What is Employee Turnover
Employee turnover is the number of employees who leave an organization and get replaced by new workers. Turnover includes any reason for employee loss, including termination, resignation, layoffs, retirement, or location transfers.
It’s helpful for employers to measure employee turnover to understand the reasons for turnover and determine if changes are needed to keep more of their valuable employees. If you’re running a business that has employees, you will deal with turnover at some point.
Turnover and replacement costs around 20 percent of an employee’s annual salary, making it pretty costly. Let’s dive deeper into employee turnover and how to increase employee retention.
Different Types of Turnover
There are primarily four types of employee turnover, which are:
Voluntary turnover: This kind of attrition is when an employee voluntarily decides to leave the organization without pressure from internal leaders.
Involuntary turnover: This type of turnover is when an employee is let go or fired for various reasons.
Desirable staff turnover: Desirable turnover is when a business fires or loses for other reasons, underperforming or even toxic employees, and replaces them with new workers.
Undesirable turnover: Undesirable turnover is when a company loses its top-performing workforce, which are difficult to replace.
Calculating Employee Turnover
A business typically measures its employee turnover as a way to predict the impact on customer service, productivity, or morale in the office. Turnover is also calculated as a means of estimating the cost-to-hire for budgeting purposes.
To calculate your organization's turnover rate, you need a total headcount in a period of time frame and the number of employees who left during the same time period.
Here’s the general formula:
Employee turnover = (total # of employees that left / average number of employees) * 100.
So is your employee turnover rate good or bad?
But there’s not a clear-cut answer to that. The average turnover rate varies based on a few things including, industry, role, and geography. Look at industry trends to get an idea of the average in your vertical.
After some time of calculating your organization’s turnover rate, you will know your average so you can focus on improving it.
Top Reasons for Employee Turnover
If your best employee leaves your organization, you need to figure out the reason so you can fix it to keep more of your top performers. On the other hand, if you find you often need to let go of workers, you’ll need to dig deep into your selection requirements and onboarding processes.
Employees gave the top reasons for employee departure:
- Poor management
- Poor organizational fit
- Lack of training, support, or resources
- Lack of competitive pay
- Lack of clear career paths
- Lack of promotion
The good news is that you can fix these problems by improving your hiring, onboarding, training, and management practices.
1. Hiring Fail
Your HR (human resources) must hire individuals that are the right fit for your organization. Of course, your employees should have the right skills needed to do the job effectively, but it’s equally important that they align with your company’s culture, values, and mission.
You’ll find if the employee isn’t the right fit for your organization, they will soon lose motivation, disengage, or possibly even bring down the morale in the office.
The solution to reducing employee turnover: Save yourself a ton of time and money by hiring individuals that are a good fit off the bat. Remember, the experience and skill set is not the only thing to look for in an applicant.
They need to possess the right attitude and values that will fit in with your company culture.
2. Poor Onboarding
You might not know it, but the onboarding process makes a big difference in the employee turnover rate. Why? An effective onboarding process includes teaching new hires the company culture, expectations, attitudes and increases employee engagement to help them feel like part of the team.
The goal of the onboarding process is to get new hires adjusted quickly so they have job satisfaction, increase productivity and reduce turnover. A well-designed onboarding process is a win-win for both the employee and employer.
The solution to reducing employee turnover: Closely look at your current onboarding process.
Does it involve the proper training and resources for new hires to learn their job correctly? Does it include getting your new hires interacting with other employees to feel welcomed and part of the team? Does it involve teaching the company culture, attitudes, goals, and expectations?
3. Poor Management
This one is big. Many top producers quit their positions due to poor management or simply not getting along with their managers. For this reason, supervisory relationships need to be a priority. Managers need to build trust and competency so their employees feel they can count on them to help them succeed.
Management is responsible for providing proper training, resources, and support needed for an employee to get the job done. It’s also critical for a manager to show appreciation, respect and provide clear expectations and direction. When employees feel respected, appreciated, and supported they are more likely to be engaged and satisfied with their jobs.
Managers who are good at their jobs help to reduce employee turnover. Excellent managers learn and value what’s unique about each employee and capitalize on their strengths to meet goals.
