Employee turnover is arguably the most misunderstood HR metric. For instance, prevailing wisdom states that companies should strive for the lowest number of staff departures.
But it’s not that simple. Whether your company’s turnover rate is at 2% or 60%, a single, broad turnover percentage isn’t a useful metric for measuring your company’s overall health.
Why? Because not all turnover is equal.
Let’s explore a few types of turnover. First, there’s involuntary turnover which happens when an employee is dismissed from their position. This type of turnover includes layoffs and terminations. There’s also voluntary turnover, which happens when an employee willingly chooses to leave their job to seek new opportunities or because they are dissatisfied with their current role or company.
But the turnover that needs to be focused on is regrettable turnover which happens when your top-performing and engaged employees quit the company. These employees often have critical skillsets. And when regrettable turnover happens there are higher than average negative business impacts. Some of these negative business impacts include:
- lost position productivity
- lost innovation
- lost revenue
- loss of skills and networking contacts
- lost engagement or morale
When we understand that there are different kinds of turnover and business impacts, two things become clear.
1) Low turnover isn’t always a sign of hiring success
After all, some possible drivers of low turnover could include:
- Poor brand image: If your company is perceived to have a weak brand, it’s unlikely that your current employees would be targeted by external hiring managers or recruiters.
- Settling for status quo: A lack of turnover could indicate that there’s no need to hire new people as current employees are in their same roles. This could limit professional growth opportunities for current employees, but it can also put your company at risk of stagnating. For organizations to effectively thrive and compete, it’s important to hire individuals who can bring fresh ideas to the table and challenge prevailing methods.
- Afraid of change: Why are your employees staying? Is it because they are truly engaged, or do they have a lack of ambition and drive and are remaining in their roles out of convenience? Perhaps your company is too lenient when it comes to letting go of poor performers either because the termination process is too lengthy, or the business is too preoccupied with keeping turnover down.
When measuring turnover and employee retention it’s critical to explore these questions and understand the why behind turnover numbers.
2) The goal shouldn’t be to retain all employees
Some turnover is desirable. This does not mean that HR should fire employees at random and strive for high turnover rates. It means that a great employee could reach retirement age and choose to leave, making room for new talent to fill your company’s vacant role. Or when an employee, who exhibits toxic behaviours at work, chooses to leave or is fired it’s viewed as a positive decision for both parties.
These examples underscore the point that turnover is relative – and that your company’s aggregate turnover percentage is meaningless if it doesn’t include supplemental turnover measures. Here’s a list of sub-metrics and questions HR professionals can consider when calculating turnover and its true impact on your organization.
- The total $ cost of last year’s employee turnover
- The forecasted turnover rate for regrettable employees next year
- The turnover % among “regrettable employees”.Did your overall rate stay low while you lost several high performers?
- The turnover % in key positions
- The % of employees with preventable turnover causes that were retained. Because easily preventable turnover could indicate a problem.
- The % of employees that are “at-risk” of leaving and the percentage that left
- Your internal movement “churn rate” (or employee movement within the company) because it is a hidden form of turnover
Bottom-line: Fixating on turnover and tenure can be problematic if you don’t dig deeper into the various influencing factors driving retention and departures in the first place. (Yes, high turnover can be a bad thing – and very costly – but so can low turnover if it’s having a detrimental impact on your company.)
Instead, to effectively course-correct, it’s important to measure the impact an employee’s departure has had on the organization and why they’ve left. This can help HR professionals determine what retention actions need to be taken to minimize preventable turnover and ensure your company takes care of its people.
- Because Not All Turnover Is Equal, Focus Retention On Your Highest-Impact Employees
- Not All Turnover Is Equal
- Why low company turnover isn’t always a good thing
- Focus your metrics on impact, not employee turnover
- A Low Turnover Rate Could Mean That You Have Ugly* Employees
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