Many of these tie directly to the relationship with the manager and how the company shows appreciation. While salary attracts talent, culture, meaningful work, flexibility, care for employees and great leadership retains it. Effective listening, transparency, and reflecting the company’s values in policies make much greater impact on loyalty, innovation and the bottom line.
Let’s explore these root causes of Employee Turnover further.
Poor Management
Many employees leave due to feeling micromanaged, berated, or generally disrespected. Authoritarian bosses who rule through fear rather than inspiration create cultures where people lose passion. This chips away at loyalty and wellbeing over time. People don’t quit jobs; they quit managers.
Lack of Growth Opportunities
When employees feel stagnant in roles without room for advancement, it can lead to disengagement as work loses meaning. This stifles professional development which is deeply tied to personal identity and self-worth for many. Without growth opportunities, resignation often becomes the only path forward.
Feeling Devalued
When hard work and dedication go unrecognized, it communicates to employees that they are expendable commodities. This erodes motivation dramatically. Salary alone does not compensate for lack of appreciation. Everyone needs affirmation to thrive.
Work-Life Imbalance
Long hours and unreasonable expectations lead to increased stress, fatigue, and burnout over time. This prevents people from fulfilling responsibilities and enjoying life outside work, putting strain on family and health. No job is worth complete life imbalance.
Poor Culture
Negative office environments with toxic colleagues, gossip, and cutthroat politics wear people down. Lacking camaraderie and inclusion, people become withdrawn which hinders engagement, innovation and productivity. Poor culture steals joy, fulfillment and purpose from work.
Loss of Trust
When leadership shows blatant self-interest through dishonesty, covering up mistakes, or shifting blame, they erode critical foundations of trust. This sends people searching elsewhere, as no amount of perks can override integrity concerns. Trust is essential.
Lack of Autonomy
Micromanagement and overbearing bureaucracy constraint talent and sap intrinsic motivation. The most competent employees need freedom and authority to apply their skills. Without autonomy, passion and potential get suppressed under layers of mundane bureaucracy.
Feeling Stuck
Specialization can pigeonhole talented people, giving them little option to progress besides leaving. Similarly outdated hierarchy structures may limit mobility. When people feel trapped in positions not matching ambitions or experience, resignation is inevitable.
Poor Communication
When leadership leaves people in the dark on decisions affecting them through secrecy,clide exclusivity or constantly shifting strategies, it breeds confusion, rumor mills and disengagement. Transparency and inclusion in communications prevents disconnects.
Future Uncertainty
Lacking clear direction or reassurances during restructuring or economic troubles understandably unsettles employees. Feeling at the whim of unpredictable management leads people to pursue more secure opportunities even reluctantly. Confidence in leadership steer through chaos is vital.
Summing It Up
The common root issue underlying all these turnover factors is breakdowns in human-centered leadership, transparent communication, trust building and supportive culture cultivation. My book will provide frameworks, case studies and diagnostic tools to help leaders understand and address the deeper intricacies behind employee turnover.
In our following posts, we will begin to analyze how to overcome these turnover causes.
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Understanding the root causes of turnover is key to preventing it.
The top causes include:
Lack of career development and advancement opportunities
Poor compensation and benefits
Minimal training and onboarding
Lack of recognition and feedback
Poor relationships with manager/leadership
Feeling devalued or insignificant
Poor work-life balance
Lack of autonomy and empowerment
Unclear performance expectations
Lack of communication and transparency
Poor or negative company culture
Feeling “stuck” in role with no options to transfer/promote
Any HR analyst worth their salt, (and we have some of the best on our staff), would stress the importance of uncovering the root causes of employee turnover in your organization. Stop guessing and get to analyzing. While exit interviews provide the most candid insights after the fact, statistical analysis of your workforce data can reveal predictive trends before retention becomes an issue. Here are some pro-tips from our analysts:
Review historical turnover figures – are specific teams, roles, or managers above average? Look for patterns.
Analyze time-to-hire and ramp-up periods for new hires. Longer durations indicate greater loss of productivity.
Compare salary bands and performance ratings of those who left versus stayed. Inequities often drive departures.
Factor in tenure alongside age and demographics. Are longer-tenured employees more or less likely to resign?
