I recently ran into a friend of mine, we discussed his story over coffee and this is what prompted me to write this blog. Let’s call him Employee X – and this is a story about employee turnover.
Employee X has been with the Finance department of a leading IT services company for the past 4 months. Initially, when he joined, he loved the energy of the company and the momentum with which they went about their daily tasks.
Over time, he felt his enthusiasm dip, and then completely drop. In a span of a mere four months, he lost confidence in his future in this role. His manager is busy and has stopped catching up with him. His HR representative has not responded to his emails in a while. He has tried speaking to a few of his colleagues but apart from small talk, they haven’t responded.
In his mind, he is mulling over the reasons he has to quit the company – disengagement from the company, limited rapport with his manager, disillusionment with the HR team and no working relationship with any of his colleagues.
At some point, you may have felt this way too.
Employee X is a good performer, with a lot of potential, but 2 months down the line, his company is going to lose him.
How many employees did your organization lose and then have to replace last year?
According to Digitalist Magazine, this is defined as Employee Turnover. At any point during the financial year in an organization, there are a certain number of new employees who join the organization, and conversely, there are a certain number of employees who choose to leave the organization. This can be due to any number of reasons such as a job opportunity in another organization, employee disengagement, a bad manager, etc.
A certain amount of employee turnover is healthy for an organization, but too much can be detrimental, especially when you lose your top talent. Excess turnover can be prevented by implementing employee retention strategies. These are the methods an organization uses to keep high performing employees engaged and have them stay.
What You Need to Know
Employee turnover is expensive and time-consuming, that’s why organizations take extra efforts to prevent high turnover and keep their top employees engaged. The responsibility for this comes right from the HR Head of the company down to the direct line managers.
Here are a few notable statistics about employee turnover which may surprise you.
- According to Gallup, 51% of the current workforce is looking to leave their current job
- Universally, 15% of the workforce does not see themselves working in their current organization a year from now
- More than 70% of high-retention-risk employees from the current workforce are ready to leave their current companies in order to advance in their careers
- Millennial turnover costs the US economy approximately $30.5 billion annually
- Conversely, engaged employees are 87% less likely to leave their organization
With a quick glance at these numbers, you can tell how difficult it may be for your organization to retain many of your skilled and top performing employees.
So What Causes Employee Turnover?
Employee turnover has the potential to affect the performance and bottom line of the company. A high rate of turnover is a sign of problems within the organization.
Turnover can be a symptom of unmotivated or disengaged employees, ineffective management, or inadequate compensation and benefits. It can also indicate the presence of unmanageable workloads and an expectation of high performance against these odds.
There are certain circumstances under which turnover is justified – if the employees are poor performers or are found to be unethical in their work. Apart from these, employees in critical positions, and/or who conduct themselves well and perform reasonably well should be retained.
Generally, HR managers will take a look at exit interview reports to study the reasons why employees choose to leave. If there are common answers or patterns found, this gives HR managers a reason to investigate further and arrive at the core of the problem. But some of the top concerns can be found here:
Causes of Employee Turnover
Employee turnover can be caused by several factors, a few of which are as follows –
- Hiring Problems – An employee that is the wrong cultural fit, someone whose skills don’t match job requirements or someone whose goals aren’t aligned with the company, are examples of employees likely to leave a job sooner than later.
- Bad Managers – It is commonly said that employees don’t leave their jobs, they leave their managers. This is quite sad, because in many cases, employees may love their jobs and be quite good at it, but they leave due to problems with their manager.
- Work-Life Imbalance – Organizations which stifle an employee’s personal life, their interests outside of work and their hobbies are subtly influencing their employees to leave the job since they do not have a reasonable work-life balance. Sometimes, employees are put in a difficult position where they must choose between their work and life. This puts people who have spouses, children, ailing family members, etc. in a very difficult position.
- Lack of Growth Opportunities – Good employees can stagnate if they are in dead-end jobs where their value is undermined. The most efficient organizations enable their employees to grow as the organization grows – giving them more autonomy, more responsibility and greater ownership over projects. Companies with high turnover rate lack such characteristics.
- Compensation Problems – Money isn’t the prime reason people leave, but it is important when you consider that other employers might offer your employee a salary hike of 20-25% because they value their skills more than your organization does. In conclusion, competitive wages and better benefits definitely go a long way with employees.
The Costs of Employee Turnover
Employee turnover is measured using the following formula:
The costs associated with employee turnover can have a huge impact on your bottom line.
- Hiring Costs – Job posting, recruitment, interviewing, selecting the right candidate, further evaluation, technical evaluations
- Onboarding Costs – The ‘honeymoon period’ – a period of about 2-3 months where the employee is learning the ropes of the role and is least productive
- Training Costs – Costs associated with getting the employee up to speed in technical or functional certifications
- Notice Period – When the departing employee is on his way out, he spends about 2-3 months serving notice to the company and tying up loose ends in his work. This is also a period of low productivity which becomes a cost if a replacement for the employee cannot be found quickly
Are There Benefits of Employee Turnover?
Employee turnover has a few benefits – such as reduction of unproductive employees through annual turnover and bringing in fresh blood in the organization through hiring their replacements. But overall, a high rate of turnover is a sign that something is wrong with the operation of the organization and interventions need to be carried out to remedy the problem.
How You Can Reduce Employee Turnover
- Improve the hiring and onboarding processes by automating as much as possible to save time, thereby reducing onboarding costs as well.
- Use a measure like a quick survey, assessment or evaluation to check how culturally fit the candidate is and how much his/her skills match with what’s required for the job. This would help hire the right candidate for the right job.
- Train managers to ensure they can become good leaders of the future – they should possess a certain degree of social intelligence and emotional intelligence to lead their team better and help them grow as individuals.
- Provide employees with continuous feedback and recognition –encourage employees to respond to the feedback given and discuss this openly with their managers.
- Assess the mood of your employees – it is essential to know how your employees are feeling at any point to understand how changes in management, policies or operations affect them and influence their behavior.
- Promote work-life balance in the organization. Be mindful not to unnecessarily overload your employees, don’t contact them outside of work unless it’s an emergency and give them a dose of positivity when they come to work in the morning.
The Right Tools Can Help:
There are a few tools available in the market which may help reduce employee turnover by encouraging continuous feedback. They are as follows –
In addition to these, Sproutlogix has created a suite of products which helps organizations retain employees and reduce the overall rate of turnover. Refer to our website www.sproutlogix.com to learn more.
In conclusion, employee turnover is a daunting phenomenon for many companies, especially when they think of their employees as important resources. Employees feel valued by the company when the company considers them to be an asset. The best way in which companies express this is by trying to reduce employee turnover. High turnover is preventable, however, it is in the hands of the company to use tools and best practices, to retain talent and thereby boost profitability.
Ready to reduce your turnover? Write to us on [email protected] to begin a conversation on how we can help you retain your top talent and positively impact your bottom line.