High Employee Turnover: 7 Major Reasons (+How To Solve Them)
In today's competitive business landscape, high employee turnover can be a formidable obstacle to success. Because good employees are hard to find and even harder to retain.
Losing your top performers can drain resources, disrupt productivity, and hinder growth. That's why reducing employee turnover is fast becoming the primary concern among companies worldwide.
We all know that employee turnover is a problem. But how big of a problem is it?
Before finding the answer to this question, let’s glimpse at the key takeaways of this article.
- Concept of Employee Turnover
- How Employee Turnover Affects Business Health
- Factors Influencing High Employee Turnover
- Action Steps to Reduce Employee Turnover
What is Employee Turnover?
Employee turnover can be defined as the rate employees depart from an organization within a specific timeframe, typically a year.
It encompasses the collective count of individuals who leave their current employment and are subsequently replaced by new hires.
The statistics mentioned above are a good example to understand the ongoing trend of the great resignation. The great resignation has brought a seismic increase in employee turnover since 2020. It is an ongoing battle, and HR professionals are trying to curb the numbers by understanding the underlying reasons and factors influencing high employee turnover.
Types of Employee Turnover
Voluntary turnover is when an employee decides to leave their current job for personal reasons. It can happen when employees switch to a different company, pursue further education, relocate to a different city, etc.
This type of turnover can include high-performing employees. Thus companies are more inclined to concentrate on improving the voluntary turnover rates.
Involuntary turnover refers to the situation when the employment of an individual is terminated by the employer. It could be for various reasons not limited to poor performance, retirement, misconduct, etc.
However, the result of such turnovers is usually situational and not entirely within the employee's control.
Desirable vs. Undesirable Turnover
Both voluntary and involuntary turnover can be either desirable or undesirable. Those terminated due to poor performance are considered a desirable involuntary turnover. Because it allows the company to fill the gap with new talents equipped with the required skills.
Similarly, an employee who leaves the company for a better-paying position at a rival company is considered undesirable voluntarily turnover.
How Employee Turnover Reflects Business Health
While evaluating a company's business health, it is very easy to get enamored by the revenue and valuation. This might make you ignore the components of employee satisfaction and engagement.
These components can be measured with the help of employee turnover data.
The data allows you to assess the cost incurred for hiring new employees, the productivity gap due to loss of knowledge, employee morale, and the reputation of the company.
Moreover, high turnover may also lead to higher expenses related to advertising for vacant positions, training the employees, providing new assets during onboarding, and many more.
The company incurs expenses associated with training the new employee and the cost of supporting them during the probationary period. Because new employees typically require time to become familiar with their responsibilities and work processes, which necessitates training.
When evaluating the health of a business, it is essential to consider that turnover standards can vary across different industries. This means that what may be considered a high turnover rate in one industry could be deemed average or even low in another.
For example, in the case of larger sectors like Tech and Media, they often have a higher-than-average turnover rate owing to constant technological advancements and changing market demands.
The statistics provided below illustrate the global average turnover rate of different industries.
Recommended Resource: How To Calculate The Employee Turnover Rate
Why Are Your High-Performing Employees Walking Away?
In the competitive business world, retaining top-performing employees is the key to organizational triumph. However, it can be disheartening when these valuable assets choose to walk away. Understanding the reasons behind their departures is vital for creating a thriving and engaged workforce.
The reasons why employees leave a company might not be the same ones you are thinking of.
According to a Gallup survey, the following reasons drive employee turnover in companies:
- Poor Managers influence at least 75% of the reasons for voluntary turnover.
- Career Advancement contributes to 32% of those voluntarily quitting jobs.
- Pay and benefits was the second most common answer (22%) to why employees decide to leave.
- 20.2% said they quit because they were not suited for that job.
- Much smaller percentages quit because of flexibility or scheduling (7.7%) or job security (1.7%).
When an employee leaves, it affects the organization as a whole. Employee turnover shows its effects, not just for some time but also in the long run. It affects overall productivity as well as diminishes morale among those left behind.
But, while you can't prevent your employees from leaving for the greener pastures, you can reduce its frequency.
Factors Influencing High Employee Turnover
1. Training and Development
In today’s fast-paced job market, employees have access to a wide range of opportunities. Organizations that fail to invest in employee development risk losing top talent to competitors who offer better training and growth prospects.