Look for correlations linking absenteeism, lower engagement scores, and policy violations to subsequent turnover. Disengagement precedes departure.
Statistically, does more turnover follow specific events like mergers, leadership changes, or new technology rollouts? Change management matters.
While statistics help us quantify the problem, conversations provide the color. Well-conducted exit interviews uncover unmet expectations, culture misalignment, insufficient development opportunities and other root causes. An unbiased third party interviewer yields the most candid insights.
Combining hard workforce analytics with qualitative data from open-ended interviews allows us to diagnose why turnover happens. This powers targeted retention strategies addressing the real underlying issues, not just symptoms.
Capturing and retaining institutional knowledge remains a challenge. Tools like knowledge management systems and wikis, thorough documentation, onboarding training, mentorships and cross-training can help but are incomplete solutions. The reality is no database can replace what a person knows intuitively from their own experiences. This makes employee retention critical.
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Well, maybe it’s good. At least some of it is good. As HR experts, we feel it is important to clarify that not all turnover is bad. Tracking voluntary vs. involuntary turnover and rehires provides insights on “good” vs “harmful” attrition.
There is another reason turnover might be good (even if it’s the bad kind). It means you recognized it and now you can work to fix it.
For a more comprehensive discussion about turnover and what it is, you can read our Ultimate Guide To Turnover
Here’s a simple breakdown:
Voluntary turnover is when employees resign of their own accord. This can be further categorized as:
Regrettable voluntary turnover
means losing top performers you want to retain. This is the most damaging turnover.
Non-regrettable voluntary turnover
describes lower performers leaving who don’t meet expectations even after coaching. Some degree of this turnover can indicate effective performance management.
Strategic voluntary turnover
is when we allow poor culture fits to resign while focusing retention efforts on your stars.
Involuntary turnover
is dismissing employees due to poor performance or misconduct issues.
Some level of essential involuntary turnover is expected. To go further, it is necessary and often welcomed by managers. A good HR team will facilitate involuntary turnover when it benefits a team, department, or the company as a whole. When this happens, it really should not be viewed by management as bad turnover or incorporated into analytics that try to tell a story about disruptive turnover.
Tracking rehires also provides context.
For example, boomerang employees returning indicates your workplace or pay may still be competitive.
The key metric is your rate of regrettable, voluntary turnover of high performers.
This signals retention problems needing action. A really good HR expert can help you analyze who is leaving and why; and then develop targeted initiatives enhancing culture, pay, development opportunities and management support.
The goal isn’t zero turnover, but minimizing regrettable loss of talent. With rigorous HR analytics, you can determine if turnover trends are constructive or destructive – and turn harmful patterns around.
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Here is a step-by-step guide to tracking and calculating harmful turnover correctly:
Categorize all employee departures over a set timeframe as either voluntary resignations or involuntary terminations.
Divide voluntary resignations into regrettable (high performers you want to retain) and non-regrettable (low performers, poor culture fits).
Calculate your total voluntary turnover rate with the formula:
Number of regrettable voluntary resignations / Average number of employees over set timeframe x 100
Calculate your involuntary turnover rate with:
6. Number of terminations / Average number of employees over set timeframe x 100
7. Add regrettable voluntary turnover + involuntary turnover to determine your overall harmful turnover rate.
Factor in rehires of boomerang employees you want back to understand the full context.
Set a benchmark for maximum desired regrettable voluntary turnover (ex. 10% annually) based on your culture and industry.
Develop initiatives to reduce harmful turnover types based on exit interview insights and management feedback.
Continuously track turnover rates to identify patterns, demonstrate progress, and refine retention efforts.
This stuff can be tough. Let us know if you would like help walking through sample turnover calculations or need assistance developing reporting templates to track your organization’s turnover effectively. Consistent, segmented tracking provides the foundation for strategic retention.
You can use our convenient turnover cost calculator to analyze just how much your turnover is costing you.
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Put on your seatbelt, because our team of experts has been developing professional human resources competency for more than 100 years altogether. We are going to give you the ultimate guide with real strategies that will allow you to bring turnover to a halt.
What is Employee Turnover?
Turnover measures how many employees leave and must be replaced over time.
