Every organization aims to recruit and hang on to the best employees they can to make sure they are not only productive but successful in realizing business goals.

Human resources professionals, managers and other administrative personnel may use a metric entitled employee turnover to establish how effective the company is in both recruiting and keeping great candidates. Learning just how excessive employee turnover can negatively affect your organization can help you deal with those issues leading to high turnover.

In this blog, we want to clarify what high employee turnover is, detail what can bring it about and talk about the steps you can take to avoid it.

First, what exactly do we mean by employee turnover?

Employee turnover is what takes place when employees leave – either of their own accord or being asked to leave, possibly as a result of inadequate performance, elimination of their role or other administrative changes.

Hiring is costly and losing people can adversely affect overall performance. An extreme employee turnover rate is often associated with low morale or customer dissatisfaction, which are both expensive and unwelcome. So, it shouldn’t be surprising that an extremely high employee turnover rate is normally regarded as an absolute no-no in business.

After all, the cost of hiring, training and replacing an employee adds up. Says Gallup, turnover costs U.S. businesses an average of $1 billion every year and can cost specific businesses anywhere from thousands to millions of dollars.

The key, then, to retaining a strong and sustainable employee turnover rate is to focus on retention as a method of lowering unwelcome turnover.

Let’s face it. You want to keep your good people for as long as possible. This is why it’s essential for human resources management to put helpful retention strategies in place from the very beginning.

The types of employee turnover

As mentioned, there are various kinds of employee turnover. Obviously, workers who breach company policies, fail to perform over a lengthy period of time or get twisted up in misconduct may encounter involuntary termination.

Redundancies take place when companies cut back on staff to stay in the black during tough times or when a seasonal project comes to an end.

And then there are those occasions when a spouse finds new employment and the family moves to the new job location.

For our purposes in this blog, however, we’re going to discuss those situations where an employee leaves on his/her own accord.

But you also need to bear in mind that employee turnover is both natural and necessary. Careers evolve, lives are altered, and businesses grow and adjust their vision and strategies over time. That’s why a company that has an unusually low employee turnover rate and keeps the same employees on board year in and year out might bit by bit come to a halt.

What’s a good employee turnover rate?

Let’s face it, a zero percent employee turnover rate simply isn’t practical or even advantageous, as mentioned. So, what is a sensible percentage? Of course, you’ll never be able to put a stop to employee turnover. However, around 10 percent is considered a decent rate. If you’re at more than 20 percent employee partings, you need to look closer at strategies to lessen turnover.

How do you determine employee turnover rate?

With the assistance of HR records, you can quickly establish the employee turnover rate. Before starting, you need to set the time frame, be it monthly, quarterly or yearly. Then, add up the total number of employees who left the company in that specific timeframe. This is your actual employee turnover.

Next, find out how many employees you had at the beginning of the period and how many were present at the end. Add these two numbers and divide by two to come up with the average number of employees. Finally, use this calculation to find your percentage: Workers who left ÷ average number of workers X 100= employee turnover rate.

Here is an example:

Let’s say you employed 200 people on January 1^st and 196 on December 31^st. During the entire year, 20 people left (actual employee turnover). With these figures in mind, here’s your calculation for an employee turnover rate:

• (200 +196) ÷ 2 = 198 average employees.
• 20 ÷ 198 X 100 = 10.1 percent employee turnover annually

If you employ temporary or seasonal workers, you should measure turnover for this group separately from full-time and part-time employees. This way, you can track staff-related expenses more accurately.

Why measure employee turnover?

As with any business metric, keeping track of staff turnover helps you track your progress to the desired objective, in this instance, a low employee turnover rate. On the other hand, if you have a high employee turnover rate, you’ll recognize you’ll need to recruit, and plan for recruitment costs, which can tally up.

By tracking your employee turnover rate, you can definitely recognize disturbing trends and appreciate where your business falls matched to competitors or other companies within your area.

Before we focus on adjusting that staff turnover rate, let’s consider why employees move on.

 

Lack of growth and progress

The absence of growth and progress is one of the chief concerns affecting employee turnover. According to a report from Gallup, 87 percent of those who identify as millennials reveal that prospects for growth and development are one of the most critical issues for career satisfaction. Around 70 percent of professionals in other generations restated the outlook.

Determined professionals are not happy to simply secure a great job and accumulate paychecks until they retire. Most of today’s workers possess career goals and seek to advance within their fields. Moreover, professionals who maintain their skills usually spend less time unemployed if suddenly laid off.

Calling a career a “dead-end job” is one of the most destructive professional insults. Human beings usually demand progress and point toward continuous improvement. Employees who stop learning, growing and establishing loftier goals become bored, impatient and apprehensive, and are apt to begin looking for new opportunities somewhere else.