However, today companies are learning more and more about the importance of having a relevant onboarding culture. But most bosses fail to understand that even an outstanding onboarding process will not make your employees stay if the learning opportunities don't continue.
One thing that we don't realize is that even the old-timers need constant training and development opportunities. With changing technology, the need arises to keep upgrading one’s skills. Their skillset becomes stagnant without effective means to keep up with the growing economy.
The only thing worse than training your employees and having them leave is not training them and having them stay.
– Henry Ford
Expertise improves the quality of work and reduces the annual turnover rate. Initial training efforts will cost you some amount of time and money. But once the employee gets skilled in their respective roles, they can provide you with better business results. It reduces the frustration level of both- the employee and the employer.
According to Gallup, 87% of millennials claim that professional growth and career development are significant to them.
Action steps to improve training and development:
Firstly, seek to implement proper training and planning for your employees. Determine what kind of training is needed. Determine who needs to be trained. Know the best resources to provide training. Fix the duration of the training. Draw up a detailed blueprint.
Develop mentoring and coaching programs for your employees. You can set up an e-learning program or Learning Management Systems (LMS) platform that centralizes training materials, manages learner progress, and tracks completion and performance.
Conduct frequent seminars, presentations, and workshops to help your employees build their skills.
Offer tuition reimbursement to your employees. You can set up a tuition fund in your company and encourage employees to enroll in courses to help them upskill in their respective roles.
2. Work-Life Balance
More than 1 in 4 employees at organizations not perceived to support work-life balance plan to leave their employers within the next two years.
Your employees have a lot of stuff to deal with every day. Meetings, office parties, interviews, deadlines, work events, and more.
On top of that, employees are expected to stay at the top of their game. The daily commute. Children to look after. Relationships to maintain. Personal crisis.
Striking a balance between your personal life and work life can be daunting. Employees feel that companies that offer a good work-life balance are worth investing their efforts into.
Another contributing factor to work-life balance is the Work From Home (WFH) facility. Companies switched to the WFH mode of working during the COVID pandemic. Although productivity was low initially, it slowly increased and produced better turnarounds on projects.
According to a comprehensive study conducted by Stanford Business, which tracked 16,000 workers over a span of 9 months, remote work resulted in a remarkable 13% increase in productivity.
Employees now expect a work-from-home or hybrid working environment from their employers.
A survey conducted by Mckinsey revealed that more than half of employees expect their organizations to adopt more flexible hybrid virtual-working models.
Many companies are now extending Work From Home facilities to employees for a better work-life balance experience.
As an employer, the question that you should be asking yourself is:
Are my employees forced to miss major family events due to work obligations? Are they compensated enough for the things they are missing out on?
If your answers are “yes” and “no” (in that order), a lot of changes have to take place.
Action steps to improve Work-Life Balance:
- Encourage employees to take breaks
- Offer a flexible work schedule. Create a work-from-home policy that facilitates employees to work remotely per their requirements.
- Offer paid time off.
- Set expectations that time off is indeed time off. Do not ask employees to complete their work on off days.
- Introduce wellness programs to improve the psychological health of your employees. There are many innovative wellness platforms that encourage employees to strike the much needed balance. These platforms are innovative, efficient and customizable to suit the changing needs.
Vantage Fit, is one such corporate wellness program that ticks all the boxes. It gamifies employee wellness through contests and challenges. For instance, the squat exercise challenge uses AI to count the number of squats and determine the exercise posture of the participant.
3. Job Satisfaction
Job satisfaction plays a crucial role in employee turnover rates. Employees who are satisfied with their jobs are more likely to remain with the organization, resulting in reduced turnover.
Recent data from a Job Satisfaction survey revealed that overall worker satisfaction in the United States in 2022 increased to 62.3 %, reflecting a positive shift from the 2021 rate of 60.2 %.
- Make sure your employees are fairly compensated and offer additional benefits that meet the industry standards and their expectations.
- Additionally, employees should be rewarded and recognized for their efforts. There is a higher chance of employee turnover if your employees constantly feel undervalued and underappreciated.
- Many organizations have also utilized employee rewards and recognition platforms to their full potential to address these issues. Although there are many platforms today that offer excellent R&R programs, there are a few game changers in the market.
