What is the difference between functional and dysfunctional turnover?

Functional turnover is when poor performers or disengaged employees leave, potentially benefiting the organisation through improved performance and morale. Dysfunctional turnover is when high performers or critical talent resign, harming organisational capability and performance. The same turnover percentage can have completely different impacts depending on who is leaving.

How do you measure dysfunctional turnover?

Measure dysfunctional turnover by segmenting your turnover data by performance rating, role criticality, and tenure. Calculate high performer turnover rate separately and compare it to overall turnover. Track regretted versus non-regretted departures, and analyse exit interview data for patterns among your best performers.

How can organisations reduce dysfunctional turnover?

Effective strategies include conducting stay interviews to understand what matters to top performers, training managers on engagement and retention, creating meaningful development paths, ensuring competitive compensation, addressing poor performance (which frustrates high performers), and building early warning systems to identify at-risk employees before they resign.

What is the cost of dysfunctional turnover?

The cost of replacing an employee typically ranges from 50-200% of annual salary, but dysfunctional turnover costs are usually at the higher end. This includes direct costs (recruitment, training), indirect costs (lost productivity, knowledge loss, project disruption), and hidden costs (team morale damage, contagion effect, employer brand harm). For senior roles, total costs can exceed three times annual salary.

Dysfunctional Employee Turnover: Definition, Causes and How to Reduce It

Q: What is dysfunctional employee turnover?

Dysfunctional employee turnover occurs when valuable employees the organisation wants to keep choose to leave. These are typically high performers, people with critical skills, or those difficult to replace. It's contrasted with functional turnover, where poor performers leaving can actually benefit the organisation.

Q: What causes dysfunctional turnover?

Key causes include lack of development opportunities, poor management, below-market compensation, limited autonomy, cultural misalignment, and tolerance of poor performance elsewhere in the organisation. High performers also leave due to pull factors like better opportunities, more interesting work, or stronger employer brands elsewhere.

Every organisation experiences employee turnover. But not all turnover affects your business equally. When your strongest performers leave while underperformers stay, you're experiencing dysfunctional turnover—and it can devastate your organisation's performance.

This guide explains what dysfunctional turnover means, why it happens, how to measure its true cost, and evidence-based strategies to keep your best people.

What Is Dysfunctional Employee Turnover?

Dysfunctional employee turnover occurs when employees the organisation wants to keep choose to leave. These are typically high performers, people with critical skills, or those who are difficult to replace.

The concept comes from distinguishing between turnover that benefits an organisation and turnover that harms it:

Functional turnover: – When poor performers or disengaged employees leave, potentially benefiting the organisation

Dysfunctional turnover: – When valuable employees resign, harming organisational performance and capability

This distinction matters because overall turnover figures can be misleading. An organisation might report 15% annual turnover, but if that includes losing their top salespeople while retaining their weakest performers, the actual impact is far worse than the headline number suggests.

Why the Difference Matters

Consider two scenarios with identical 10% turnover rates:

Scenario A: Ten underperformers leave. The organisation replaces them with stronger candidates, performance improves, and remaining staff morale rises because problem employees have gone.

Scenario B: Ten top performers leave. The organisation loses critical knowledge, projects stall, client relationships are disrupted, and remaining staff become overworked and demoralised.

Same turnover rate. Completely different outcomes.

CIPD research consistently shows that organisations need to look beyond headline turnover figures to understand who is leaving and why. This is particularly important for strategic workforce planning at CIPD Level 5 and Level 7.

What Causes Dysfunctional Turnover?

High performers leave for different reasons than average or poor performers. Understanding these causes is essential for developing effective retention strategies.

Push Factors (Why They Leave)

1. Lack of Development Opportunities

Top performers are often ambitious. When they can't see a clear path for growth—whether that's promotion, new challenges, or skill development—they start looking elsewhere.

2. Poor Management

The saying "people leave managers, not organisations" is particularly true for high performers. Micromanagement, lack of recognition, inconsistent feedback, or simply not being valued drives talented people away.

3. Compensation Below Market Rate

While money isn't everything, high performers know their worth. If competitors offer significantly better packages, loyalty only stretches so far.

4. Limited Autonomy

Top performers often want ownership over their work. Excessive bureaucracy, lack of decision-making authority, or rigid processes frustrate them.

5. Cultural Misalignment

Values matter to engaged employees. If organisational culture shifts—or was never what it seemed—high performers may feel their values no longer align.

6. Tolerance of Poor Performance

Nothing frustrates high performers more than watching poor performers face no consequences. When mediocrity is tolerated, excellence feels pointless.

Pull Factors (What Attracts Them Away)

Better opportunities for career progression elsewhere
Higher compensation or benefits packages
More interesting or challenging work
Stronger employer brand or company reputation
Flexible working arrangements
Values-aligned organisations

The True Cost of Dysfunctional Turnover

The cost of replacing an employee is often estimated at 50-200% of their annual salary, depending on seniority and role complexity. But for dysfunctional turnover, the costs are typically at the higher end—or beyond.

