Good employees are hard to find. It is even harder to retain those employees. That's why reducing employee turnover is fast becoming the primary concern among organizations.
So, how to calculate employee turnover rates? It’s essentially the percentage of the total number of employees who leave an organization, over a period of time, and gets replaced by new employees.
Hiring top talent can be expensive, tiresome, and stressful. Subsequently, when the high performing employee chooses to leave, things become complicated.
The high annual turnover rate has become a pain point for growing companies. You have to worry about organizational growth while replacing a steady stream of employees leaving their jobs.
We all know that employee turnover is a problem. But how big of a problem is it?
According to an SHRM study, employers will end up spending 6-9 months of an employee’s salary to hire and train a replacement.
Very stressful, isn’t it?
When an employee chooses to leave, it might be due to various reasons. Some might be reasons you have no control like the poor health of an employee. But most often, the answer to why turnover occurs lies in the very heart of some common management practices.
Types of Employee Turnover
Essentially, here are two types of turnover. Voluntary and involuntary turnover.
Voluntary turnover occurs when an employee makes the decision to leave for any personal reason. However, involuntary turnover occurs when the employer lets go of employees for being a poor performer.
Voluntary turnover involves some of the high performing employees leaving. Thus companies are more inclined to concentrate on improving the voluntary turnover rates as compared to involuntary turnover.
So why are your high performing employees walking away?
The reasons why employees leave a company, might not be the ones that you are thinking of.
According to a Gallup survey, these following reasons drive employee turnover in companies:
- 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 make the decision to leave.
- 20.2% said that 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 a period of time, but in the long run. It affects overall productivity as well as diminishes morale among those left behind.
While you can’t prevent your employees from leaving for the greener pastures, you surely can reduce its frequency.
6 Factors Influencing The High Employee Turnover Rate
Understanding the reasons behind high employee turnover is preferable than conducting exit interviews.
Below are 6 problems pointing to a risk of high staff turnover, and what you can do about it.
1. Less Training Equals Higher Voluntary Turnover
Employee retention strategies should start when a new hire steps through the door.
Part of that experience is their on-boarding, which also counts as a part of their training.
Nowadays, companies are learning more and more about the importance of having a relevant onboarding culture.
But what most bosses fail to understand is that even an outstandingly good onboarding process will not be able to make your employees stay if the learning opportunities don’t continue. That is, many a time we don’t realize that even the old-timers need constant training and development opportunities.
The onboarding processes of companies like Facebook is almost legendary because it starts prepping their new hires even before their first day at work.
With changing technology, the need arises to keep on upgrading one’s current skills. Without significant means to keep up with the growing economy, their skillset becomes stagnant.
This contributes to a whopping 32% of employees who leaves because of this very lack of career advancement.
Expertise improves the quality of the work and ultimately helps in reducing 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.
Firstly, seek out 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 with. About what period of time will the training be provided. Draw up a detailed blueprint.
Conduct frequent seminars, presentations, workshops to help your employees build their skills.
At the start of the year, make it easier for them to get access to any learning resources like online educational programs. Also called e-learning, this gives the advantage of being faster, easier to access, and is more user-friendly as compared to traditional training practices.
2. The Culture Problem (Work Environment Matters!)
According to the Kapor Center for Social Impact study:
Nearly 40 percentage of employees leave after experiencing unfairness and mistreatment related to their identity.
Diversity is now more important than ever. 47% of millennials look for D&I programs in their prospective employers before finalizing a job decision.
Employee turnover occurs when companies ignore the need for diversity in the workplace.
To improve retention, companies have got to start making serious changes in the work environment. It can be measures taken to close the wage gap or combating inappropriate conduct.
Facilitating workplace diversity may mean creating system-wide new policies.
Allowing employees to take days off for religious holidays that may not be otherwise observed by the company. Offering on-site daycare for their children, and extending the option for flexible work hours. These are some of the many examples of diversity-friendly policies.
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 about 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 for training.
3. A Bad Hiring Process Affects Employee Turnover Rates
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.
Here’s the problem: the right people don’t get hired. This approach is a sure way recipe for high turnover. When the wrong people get hired, it creates big problems down the road.
However, with a systematic hiring approach, companies can hire better and faster by focusing on the first-minute, upfront work of hiring the employees who can best fit the role.
Before posting a new job listing, try to ask yourselves a number of questions. Ask about the role’s business need, high-level objectives, and needed skills.
Before releasing any new job listing to the public, first, share it internally with the team to see if it’s a good fit for an existing teammate.
Use sufficient 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.
4. Defining The Right Roles Influences Employee Engagement
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 exactly understand 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 doing tasks that they have suitable expertise in.
- 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 summarize, when employees know their place in the organization they become more assured, confident, and find relevant tasks to showcase their skills. In such a scenario, it is less likely that they consider quitting.
Make a list of all the existing staff or employees of the company. Next, create another list of the roles and tasks that are required to perform in the business operations.
Another useful tool is a rough organizational chart. This will be useful in analyzing how the different departments or divisions of the organization interconnect with each other.
Think of the role description as your guide or map, for both the management and the employee. This will help your employees in their attempt to attain the goals of the organization.
5. Opportunities For Mobility Within The Organization
Without mobility, there are no real opportunities for growth. Gallup's research found that the primary reasons employees look for change is to have the chance to expand their knowledge and use their strengths.
In a nutshell, people want to do what they're good at. When these opportunities for growth stop coming, an employee leaves.
The answer to retaining your top talent may not necessarily be a move up the corporate ladder. Rather than upward mobility, many employees are searching for "internal mobility".
Bersin by Deloitte defines it as a dynamic process for moving talent from role to role at every level, from top executives to operational staff.
Take into account both your high performing and high potential employees. High potential employees have the ability to be great assets to the organization. But they need further development and resources. Being able to identify these individuals is key to figuring out how to motivate and retain them.
Having the right learning and development resources in place for your employees.
It’s up to the organization to educate the management on the benefits of internal mobility. Just because this means you may end up losing an employee from your department, doesn’t mean you shouldn’t provide them with the right opportunities to grow and flourish in another part of the organization.
6. Work-Life Balance Is A Key Tool For Retention
When you don’t sleep, eat crap, don’t exercise, and are living off adrenaline for too long, your performance suffers. Your decisions suffer. Your company suffers.
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. There are 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 a daunting task. Employees feel that companies that offer a good work-life balance, are the ones worth investing their efforts into.
As an employer, the questions that you should be asking yourself is:
Are my employees forced to miss out on major family events because of 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.
- If you’re a manager, and you tend to be an overachiever, encourage your staff to take breaks.
- Offer a flexible work schedule.
- Offer paid time off.
- Set expectations that time off is indeed time off.
High employee turnover has the capability of bringing an organization to a standstill. Retaining your employees is a long, overdue process and it’s okay! Good things need a period of time and effort to happen.
Thus if you work to improve upon the above 6 key problems for your high employee turnover rates, you might be in a position to retain your best employees.