Vantage Circle is one such player in the field of R&R. The platform offers solutions to enhance employee recognition, collaboration, and overall productivity.
The Vantage Rewards platform can be customized as per your company’s needs. With features like the AI-powered ‘Service Yearbook’, customizable badges, manager’s gifting wallet, and service milestone recognition, employees can surely be encouraged to achieve job satisfaction.
The AI-powered Service Yearbook has an exclusive feature that uses predictive text to help you craft a message. It enables employees to collect and share memories, including photos for their colleagues’ work anniversaries, in a personalized online yearbook format.
Action steps to improve Job Satisfaction:
- Regularly evaluate the competitiveness of your employee benefit and compensation offerings to ensure they remain in line with current industry standards.
- Offer performance-based incentives or additional perks to recognize your employees’ hard work and commitment.
- Do not try to micromanage your employees. Empower them by providing autonomy and decision-making capabilities that are relevant to their roles and responsibilities.
- Regularly conduct surveys to measure employee satisfaction levels. Identify areas for improvement. This is where employee survey tools like Vantage Pulse comes into play. With the help of e-NPS based survey, you can listen to your employees’ voices and measure their satisfaction levels.
4. Company Culture
Company culture has a significant impact on high employee turnover. Organizations have identified toxic company culture as a major concern in reducing employee morale and productivity.
A negative or unengaging culture can lead to disengaged employees who are more likely to seek opportunities elsewhere. Poor leadership, communication, limited growth opportunities, toxic work environments, values mismatch, and lack of work-life balance can all contribute to employees leaving.
According to Randstad 38% of workers want to leave their jobs due to a toxic work culture.
On the other hand, a positive culture that values employee growth, fosters open and effective communication, promotes a healthy work environment and aligns with employee values can help reduce turnover rates by fostering loyalty and job satisfaction.
Lack of diversity and inclusion is another factor that can hugely impact the company culture. Morely because it can hinder their sense of belonging within the organization.
As per a study, 47% of millennials look for D&I programs in their prospective employers before finalizing a job decision.
As companies start hiring employees from diverse backgrounds, they must ensure a safe environment at the workplace.
According to a survey by International Labour Organization,
Globally, 17.9% of employed individuals have experienced psychological violence and harassment, while 8.5% have faced physical violence and harassment.
Companies must take necessary measures to prevent workplace harassment and create a safe and secure environment.
Action steps to improve company culture:
- Clear communication and follow-throughs are necessary to ensure the policies are effective. Employees should feel comfortable coming to their managers with any concerns, especially their treatment in the company due to their gender, ethnicity, sexuality, age, or other factors.
- Create dedicated diversity task forces with team members from every department to train employees on diversity and inclusion in the workplace.
- Create awareness among employees regarding workplace harassment. Implement a sexual harassment policy in the workplace.
- Increase your employees’ involvement in the decision-making processes of the organization. It can be as simple as asking for votes for deciding the cafeteria menu, and complex decisions like changes in the company policies.
5. Hiring Process
Developing an efficient hiring process is very often neglected. Mainly because companies are so hard-pressed for time and resources that they want to fill in the vacant positions as soon as possible.
With this short-term view, they throw strategic planning out the window and start interviewing candidates according to inconsistent processes and with a firm reliance on gut reactions.
The issue at hand is the failure to hire the right people. This approach sets the stage for high turnover, as hiring individuals who do not fit well culturally can lead to significant challenges in the future. When the wrong people are brought on board, it creates substantial issues, highlighting the importance of considering cultural fit during the hiring process.
With a systematic hiring approach, companies can hire better and faster by focusing on the first-minute, upfront work of hiring the employees who best fit the role.
Another important factor to consider while creating a hiring process is the emotional intelligence of your employees. Employees with higher EQ can easily resolve conflicts, produce higher employee morale, and have the potential to rise to leadership positions.
Listen to this podcast to learn about The Interplay of Leadership, Emotional Intelligence, and Employee Engagement
Action steps to improve the hiring process:
- Before posting a new job listing, ask yourselves several questions. Ask about the role’s business needs, high-level objectives, and needed skills.
- Before releasing any new job listing to the public, share it internally with the team to see if it fits an existing teammate well.
- Use good tools to keep your hiring process efficient and help create a great experience for everyone involved.
- Focus the interview on understanding the candidate and what they value.
