How to manage employee turnover

The business environment we find ourselves in today is extremely competitive. Organisations are now finding it incredibly difficult to differentiate themselves from their competitors, this comes as a result of vast improvements in technology and mass communication. This is why it is vital for companies to create the best culture possible in order to both attract and retain the best people they can.

Cost of losing employees

According to research carried out by Columbia University, the cost of replacing an employee is 150% of their annual salary, SHRM on the other hand have stated that it is between 60-200%. The costs however, don’t stop at money, there are also hidden costs such as lower organisational engagement, lower moral, lower organisational performance and training for new employees.

There are a number of myths surrounding turnover which, if are listened to can actually hinder the growth of your organisation and contribute to employee disengagement.

Myth: Measuring turnover isn’t important. Many people think that because no one is irreplaceable worrying about things like turnover is pointless and it will be clear if there is a problem. However, this is not always the case. A person’s perception can be clouded by preconceptions and biases, and although perception is of course important, hard data is too perhaps even more so.

Myth: is that low turnover is always a good thing. Often low turnover is put forward as proof that an organisation is great, which is an understandable assumption to make. People think that if there is low turnover the organisation must be great if employees don’t want to leave there. However, when it comes to human emotion it is very complex. There are many reasons why an employee could choose to remain at a company that have nothing to do with the company being great. Employees could for example, be overpaid, under-skilled, unmotivated, believe the benefits are too good etc. We will look a little deeper into each of these points.

  • Under-skilled & overpaid: If an employee is under skilled or overpaid, they will not be hugely attractive for another company. The majority of employees in this situation know this and won’t try to look for another job as a result of this, other people don’t realise that they are unemployable until they start to look for another job and don’t receive any offers.
  • Unmotivated: Employees in this category tend not to want to do much more than what they are already doing. This may or may not be okay in your organisation, depending on how flexible you need your employees to be in relation to managing changes within the business.
  • Company Benefits: Benefits for the most part, are put in place in order to help drive retention. However, if the only reason your employees are staying with you is for the benefits when what they really want is to be somewhere else, it’s probably better for your company that they work somewhere else.
  • Unstable Economy: A huge byproduct of the 2008 recession is that employees had no plans to leave jobs they hated. With the economy picking up it seems that these employees may begin looking elsewhere.

For the most part, low turnover in an organisation is a good thing. However, it is good to keep in mind that this may not always be the case.

Myth: Turnover is always bad. It is true that turnover can be disruptive and is extremely expensive in terms of both direct and indirect costs and so must be avoided. The truth however is that in some cases change is needed. Whether this means employees are fired or leave voluntarily, turnover can be an opportunity for employers to select employees who are enthusiastic about the company and where it is going. Sometimes turnover can actually be good for the company in the long run especially when it comes to under-performing, overpaid employees.

Disengaged employees and turnover

There is vast amounts of information available on how to engage employees, however employers are constantly doing a bad job of it. Gallup News found that only 33% of US employees are engaged. A certain level of disengagement is normal as nobody can be fully engaged 100% of the time. In Gallup’s study, they define being disengaged employees as employees who are “essentially ‘checked out.’ They’re sleepwalking through their workday, putting time—but not energy or passion—into their work”. Employees who are actively disengaged are a bigger threat to companies. In this case employees “aren’t just unhappy at work; they’re busy acting out their unhappiness. Every day, these workers undermine what their engaged co-workers accomplish.” It is important for organisations to recognise when an employee has started to distance themselves, so they can intervene and start the re-engagement cycles. A huge element of retention is to make sure your employees do not get to the stage where they are disengaged.

How to retain your best employees

Focus on culture: Companies that manage their culture perform much better than those that don’t. Culture affects every aspect of a company. Time spent creating a good culture is time well spent and is hugely important in relation to employee retention. Once a company culture is defined, every action, strategy and communication should support the cultural beliefs. Hiring employees who are compatible with the culture of the organisation will perform better than those who are not.

Focus on competency: Job descriptions should be created and the employee filling this role should be responsible for fulfilling these descriptions. Similarly, managers should know or be trained in how to give feedback and if they do it correctly as well as honestly then they should be rewarded. Employees who are competent want to work with other employees who are also competent and who value their talents. If this is not the case employee will leave this environment and find one which meets their standards.

Onboarding: There are a number of ways in which onboarding can be described. Scott et al. describe it as a process that “enables newcomers to acquire the knowledge needed to successfully adjust to their new work surroundings and function in their new roles”. For more information on leadership onboarding click here

What do employees want

Flexibility: In a survey carried out by SHRM, 59% of respondents stated that both retaining and rewarding their top employees was their biggest concern. In a follow up questions these respondents were asked how they thought they could achieve this goal, 40% said through “providing flexible work arrangements”. Similarly, a study by Mercer revealed that 51% of employees wanted their company to offer more flexible work options. The majority of employees are willing to show loyalty to employers who provide a better work-life balance.

Respect: Employees want to know that what they are doing is important and that their opinions matter. Every employee wants to be treated as a valuable member of the team. They definitely do not want to be humiliated or demeaned by another abusive employee.

Challenging work: Employees want to be intellectually challenged. Most employees spend more time in the office than they do at home and so it is important that they do not feel as though their time is being wasted. Boring, mind-numbing work that does not provide any mental stimulation will not be challenging enough to keep good employees.

Autonomy: Employees value being given the freedom to carry out their tasks whatever way they see fit. Most of the time there are a number of different ways to complete a goal, and employees appreciate the freedom to choose whatever way they are most comfortable with. Managers who insist employees do things their way will only frustrate employees and often, this can lead to employees looking for work elsewhere.

Managing turnover is an ongoing process. In the end it all comes down to creating a workplace culture that provides some sort of system to fairly find out who the poor performers are, whilst also supporting high performers on intellectual, financial and psychological levels. For more information on how to onboard leaders visit our website here or view our  guide to retention and engagement here.

Scott, K., Montes, S. and Gregory, P. (2012). Examining the Impact of Socialization Through Trust: An Exploratory Study. Journal of Personnel Psychology, 11(4), pp. 191–198

RFC (2018). How to Onboard Leaders [Online] https://www.rfc.ie/does-leadership-onboarding-work/

Mercer (2018) Mercer Global Talent Trends 2018. [Online] https://www.mercer.com/our-thinking/career/global-talent-hr-trends.html

Kohll, A. (2018). What employees Really Want at Work. [Online] https://www.forbes.com/sites/alankohll/2018/07/10/what-employees-really-want-at-work/#51bf6d5f5ad3

Payscale (2018) Managing Employee Turnover. [Online] https://hosteddocs.ittoolbox.com/ManagingEmployeeTurnover.pdf

Gleeson, B. (2017) How important is culture fit for employee retention? [Online] https://www.forbes.com/sites/brentgleeson/2017/04/03/how-important-is-culture-fit-for-employee-retention/#2984b9007839

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