The solution to reducing employee turnover: Some managers are toxic and cause high turnover with poor management and people skills. It’s imperative to weed out these managers quickly. Managers should be fair, honest, approachable, and ask their employees for feedback.
Leaders should oversee managers ensure their management styles align with the company culture and are keeping the employees happy, enjoying their work, and having job satisfaction.
4. Lack of Work-Life Balance
Let’s face it; no one likes to work day in and day out without time to enjoy life. When employees feel like they are always working, they can quickly get burned out and look for a way out. For example, if they are required to check and respond to emails or calls while they are at home.
An employee who always brings work home or has their job on their mind when they leave the office means their job interferes with their home life and probably their overall happiness. A stressed-out, overworked person just doesn’t perform at their best anyways.
The solution to reducing employee turnover is to ensure your employees get the proper breaks from work, including vacation time off, so they take time to do what makes their soul happy and refreshed.
When possible, offer flexibility with schedule start and stop times to allow workers to complete their work when they will be most productive and focused.
5. Competitive Pay
Compensation and benefits are a big reason people leave their job for another, especially top performers. When a company pays their employees well, it shows their staff they value their contribution. It also makes it less likely that an employee will leave for another company just for financial reasons.
The solution to reducing employee turnover: In business, you should always know what your competition is up to, including how much they’re paying their employees, which could be hard to find.
But understanding your employee’s options for salary is critical to ensure competitive offerings do not entice them.
6. Toxic Environment
Company culture is extremely important not only for employees but for customers too. A toxic work environment brings down staff morale and increases turnover, and trust me, customers feel it.
Sometimes, a negative environment gets started by one bad seed in the group. Other times it's triggered by leaders not communicating well with employees or listening to their feedback to make them feel like a valued and essential part of the team.
The solution to reducing employee turnover: A business must eliminate any toxic employees quickly before it causes top producers to leave for a more positive environment. A light and fun atmosphere with no office politics make for more happy employees who enjoy their job, reducing turnover.
7. Lack of Recognition
It can be completely draining for an employee to work hard day in and day out to do their best work but get little to no recognition. It eventually will make them disengaged, less productive, unmotivated, and ultimately seek new employment.
The solution to reducing employee turnover: Recognition comes in different shapes and sizes. You could acknowledge employees for stellar work at staff meetings in front of their peers (the most rewarding for an individual), verbally in passing, or in writing, such as in email.
You could also recognize monetary rewards such as cash bonuses, additional time off, paid group outings, or free food at the office.
Monitoring Employee Happiness to Reduce Turnover
OK, we’ve gone over everything about employee turnover and solutions to reduce it. But how do you know how happy your employees are with their job at your company? How can you tell if they’re not satisfied and possibly at risk of turnover? Employee surveys to gain valuable feedback are the answer.
No doubt, managers should be getting feedback often from their staff. But sending company-wide surveys monthly, quarterly, or bi-annually will give you the additional feedback managers are not asking for or that employees may be holding back. Now what you do with the feedback is what’s most important.
The feedback must be analyzed to determine where your organization is falling short and causing a voluntary and undesirable turnover. Implementing changes and creating policies to ensure your employees are happy and have job satisfaction will without a doubt reduce turnover.
The truth is, employees are the backbone of an organization and should be treated with the highest care. When your employees are happy at work and enjoy their job, they’re likely to be more engaged and committed to the business’s success. Simply put, invest in your employees, and they will invest in your organization.
Employee turnover happens. But you can take steps to reduce it and save your organization time, money and avoid disrupting your positive environment. Remember, employees are the backbone of a company and need the proper time, attention, and nurturing to ensure they’re happy and satisfied with their job.
Employee satisfaction is equally as important as customer satisfaction. When employees get acknowledged for their hard work, respected, compensated fairly, and in a positive working environment, they are less likely to be lured by competitive offerings. Also, happy employees dedicated to the organization's success will be more committed to providing total customer satisfaction.
Are you ready to hire an awesome staff to increase productivity and improve efficiency? If so, contact Awesome CX today, and we’ll show you the way.