- Do a thorough background check before hiring the candidate
- Consider evaluating the emotional intelligence of the candidate before hiring
- Analyze the data collected during the exit interviews. Look for any patterns, whether the turnover is high during a certain period or within a specific department.
Companies can expand their talent pool by 10x by recruiting through their employees’ networks.
6. Defining The Right Roles
Every employee has a role that he will fit into. A Harvard Business Review study highlighted:
In fact, when individuals feel their role is bounded in ways that allow them to do a significant portion of their work independently. Without such clarity, team members are likely to waste energy negotiating roles or protecting turf, rather than focusing on the task.
A clear role definition helps employees to understand exactly what's expected of them.
When employees know what's expected of them, they tend to:
- Feel confident about their contribution to the organization.
- Focus their time and efforts on tasks they have suitable expertise.
- Avoid working on tasks that are unrelated to their skillset.
- Spend less time trying to get a grasp of their duties and responsibilities. They already know what their priorities are.
- Feel less stressed.
To simplify, when employees know their role clearly, they become more self-assured, optimistic, and more likely to seek out tasks that enable them to display their skills. In such a scenario, it is less likely that they consider quitting.
Action steps to define the right roles:
- Creating lists is a good way to start. To make things easy, create 2 lists, where the first one has details of the existing workforce and staff. The second list should highlight the tasks and roles required for the operations.
- Another helpful tool is a rough organizational chart. This will be useful in analyzing how the organization's different departments or divisions interconnect.
- Think of the role description as your guide or map for the management and the employee. This will help your employees attempt to attain the organization's goals.
- Set expectations for the roles right from the hiring stage. Employees can perform to their best only when they know what is expected of them.
7. Internal Mobility Opportunities
Without mobility, there are no real opportunities for growth. So, what is mobility in an organization?
According to AIHR, mobility, or internal mobility to be specific, is the movement of employees to new career and growth opportunities within the same organization.
Internal mobility can be vertical or lateral, including promotions, demotions, new positions, mentorships, cross-team or additional projects, job shadowing, and job swaps.
Employees are more likely to stay within the organization for a longer period of time if they are provided the opportunity to move within.
internal hires significantly outperform external hires during the first two years of a promotion.
Action steps to improve internal mobility:
- Educate the management on the benefits of internal mobility. Without an understanding of the benefits, managers won’t be able to take full advantage of internal mobility.
- Ensure transparency in the communication of internal job postings and development opportunities to all employees.
- Provide cross-functional training to your employees. This allows employees to develop new skills and gain greater insight into various organizational functions.
- Don’t make it a one-time-only project. Consider internal mobility as a long-term investment.
Listen to this podcast to learn about Leveraging Internal Mobility With Technology And Branding
High employee turnover has the capability of bringing an organization to a standstill. By understanding the root causes and implementing effective strategies, you can transform your organization into a retention powerhouse.
Retaining your employees is a long, overdue process, and it's okay! Good things need a period of time and effort to happen.
Don't let limited growth opportunities, toxic environments, or work-life imbalance hinder your success. Take action now to create a workplace that fosters growth, nurtures well-being, and values its employees. Embrace recognition programs, invest in professional development, and cultivate a positive culture that inspires loyalty and commitment.
1. Can employee turnover be controlled?
Yes. Employee turnover can be controlled by addressing the major concerns related to company culture, hiring process, internal mobility, work-life balance, role definition, and job satisfaction.
2. Is employee turnover good or bad?
Employee turnover is bad for your company. Losing your valuable employees can drain resources, disrupt productivity, and hinder growth. However, you can find some good attributes like being able to hire new skilled employees. But those goods are a drop in the ocean.
3. What are some effective strategies to reduce high employee turnover?
Some effective strategies to reduce high employee turnover are training and developing employees, conducting surveys to measure job satisfaction, improving the hiring process, encouraging effective communication, etc.
4. Can high employee turnover impact the employer brand and recruitment efforts?
High turnover rates send a negative signal to potential recruits, indicating underlying issues of the company. It also raises concerns about poor employee experience, career growth opportunities, and overall organizational stability.
5. How long does it typically take to see the impact of retention strategies?
The time taken to see the impact of retention strategies usually varies depending on its factors. But, generally, it requires a sustained and consistent effort to yield significant results.