Understanding Turnover

Understanding Turnover

And What Your Turnover Rate May Be Trying to Tell You

Turnover is often thought of as a numbers game, but it’s not. Turnover goes much further than a figure that gets recorded at the end of each month, year, etc. There are many factors that influence your company’s turnover rate, many of which are in your control to improve, which will in turn benefit both your employees and your company.

Simply put, turnover is the rate in which employees leave a company and are replaced by someone else. A company’s monthly turnover can be calculated by using this simple formula:

Once you’ve calculated your turnover rate, it’s important to analyze your results. Does your turnover rate seem low? Does it seem high? What factors may be influencing your turnover rate? What can you do to achieve a turnover rate that you are more comfortable with?

Before you settle on your answers to these questions, it is important to understand some of the misconceptions about turnover first. Understanding these misconceptions may help you better understand what turnover means to you and your company and what you can do to achieve a turnover rate that you are more satisfied with.

Turnover is common, right? Employees come and go, which is normal for any workplace, so why is it important to keep track of this? Most employers believe that if there is a problem within their organization it will be obvious, when in reality this is not always the case. Tracking your turnover rate can instead help uncover underlying issues within your organization that may not be entirely obvious. It can also help calculate financial losses within your company, but we will get to that later.

There are many reasons someone chooses to leave a job. There are also many reasons why they stay. Having low turnover does not always mean that your organization is running a tight ship and that your employees are ecstatic to be aboard said ship. Instead, it may indicate negative reasons your employees choose to stay with your company. Ask yourself, are your employees overpaid in a position they are under-skilled for? Are they unmotivated to make progress in their career? Have you created a work environment that offers too much stability such as benefit packages that are too good to give up? Are your employees held accountable for the poor behaviour they know wouldn’t be tolerated elsewhere? Is the economy too unstable for them to give up a decent job? These are all factors that may persuade an employee to stay in the position they are in when they know full well that they would be happier elsewhere. And that just goes for the productive employees. What about the less motivated individuals that are happy to stay because they get a great paycheque but only work at half capacity? In this case, you may have low turnover, but is your company working to its fullest capacity? Likely, not.

More often than not, low turnover points to a well-run organization with satisfied employees, but it is also important to consider that low turnover may be the result of other underlying issues that may need to be addressed to ensure that your company and its employees are happy and working to their fullest capacity.

In most situations turnover is not ideal for a business because of the financial costs associated with recruiting and training new employees. However, in certain cases turnover can be a very good thing. When employees naturally decide to quit, retire, or are fired, an opportunity presents itself for a company to move in a new, exciting direction if that is what feels needed. Having staff turnover in this way, allows for poor performing employees and employees that may be stuck in the old ways of how business was once done to be flushed out so enthusiastic and engaged employees and new hires can fill their spots. While turnover can be a sign of a poorly run business, it can also pose as a great opportunity to revamp your current business and transform it into something that will be more sustainable in the long run and more attractive to current employees and future hires.

Sure, people have the autonomy to choose to leave their job whenever they would like. We can’t really control that decision. What can be controlled is the reason or reasons for why a person chooses to leave their job. What can you be doing to retain your employees and ensure that they are happy with where they are at? This is where diving deeper than just the numeric data associated with turnover comes into play. You must assess what may be working for your staff and what is not. Ultimately, you must understand what actually matters to your employees and keeps them happy to be working for you. Here are a few things to consider that most (if not all) employees appreciate from their employer:

1. Pay that reflects a person’s value

Good pay has been and always will be a top priority for most people. Good pay is essential to one’s livelihood but also represents the value an employer has for their employee. It’s a no-brainer, good pay = high value. What you pay your employee is a direct indicator of how much value you have in them and at the end of the day everyone wants to feel that they are valued.

2. Flexible work schedules

Flexible work schedules allow people to put their personal needs and obligations first, ultimately allowing them to shape how they want their work week to look based on their needs. This is not always ideal for every line of work, but employers that can offer their employees flexible work schedules may see a boost in employee morale as a result of the better work/life balance this creates for employees.  

3. Fairness among coworkers

It goes without saying that people generally appreciate being treated fairly. As an employer this is something to be very mindful of. Are you treating all your employees fairly and are they being held to the same regard? For example, do you allow less motivated employees to slack off during work hours while your star performers carry the brunt of the workload? Disregard for dynamics such as this does not go unnoticed by your most productive employees. Holding those accountable for not meeting the expectations of the company can go a long way in improving your company’s productivity and also the appreciation felt by your highest performing employees. No one wants to work for a company where their hard work goes unnoticed. To that same point, no one wants to work for a company where the slackers also go unnoticed.

4. Respect from management

Worker loyalty has a lot to do with feeling respected by an employer. Employers often preach about respect, but are they always willing to show it? Pay attention when your employees have something to say, listen to the ideas they put forth, and don’t shout at or belittle them. Showing true, honest respect for your employees is a sure-fire way to gain the loyalty of your staff.

5. Work that’s interesting

“Love what you do, and you will never work a day in your life” is a common and often overused phrase, but it’s true. People want to do work that interests them, drives them, and gives them a sense of purpose. When work becomes mundane, boring, unmotivating, it can be easy for someone to look to other more exciting options when it comes to work. So, for your employees, keep things interesting, introduce new projects that may pique their interest, incorporate new training modules that keep your employees feeling current and on the cusp of new trends, and offer opportunities for cross training in other departments or promotion to other positions of interest. A great way to understand an employee’s interests is to have a conversation with them. Check in regularly and ask them if what they are doing is of interest to them. If it’s not, then discuss options that may be a better fit for them. An employee who is interested in their work is likely going to be highly motivated and more productive in their work and will be more likely to stay with your company longer.

6. Autonomy in the way work gets done

Every employee you have has a particular way in which they like to work depending on their temperament. Allowing your employees the freedom to achieve a set goal using a method of their choosing shows them that you trust them to get the job done without being told exactly how to do it. This allows your employees to be both comfortable and creative in their work. They will feel respected and proud of the work they do because it will be all theirs and granting them that responsibility will make them feel trusted.

Managing turnover can be tricky to navigate because it often means that employers have to look critically at the way they lead their company. This can feel like a daunting process, but it is certainly something that should not be glossed over. So before brushing off the tips in this article that can be used to improve your turnover rate, consider this: the financial impact of losing and replacing just one employee. Steve Holmgren, a manager at Eastern Ontario – Manufacturing Consortium created a spreadsheet that can be used to assess the costs of losing and replacing an employee that chooses to leave a company on their own terms. This tool can be used to ballpark how much a company loses in turnover per employee. If you are more of a numbers person, this tool can help put into perspective the cost of losing a good employee, demonstrating just how important it is to constantly work at retaining your employees so they are happy to choose you as their employer every single day.

Download Steven Holmgren’s Cost of Unplanned Attrition spreadsheet to begin calculating the cost of turning over one of your employees.

Resources:

https://www.payscale.com/content/whitepaper/Turnover-the-Good-the-Bad-and-the-Ugly.pdf

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