Employee turnover is the rate at which employees leave an organization and have to be replaced. Turnover is measured over a specific period of time (usually one year) and is usually expressed as a percentage.
Turnover can substantially impact organizational performance and bottom line.
Managing turnover requires understanding what causes it.
There are two main types of turnover:
Voluntary Turnover: This occurs when employees voluntarily choose to leave the organization. Common reasons for voluntary turnover include dissatisfaction, limited career opportunities, stressful work environment, or inadequate compensation. Employees may quit to pursue better opportunities elsewhere.
Involuntary Turnover: This occurs when employees have to leave the organization against their will. Common causes are layoffs, firings, retirements, or other dismissals initiated by the employer. Involuntary turnover stems from organizational restructuring, performance issues, or budget cuts.
Both types of turnover lead to vacancies that need to be filled by new hires. The costs of turnover include recruiting, interviewing, hiring, onboarding and training replacements. There are also indirect productivity costs as new hires learn their roles.
High turnover disrupts organizational stability and continuity. Loss of talented employees means loss of skills, experience and institutional knowledge. This drain on human capital can reduce innovation and growth.
What Is Attrition?
Attrition refers to the gradual loss of employees over time through voluntary resignations, retirements, firings, etc. It is the reduction in workforce due to natural causes rather than layoffs. Technically and historically, attrition is used to reference loss of personnel that is purposely NOT replaced by the company.
In other words, attrition is a reduction in headcount that the company lets happen and dos not work to counteract.
Is Attrition Different Than Turnover?
Yes. Although the terms attrition and turnover are sometimes used interchangeably, they refer to related but distinct concepts:
Turnover considers the entire cycle of employees leaving and being replaced. It focuses on the equilibrium of arrivals vs. departures.
Attrition solely focuses on employees that leave, rather than also incorporating replacement hires. It looks only at the outflow rather than the equilibrium.
Turnover emphasizes the ratio of filled positions changing over time. Attrition emphasizes the absolute headcount reduction over time.
Turnover conveys a sense of fluidity and motion, with employees constantly cycling in and out. Attrition conveys a sense of gradual shrinkage and erosion.
So in summary, turnover refers to the entire process of employees leaving and being replaced. Attrition narrowly focuses on those that leave without considering any new hires. Both measure workforce reductions, but attrition focuses exclusively on the outflows.
Is Churn the Same As Turnover?
No. “Churn” refers to customers while “turnover” refers to employees.
While churn and turnover are related concepts, they have some distinct differences.
Churn refers specifically to the rate at which customers stop doing business or end a subscription with a company. It measures the percentage of customers lost over a given period. High churn means a company must continuously acquire new customers just to maintain the same level of sales revenue.
In contrast, employee turnover refers to the rate at which employees leave an organization. It measures what percentage of staff leave during a set time period and must be replaced with new hires. High turnover signifies an unhealthy or unstable workplace.
While both concepts deal with loss rates, churn deals with the loss of customers while turnover deals with the loss of employees. They measure fundamentally different things.
There are some similarities though. Both high churn and high turnover can signal deeper issues that need to be addressed. For churn, it may reflect problems with product quality, customer service, pricing, or changing tastes. For turnover, it may indicate poor company culture, compensation, lack of growth opportunities, or ineffective management.
Additionally, both churn and turnover lead to costs for the company, such as marketing expenses to acquire new customers or HR expenses to recruit and onboard new employees. Minimizing churn and turnover helps optimize spending.
The key difference remains that churn solely measures customer losses while turnover measures employee losses. They are distinct metrics, although excessive levels of either one can hamper a company’s performance and growth. Evaluating them requires looking at different data sets and implementing different mitigation strategies.
Why Worry About How to Reduce Employee Turnover?
Employee turnover is expensive. Various studies estimate the cost of replacing an employee to be anywhere from 50% to 200% of that employee’s annual salary. This includes the costs of recruiting, interviewing, hiring, onboarding and training a new employee, as well as lost productivity while the role remains vacant. High turnover also causes the loss of organizational knowledge and experience, disrupts continuity, and can lower morale for remaining employees who have to pick up the slack. Reducing turnover has a direct positive impact on a company’s bottom line.
