Employee Turnover: What it means and how it impacts you

It’s a fact today that your workforce carries a large responsibility in helping your company achieve its success. Especially during the pandemic, human capital proved essential for organizational survival and growth. Because of this, it’s important to understand that the quality of employee experience your company delivers should go beyond your recruitment and hiring process, in order to avoid what is popularly known as a high turnover rate. 

Even though many organizations worry about employee retention, not all teams understand how to monitor and prevent turnover. Why should you understand and care about Employee Turnover? What real impact does it have on your company? Let’s find out! 

What is turnover, and why does it happen?

The term turnover is a synonym for the number of people that leave your company. It’s a significant indicator to keep track of to understand the quality of your recruitment process, employee engagement and workforce environment. You can measure your turnover rate by dividing the number of  terminations over a given period of time by the average number of employees.   

Your turnover rate can vary depending on your organization’s  current moment, goals and even its industry.  Regardless, it’s important for your company ro determine what a healthy turnover rate is for its present moment and keep an eye on it to prevent it from increasing. A high turnover rate means that your company’s ability to retain talent is impaired. Your workforce is most likely  unhappy with their work environment which results in them leaving the company and taking the intellectual capital that was built while they were an employee. 

Many different situations can lead to employee turnover. Some are uncontrollable, such as fatalities and diseases, while others are directly related to the quality of life at work and their job satisfaction.

 Here are some of the leading causes of employee turnover:

Receiving a lack feedback and unclear directions from managers  

Through daily tasks, employees seek to add value and purpose to their work and achieve professional recognition. When the job doesn’t meet these expectations,  goals aren’t aligned and there’s absence of feedback, work can become frustrating for professionals who are invested in bringing more meaning into their careers. 

Absence of a career plan

Even when goals are set and feedback is given, it’s important that employees have a clear sense of direction in their careers and long-term development within your organization. If not, they’ll most likely find a company  that can provide them with more opportunities in the future. 

Lack of identification with the company culture

When employees do not connect with the purpose of their activities, they become more likely to seek new places both for personal values and for compensation or other similar factors.

Compensation 

It’s extremely important to keep an eye on your organization’s salary and benefits and compare it with other players in your industry to understand if what you offer is competitive and attractive to your employees. Considerable salary differences across teams or roles (within your company, or when  compared to other organizations in the same industry) can definitely be unmotivating for your workforce.   

Weak leadership

Immediate supervisors and managers have a crucial role in reversing (or causing) turnover. It’s important to train managers and key leaders on how to establish positive relationships with their direct reports and teams. As mentioned previously, lack of feedback or an abuse of micro management can be direct attitudes that influence employee turnover. 

Unhealthy work environment

Organizations that aren’t able to provide a healthy and employee-centric environment that fosters trust, work life balance, creativity and transparency for their employees are destined to have a high turnover rate. 

Types of Turnover

Many situations can lead to employee turnover, however turnover can be categorized in different ways:    

Voluntary: When the employee chooses to leave the company. In this case, your organization is at risk of losing a high-performance and talented professional due to problems such as those mentioned above. 

Involuntary: When the company terminates the employee. Despite the financial costs involved in the dismissal process, this type of turnover can be healthy if used strategically to replace underperforming employees. 

Functional: When the employee who resigns is a low performing employee. 

Dysfunctional: The opposite of functional,  in this scenario the company loses a talented employee that brings in good results. 

Inevitable: When employee turnover occurs due to external casualties that are not in the company’s control. 

Avoidable: Turnover was due to internal organizational problems that relate to  management.

Consequences of having high turnover rates in your company

High turnover rates can bring many consequences that directly impact your organization’s overall health. In general, every time companies lose talent,  it also automatically loses its ‘know-how’ or in other words, intellectual capital (the learned knowledge about processes and strategies that an employee builds during its time with your organization). This loss can create a short-term, or in some cases long-term, imbalance in your organization’s processes, teams and communication.  

Their are also financial costs related to turnover: 

Recruitment and Hiring costs

Opening a new role, screening candidates, scheduling interviews, advertising the new position and  involving other hiring managers, in addition to using the recruitment team’s time, can all add up financially. 

Onboarding and Training costs

New employee training programs, orientations, miscellaneous training costs, time of those involved, are also costs to be aware of. 

Resignation and Dismissal costs

When an employee resigns or is dismissed, organizations also have to invest their time on exit interviews and covering related costs depending on the situation and specific employee contract. 

How to calculate turnover 

 As mentioned previously, turnover rates will depend a lot on your company’s current moment and industry. However, in general, an acceptable turnover rate is defined as 3% .

Strategies to reduce turnover 

It’s important to emphasize that turnover will always exist in your company and is not something that should be eliminated completely, as there are healthy types of turnover (ex: when an underperforming employee resigns). Every company will have its own turnover rate, but your team must know how to differentiate a healthy rate from an alarming one. 

To reduce your turnover rate in the case that it’s negatively affecting your company, you can invest in management strategies such as: improving organizational climate and reinforcing company culture, maintaining a positive and employee-centric workplace environment, training leadership teams to collaborate with their direct reports in a healthy manner, create well-planned internal policies and opportunities for growth and learning, as well as creating a professional development plan. 

Make room for recognition, creativity, autonomy, diversity, trust and transparency in your company. 

When recruiting talent, align expectations from the beginning and keep true to your word when speaking about company culture, environment, teams and role. 

How your hiring process influences turnover 

Your recruitment and hiring process goes hand in hand with turnover rates, because as you’re hiring new employees, you’re aligning important expectations that will make them decide whether or not to be a part of your organization. 

If these expectations aren’t aligned correctly or  important company information isn’t well communicated during this process, it can easily cause frustration for new hires and increase turnover. 

Your recruiting process should ensure that new hires meet your organization’s needs and specific position requirements while simultaneously providing assurance to new talent that your company will provide the benefits, environment, career development and compensation that you’ve offered.

That’s why it’s important to count on recruitment and hiring tools that allow your HR team to strategically align these expectations with candidates throughout your hiring process. Plooral helps organizations save time in hiring qualified talent and reduce turnover rates through it’s engaging application process and innovative features. 

Turnover rate is an extremely important HR metric to track. Develop your own internal standards by regularly collecting turnover data over various periods of time and across all departments. Track turnover as it relates to individual managers at different levels. By having this type of information in hands, you’ll be well-prepared to make improvements and create an exciting employment opportunity that job seekers want and employees don’t want to leave.