Direct Costs

Recruitment expenses: – Advertising, agency fees, hiring manager time

Selection costs: – Interviews, assessments, background checks

Onboarding investment: – Training, equipment, administrative processing

Temporary cover: – Overtime, contractors, or interim staff

Indirect Costs

Lost productivity: – New hires take 6-12 months to reach full productivity

Knowledge loss: – Tacit knowledge, relationships, and institutional memory leave with the person

Project disruption: – Work stalls, deadlines slip, quality suffers

Training investment lost: – Development spending on the departing employee yields no return

Client relationships: – Customers may follow the employee or lose confidence

Hidden Costs

Remaining staff workload: – Burnout risk increases as others absorb extra work

Team morale: – Watching valued colleagues leave affects engagement

Contagion effect: – One departure can trigger others to reconsider their position

Employer brand damage: – Word spreads, making future recruitment harder

For senior or specialist roles, the total cost of dysfunctional turnover can exceed three times annual salary when all factors are considered.

How to Measure Dysfunctional Turnover

Standard turnover metrics don't distinguish between functional and dysfunctional departures. Here's how to develop a clearer picture:

Segment Your Turnover Data

Break down turnover by:

Performance rating: – Are leavers predominantly high, average, or low performers?

Role criticality: – Which departures affect business-critical functions?

Tenure: – Are you losing people after heavy development investment?

Potential: – Are those identified as future leaders leaving?

Calculate Turnover by Performance Category

High Performer Turnover Rate = (High performers who left ÷ Total high performers) × 100

Compare this to your overall turnover rate. If high performer turnover exceeds your average, you have a dysfunctional turnover problem.

Analyse Exit Interview Data

Properly conducted exit interviews reveal patterns. Look for:

Common themes among high performer departures
Differences between why good and poor performers leave
Early warning signs that weren't acted upon
Comparison with competitor offerings

Track Regretted vs Non-Regretted Turnover

Classify each departure as:

Regretted: – We wanted to keep this person

Non-regretted: – This departure is neutral or beneficial

Your regretted turnover rate is a more meaningful measure than overall turnover.

Strategies to Reduce Dysfunctional Turnover

Evidence-based approaches focus on the specific drivers of high performer departures:

1. Differentiate Your Talent Management

Not all employees need or want the same things. High performers often respond to:

Stretch assignments and challenging projects
Accelerated development opportunities
Greater autonomy and decision-making authority
Recognition that acknowledges their contribution
Career conversations that address their specific aspirations

2. Train and Support Managers

Since management quality directly affects retention, invest in:

Regular manager training on engagement and retention
360-degree feedback to identify problem managers
Clear accountability for team retention metrics
Coaching support for struggling managers

3. Conduct Stay Interviews

Don't wait until the exit interview to understand what matters to your best people. Stay interviews ask current employees:

What keeps you here?
What might tempt you to leave?
What would make your work experience better?
How can I better support your career goals?

These conversations, held regularly with valued employees, identify issues before they trigger resignations.

4. Review Compensation Competitiveness

Ensure pay and benefits for critical roles remain competitive:

Benchmark regularly against market rates
Address compression issues where new hires earn similar amounts to experienced staff
Consider total reward, not just base salary
Be prepared to make retention-based adjustments for key people

5. Create Meaningful Development Paths

High performers need to see a future:

Map out potential career trajectories
Provide access to senior leaders and mentoring
Fund qualifications and professional development
Offer secondments, projects, or rotation opportunities
Discuss career aspirations in regular one-to-ones

6. Address Poor Performance

Counterintuitively, one of the best retention strategies for high performers is dealing effectively with poor performers. When top talent sees that excellence matters and mediocrity has consequences, they feel more valued.

7. Build an Early Warning System

Identify risk factors before resignations happen:

Monitor engagement survey results by team and individual
Track changes in discretionary effort or enthusiasm
Note when development requests are repeatedly denied
Pay attention to managers flagged for poor leadership

Dysfunctional Turnover in CIPD Assignments

This concept appears across several CIPD units:

Level 5: Units covering resourcing, talent management, and organisational performance often require analysis of turnover types and retention strategies. The 5RST (Resourcing and Talent Planning) unit specifically addresses attraction, retention and turnover.

Level 7: Strategic HR modules examine workforce planning, talent pipelines, and the strategic implications of turnover. You might analyse turnover as a symptom of broader cultural or leadership issues.

When discussing turnover in assignments:

Distinguish clearly between functional and dysfunctional turnover
Use data to support arguments about turnover impact
Connect retention strategies to specific causes of departure
Consider both push and pull factors
Evaluate the business case for retention investment

The Bottom Line

Headline turnover figures hide more than they reveal. A 15% turnover rate could represent healthy renewal or organisational crisis—depending on who is leaving.

Dysfunctional turnover is particularly damaging because it creates a negative spiral: the best people leave, workloads increase, morale drops, and more good people follow. Breaking this cycle requires understanding why your best performers leave and addressing those specific causes.

The most effective retention strategies target what high performers actually want: meaningful work, development opportunities, good management, and recognition that their contribution matters. Generic retention programmes miss this point entirely.

For HR professionals, measuring and reducing dysfunctional turnover represents one of the clearest opportunities to demonstrate strategic value—turning people data into business insight and retention investment into measurable returns.