In addition to the financial costs, employee turnover negatively impacts a company’s culture and ability to build institutional knowledge. Relationships and rapport between team members are lost when someone leaves. Experienced employees take their knowledge with them, including information about customers, vendors, processes and why decisions were made. A revolving door of employees hinders a company’s ability to learn from experiences over time. Stability in the workforce provides time to perfect processes, improve products and services based on feedback, and leverage what has worked well.
When employees leave, their institutional knowledge leaves with them.
Some examples of lost knowledge include:
Knowledge of key contacts such as vendors, partners and clients
Understanding of company systems, software, processes and infrastructure
Awareness of why past decisions were made
Familiarity with day-to-day responsibilities and tasks
Historical interactions with various teams or departments
Access to past communications, data or documents
Encouragement for Leaders
Now is the time for decisive action to engage your people for the long haul.
Losing top talent to “greener pastures” saps company knowledge, productivity and culture. Recruiting and onboarding replacements strains time and budgets. Yet quick fixes like across-the-board raises temporarily mask deeper issues driving turnover.
The hard truth? Retention starts from within. Analyze your culture honestly – do employees feel valued, trusted, heard? Do leaders model empathy, integrity and work-life balance? Or does overwork and favoritism spread?
Probe for root causes of resignations. Compensation often tops the list, but dig deeper. Do exit interviews reveal poor management, lack of recognition or unhealthy team dynamics? Preventable turnover indicates areas needing change.
Cultures thriving on collaboration and transparency retain innovation and experience. Employees give their all when they feel cared for holistically, not just regarded as “resources.”
As an organization’s heartbeat, you set the tone. Double down on onboarding new hires effectively and celebrating tenured employees. Keep listening and taking action on engagement survey feedback. Lead with the wisdom that businesses don’t succeed – people do.
The cost of inaction is continual talent bleed. But united in purpose, engaged teams transform companies. They propel competitive advantage that no competitor can replicate.
Take pride in the privilege you have to steward an environment where all employees reach their potential. The dividends to your culture and bottom line will astound you.
Explore Our Ultimate Guide To Employee Turnover
And find the right answers to your questions and then utilize the amazing strategies from our experts. We are confident you will find the solutions to all of your problems.
Table of Contents:
Main Causes of Turnover and Institutional Knowledge Loss
Reasons Employers THINK Employees Leave
The Real Reasons Employees Actually Leave
Stop Turnover Before it Starts – Recruit the Right Person for the Right Job
Get Onboarding Right and Turnover Will Reduce Itself
Offer Pay that Keeps Up with the Market to Avoid Bad Turnover
Craft Benefit Plans That Attract Good Employees and Work Against Turnover
Create a Company Culture On Purpose
Build Teams & Company Unity That Will Prevent Turnover
Transparency is Key to Superpower Employee Retention and Reduce Turnover
The Trust Gap Problem That Is Causing Your Turnover
Don’t Let a Toxic Workplace Spread Into Turnover
Be the Boss You Want to Have and Reduce Turnover
Empowering Employees Will Lower Turnover
Recognize Good Employees and Reward Good Behavior
Make Work-Life Balance a Real Thing In Order to Stave Off Turnover
Make Your Workplace Flexible
Employee Engagement Matters…A Lot
Performance Management Is an Everyday Thing That Can Reduce Turnover
Be Purposeful About Succession and Career Pathing to Lower Turnover Rates
Encourage Professional AND Personal Development To Raise Retention
Personal Development… At Work?
Provide Training On Interpersonal Skills To Stop Turnover From Pervading
Do Exit Interviews To Reverse Turnover
Do Stay Interviews and Stop Turnover In Its Tracks
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The sources and end notes for this article and all of the sub-pages is listed below. All information is used under the Fair-Use.
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Kumar, J., & Raghavendran, S. (2015). Gamification, the finer art: fostering creativity and employee engagement. Journal of Business Strategy, 36(6), 3-12. https://doi.org/10.1108/JBS-10-2014-0119
Mekler, E.D.li Brühlmann, F., Tuch, A.N., & Opwis, K. (2017). Towards understanding the effects of individual gamification elements on intrinsic motivation and performance. Computers in Human Behavior, 71, 525-534. https://doi.org/10.1016/j.chb.2015.08.048
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Employee turnover is inevitable for any organization, but excessive turnover that causes skills and knowledge to frequently walk out the door can significantly impact a company’s bottom line. Excessive employee turnover can significantly erode institutional knowledge and morale.