Overwork

Overwork is another key motive for employees leaving their jobs. A recent Deloitte survey revealed that 77 percent of respondents suffered burnout at their present job and 42 percent had left for this reason. Even more precisely, 84 percent of millennials reported burnout. Over half of these respondents named this burnout as their reason for leaving. Younger generations are insisting upon a more sustainable work-life balance.

Obviously, increased workloads are not completely avoidable. Busy seasons or larger projects may demand that employes put in more hours. Nonetheless, lengthy episodes of overwork often mean staff discontent and burnout. Continuous overwork is also a sign of understaffing, inadequate planning and human capital management, adding up to an unwelcome work culture.

 

Poor compensation

Especially for younger people, extra money and more benefits are the chief reasons they leave a company. The Pew Research Center uncovered that low pay is the main reason to change jobs. Paying a decent salary has a huge impact on retention for the following:

• Paying people appropriately demonstrates that you appreciate their contributions.
• It is less probable that a competitor seeking to poach top performers can entice them to leave with only financial incentives.
• When your company pays near or at the top of the scale, you make headhunting a costly activity for competitors.

FYI: Glassdoor discovered that workers earn on average 5.2 percent more when they change jobs.

Pay out of line with performance

The connection between pay and staff resignations is a thorny issue – it’s not just that you can pay someone more to remain, though if everything else is spot-on with the role, a salary bump may stop a high-performing person from leaving you for a competitor tendering a higher salary.

Rather, pay turns up in the equation when outcomes and compensation are clearly connected, as in commission-based roles. In these circumstances, robust performance and lofty rewards go hand in hand with job satisfaction, which in turn could be a protective component opposed to turnover.

Ineffective management

As the saying goes, “Employees don’t leave companies, they leave managers.” Corresponding to one particular employee retention statement, employees who evaluate supervisor performance as inadequate are four times more apt to leave.

Little feedback or recognition

One Gallup survey disclosed that employees whose managers’ responses left them feeling more positive are about four times more likely to be engaged, with just 3.6 percent in search of a new job.

Many employees believe they don’t receive the right kind of manager feedback. Feedback doesn’t constantly need to be praise, but it should offer comments in an affirmative light.

Toxic culture

Perhaps surprisingly, around 25 percent of U.S. employees truly dread going to work every day. They don’t sense they can utter their opinions, and they don’t feel appreciated and respected for their efforts. Toxic culture costs companies billions in preventable turnover.

No company sets out to initiate a toxic work culture . . .it’s more often a mixture of all the above issues that make employees want to go elsewhere.

How do you reduce employee turnover?

To keep good employees on board, you need to understand the basic triggers expressed above and if and how they connect with your company. Only then can you come up with a strategy to contend with each situation.

For example, here are some actionable steps to boost employee retention.

Create training opportunities

When training thrives, employee turnover plunges. According to the 2022 Learning & Development Report by Findcourses, over two-thirds of employees that graded themselves as very satisfied with their jobs also stated their company endorsed a learning culture. If at all possible, training should begin at the onboarding phase and remain throughout the worker’s duration.

Such training programs permit employees to foster new skills and search various career paths within the company in a pragmatic way to fight boredom and decrease burnout. Moreover, management training can help someone to acquire the traits essential to producing successful leaders. Employees simply want a fair-minded, supportive boss who delivers positive feedback and recognizes their talent.

Employee compensation and recognition programs

Well-designed payment and recognition programs give workers a boost and help increase retention rates. Conventional awards such as Employee of the Month will still work, as do bonus checks and project-based rewards. To get the most from your recognition program, acknowledge achievements straightaway and offer important feedback.

Employee engagement surveys

Perform routine employee engagement surveys to gauge staff attitudes and discover would-be problems. Make sure the responses are anonymous to foster sincere feedback. Organize a culture committee and convene routine team building events and get-togethers. Task HR and company managers with fostering a positive company culture and develop tangible company culture goals.

Promote routine breaks and vacations

Urge employees to take regular breaks and, more importantly, spend their vacation time. Also, aggressively assist team members in finding coverage for their time off. For instance, one company scales down sales representatives’ assignments in the weeks leading up to paid leave.

When doable, control the hiring cycle to lessen time lapses. Such an approach includes cultivating hiring pipelines, posting open positions in a well-timed manner and simplifying the training process.

PDDM Solutions can help

Need some help in improving your employee turnover rate?

Ask the professionals at PDDM Solutions. Their experience in working with a variety of companies can provide you with some helpful insights in cutting unwanted employee departures.

Moreover, they can help in replacing those employees who have left with top-notch candidates for most any skilled position.