relationships

But, what makes employees consider leaving their job, and how can companies improve retention?

Understanding Why Employees Leave

Employee turnover is a major concern for companies, and understanding the reasons behind it is crucial for addressing the issue effectively. High-potential employees are particularly prone to leaving if they feel that their growth and development needs are not being met, which can have significant implications for a company's performance and success.

Common reasons for employee turnover include:

  • Lack of Career Growth Opportunities When employees feel like there are no chances for them to learn, grow, or advance within the company, they may become dissatisfied and consider leaving.

  • Lack of Mental Fatigue and Burnout: Balancing Work and Life Having a tough time balancing work and personal life happens when the job is too demanding. It doesn't just lead to burnout but can also affect mental health. The stress from an overwhelming job can make people feel anxious or down. That's why people might start looking for jobs that let them have a better balance between work and life, keeping both their body and mind healthy. For this reason, effective mentoring programs can teach employees how to handle their tasks without feeling overwhelmed.

  • Lack of Adequate Managerial Support supportive and effective management is key for employees' success. If managers fail to provide guidance, help, and a positive work environment, employees may become frustrated and look for better leadership elsewhere.

High turnover also creates a sense of uncertainty about job security and reduces happiness for those employees who stay. This can lead employees less effectively, be more stressed, and have a negative impact on how satisfied employees are.

How Do Mentoring Programs Contribute to Employee Retention?

The implementation of mentoring programs is a priceless investment for companies. By retaining high potential talents through these programs, companies can save significant amounts of money in recruitment and training costs. The benefits of mentoring programs go beyond financial savings, they also contribute to the overall success and sustainability of the organization.

Here are some ways mentoring programs contribute to employee retention:

Career Development and Knowledge Transfer

Mentoring programs are a strategic asset for companies, particularly in nurturing high-potential employees into future leaders, thereby aligning with the company's long-term goals. These programs offer invaluable opportunities for employees' career growth by providing personalized guidance, goal setting, skill development, and support in overcoming professional challenges. Rooted in strong mentor mentee relationships, this approach not only fosters individual advancement but also ensures that employee development aligns with the company's vision for success.

Emotional Support and Guidance

The mentor mentee relationship in a Mentoring Program provides emotional support and guidance, which is important for employee retention. Mentors often act as sounding boards for mentees, offering advice on career challenges and personal growth.

Networking Opportunities

Mentoring Programs foster valuable connections within the company that might not otherwise exist. Mentors play a crucial role in introducing mentees to key colleagues and leaders within the organization, expanding their internal professional network. This internal networking not only strengthens the mentor mentee relationships but also enhances their understanding of the company's culture and operations.

Cost saving through mentoring Programs

Investing in mentoring programs can result in significant cost savings compared to recruiting and training replacements. When employees have access to mentors who can guide them through their professional journey, they are more likely to stay with the company for the long term. High turnover rates can be costly for companies as they require resources to find, hire, and train new employees. By investing in mentoring programs, companies can reduce turnover rates and retain valuable talent.

Source: CNBC/SurveyMonkey

These statistics clearly show that having a mentor makes a big difference in how happy employees are with their jobs. For example, among individual contributors, only 26% of those with mentors have thought about leaving in the last three months, compared to 44% without mentors.

These numbers highlight the real impact of mentoring programs on employee satisfaction and retention. They're not just about personal development; they also help keep the team motivated and productive.

The data from the CNBC/SurveyMonkey survey also provides clear evidence supporting the importance of mentoring programs in the workplace, connecting directly to the points made earlier about mentor mentee relationships.

The survey shows 91% of employees with mentors are satisfied with their jobs. In contrast, these satisfaction levels drop among employees without mentors.

mentoring also provides a cost-effective way to develop employees' skills and capabilities. Instead of sending employees to external training programs or hiring expensive consultants, companies can leverage the knowledge and experience of internal mentors to develop their workforce.

mentoring programs can also contribute to the overall productivity of the company. Mentees who receive guidance and support from mentors are more likely to perform better, make fewer mistakes, contribute positively to the team's success and establishes strong mentor mentee relationships

Overall, mentoring programs offer a cost-effective solution for companies to retain high potential talent, develop their workforce, and drive performance and productivity.


Remember, the hidden costs of high employee turnover can have a significant impact on a company's finances and operations. Recruiting and training replacements can be a costly and time-consuming process, not to mention the loss of knowledge and expertise.

In addressing these issues, mentoring programs are necessary for both retaining and developing employees. These programs offer experienced individuals the opportunity to guide and support less experienced employees, known as mentees. In the mentor mentee relationship, trust and respect are important, with mentors providing guidance and wisdom, and mentees gaining benefit from this support and valuable insights through the process of workplace mentoring.

By investing in mentoring programs, companies can create an environment where their high-potential employees thrive, resulting in increased retention, enhanced productivity, and a sustainable competitive advantage.

Ready to make a lasting impact on employee retention?

Empower your company's success by taking a proactive step towards retaining your high-potential talents. Consider launching your own mentoring program with FutureLab, a leading platform specializing in mentoring solutions. Our comprehensive mentoring platform provides the tools and resources needed to establish and manage effective mentoring programs.


With FutureLab, you can create a strong and empowered workforce that is committed to the success of your company. invest in your future.


204 views8 comments


Training plays a crucial role in developing an employee's skills and competencies, thanks your post


Nero Nerancia
Nero Nerancia
Dec 19, 2023

This is very insightful and informative


Ugik Febriyanto
Ugik Febriyanto
Dec 18, 2023

So insightful after read this article


Dec 18, 2023

This article is amazing and give me new knowledge 👍


gendis rara
gendis rara
Dec 18, 2023

worth the read! thanks!

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