The Financial Impact of Losing Valuable Employees
In this post, we’ll explore some eye-opening statistics on the financial toll turnover takes on businesses. We’ll look at the main reasons employees choose to leave jobs, particularly in regards to career development and poor management. And we’ll briefly touch on some best practices that can enhance retention, which we’ll cover in more depth in our post.
The Hard Cost of Turnover
Replacing an employee is expensive. From recruitment to training, turnover necessitates a significant outlay of resources. The Center for American Progress estimates that turnover costs for those making under $50,000 per year amount to 20% of the departing employee’s salary. For an employee making $45,000 a year, that’s $9,000 in replacement costs. In smaller firms, the costs are even higher. (Midlands Tech)
According to the definitive research by Deloitte: “Estimates of the cost of losing an employee ranges from roughly 1.5 – 2.0x that employee’s annual salary.” (Josh Bersin)
Further, the higher the pay rate or the higher the skill, the more it costs (G&A Partners):
Entry-level/non-skilled
30-50% of employee’s annual salary
Service/production
40-70% of employee’s annual salary
Clerical/administrative
50-80% of employee’s annual salary
Skilled hourly
75-100% of employee’s annual salary
Professional
75-125% of employee’s annual salary
Technical
100-150% of employee’s annual salary
Supervisor
100-150% of employee’s annual salary
For higher salaried managerial and executive positions, turnover can cost up to 213% of the employee’s gross annual salary according to The Center for American Progress. That means for an executive earning $100,000, turnover could cost well over $200,000 when you factor in temporary coverage, recruiting and interviewing, onboarding, and productivity loss.
Across industries, businesses are shelling out billions in response to turnover:
Lost productivity costs U.S. businesses $1.8 trillion every year. (Matthew S. O’Connel)
Turnover costs U.S. businesses an estimated $1 trillion annually. (Matthew S. O’Connel)
Employee turnover has cost US industries more than $630 billion. (Work Institute, 2020)
The healthcare industry loses $38 billion annually from turnover (National Healthcare Retention & RN Staffing Report)
Companies as a whole lose over $1 trillion yearly due to voluntary turnover (Work Institute)
At the organization level, turnover related expenses are significant:
It can take 1-2 years for a new employee to reach the same productivity level as a high-performing employee who leaves. (Josh Bersin)
Even after hiring a replacement, it takes months for them to become productive.
If the team member who left could bring in $100,000 in revenue, your company will experience $25,000 less in income and profits for those months. (Forbes)
A 100-person organization that provides an average salary of $50,000 could have turnover and replacement costs of approximately $660,000 to $2.6 million per year. (Gallup)
The cost of talent shortages is projected to reach $435.7 billion for the US (Catalyst)
With numbers like these, it’s clear that reducing voluntary exits needs to be a priority for employers.
Employers need to spend the equivalent of six to nine months of an employee’s salary to find and train their replacement. (SHRM)
For companies who experienced extended job vacancies, 81% reported it had a negative impact on their company.
Among these are not getting work done (28%), disengaged or unmotivated workers (27%), low employee morale (25%), revenue loss (25%), and delivery time delays (22%). (Express Employment Professionals, 2020)
“Keeping one salesperson for three years instead of two, plus ensuring better management and onboarding, produced “a difference of $1.3 million in net value to the company over a three year period.” (Maia Josebachvili)
While some degree of turnover is inevitable and brings in fresh ideas, excessive churn saps company resources.
Why Do Employees Resign? Lack of Growth and Poor Management
To reduce voluntary turnover, organizations need to first understand why people are motivated to quit in the first place. One of the main factors driving resignations is lack of career development.
In a Gallup survey, a shocking 93% of millennials said opportunities for professional growth are very important to them at work.
Yet according to the Work Institute’s retention report,
25% of employees leave due to lack of career development,
while 29% resign due to lack of learning opportunities.
This data indicates that today’s workers, especially younger generations, are willing to jump ship if they don’t feel their current job is helping them gain skills for the future or move toward their long-term career goals. They expect managers to take interest in their aspirations and provide developmental assignments, training, and promotions that align with their professional objectives.
Bad Managers Ruin Companies
However, one of the most significant yet overlooked drivers of turnover is poor management.
More than half of employees (60%) say a less-than-ideal work environment, unsupportive managers, and dull work duties can speed up their resignation. (Zippia, 2020)
More than a third of parting employees said they were motivated more by their unhappiness than by the attraction or availability of an outside opportunity. (Monster.com)
One in four left a job because they feel their company leaders did not treat them with dignity. On the other hand,
One in five resigned because their company was unable to support their well-being. (Limeade, 2020)
As Joe Campagna, owner of My Virtual HR Director notes, “A bad manager often was an excellent individual contributor who was promoted because of their job-specific skills or knowledge. Without proper management training, an excellent employee can become a terrible manager.
The employer is extremely hesitant to reprimand or fire the terrible manager because the employer remembers how great the manager was as an individual contributor. So there is exponential bias due to the investment in that manager’s tenure and past performance.”
This dynamic makes it very difficult for organizations to recognize they have a poor manager on their hands. The bad manager usually even has great technical expertise. But the lack of essential people skills like communication, accountability, and emotional intelligence is crippling.
So why does this manager get promoted in the first place? Often because management sees their standout individual performance and assumes they’ll excel in a leadership role. But without equipping them with management training and evaluating their fit, it’s a recipe for dysfunction. The team suffers from the manager’s unsupportive style and lack of guidance. Morale and engagement plummet. And eventually, the manager’s reports come to resent the work and culture.
Turnover rises as employees seek open positions with managers who value their development and provide effective coaching. According to the Work Institute survey, 18% of employees leave due to unsatisfying job responsibilities, while 23% resign due to poor management. Clearly, leadership capability has a massive impact on retention.
Managers Are More Influential Than Most Companies Realize.
According to Gallup, Fifty-two percent of voluntarily exiting employees say their manager or organization could have done something to prevent them from leaving their job.
Over half of exiting employees (51%) say that in the three months before they left, neither their manager nor any other leader spoke with them about their job satisfaction or future with the organization.
According to 60% of employees in the US, the most important contributor to job satisfaction is the people at work. (The Conference Board, 2019)
What Can Managers Do To Make Them Stay?
The leading reasons why an employee would stay at their current job include recognition (21%) and
a good working relationship with their manager (19%). (Achievers Workforce Institute, 2021)
The bottom line is that neglecting to properly train managers, hold them accountable, address dysfunction, and plan for succession planning sets organizations up for turnover. It’s essential to track reasons for attrition and proactively build the culture and leadership capabilities that will enhance retention.
Stay tuned for more insights on crafting an effective employee retention strategy!
Cited Resources & References:
Gallup. (2017). The Fixable Problem That Costs U.S. Businesses $1 Trillion. Retrieved from https://www.gallup.com/workplace/247391/fixable-problem-costs-businesses-trillion.aspx
Finances Online. (2022). Employee Turnover Statistics: 2022 Retention Data & Rates. Retrieved from https://financesonline.com/employee-turnover-statistics/
O’Connell, M., Kung, M. (2007). The Cost of Employee Turnover. Industrial Management, 49(1), 14-19. Retrieved from https://www.researchgate.net/publication/211392097_The_Cost_of_Employee_Turnover
Bersin, J. (2020). Employee Retention Now a Big Issue: Why the Tide has Turned. Retrieved from https://joshbersin.com/tag/retention/
Employee Turnover Definition (n.d.). In Investopedia online. Retrieved from https://www.investopedia.com/terms/e/employeeturnover.asp
Catalyst. (2020). Turnover and Retention: Quick Take. Retrieved from Catalyst website: https://www.catalyst.org/research/turnover-and-retention/
Deloitte. (2020). Talent 2020: Surveying the Talent Paradox from the Employee Perspective. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-cons-hc-trends-2020-talent.pdf
Limeade. (2020). Limeade Employee Care Report 2020: The Hidden Causes of Turnover. Retrieved from https://www.limeade.com/resources/white-papers/limeade-employee-care-report-2020/
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