Many businesses put considerable effort into minimizing employee turnover, but why? In this article, we’ll look at what employee turnover is, what it says about your business, and how to minimize it.
How is employee turnover calculated?
In the context of business, employee turnover refers to the rate at which employees leave a company. It’s an important factor to consider, especially considering its effects on company culture and the resources associated with replacing an employee.
Companies track the number of employee departures over a predetermined period. This period of time can be a year, half a year, or even 3 months. This number is then converted into a percentage, thereby offering the rate of employee turnover.
For example:
Amy runs a company that offers virtual contact center software, and wants to determine the employee turnover rate of her company for the last month.
To calculate her company’s employee turnover rate, she just has to divide the number of employees who left the company by the total number of employees, then multiply that number by 100.
To work out her average total number of employees, all Amy has to do is add the number of employees at the start of the month to the number of employees at the end of the month, and divide that number by two. All done!
Now that we’ve looked at what employee turnover is and how to calculate it, the question that remains is: Why is this information important to businesses?
Why should companies pay attention to high employee turnover?
Companies need to keep track of their employee turnover so that they can react before it gets out of hand. High employee turnover can be detrimental to a business, especially when you want to incorporate new technologies such as an inbound call center software. When dealing with training-specific skills to keep the gears turning, businesses need to stay informed about their employee turnover. Here are several reasons as to why a high employee turnover is not good for a company.
- Loss of good employees
- Expensive
- Slows down productivity
- Negative impact on reputation
- Low employee morale
Let's go over these reasons in more detail.
Loss of good employees
Depending on the reason for which your employees are leaving, you may be losing valuable staff who were an asset to your company. This is especially true when you are losing senior employees who have accrued a lot of knowledge and experience. Any business naturally wants to retain its best people.
Expensive
Having a high employee turnover rate means that you will have to spend money and resources in order to find replacements, as well as train them to fill their role effectively. This is expensive both in terms of money and time, so it's best to have some employee retention goals in place to mitigate high employee turnover.
Slows down productivity
The productivity of your employees can be significantly affected by a high turnover rate. For instance, overall workflow can be seriously reduced while a new hire is being trained. Moreover, it will likely take them some time to get to grips with the way things are done.
While recruitment is taking place, other employees may also have to take on more responsibility than usual, which can lead to increased stress, a backlog of work, and reduced productivity.
Although you can employ tools such as an auto attendant phone system for your small business, the fact remains that the proper management of employees is vital in order to maximize productivity.
Damaged reputation
On top of the reasons outlined above, high employee turnover can also give the impression to other employees that your company is not a nurturing place to work in, leading others to also leave.
Customers can also be affected by this. Since businesses are heavily reliant on customer service and experience, building relationships with customers is essential.
Picture walking into your favorite store and looking for that one smiling staff member who is always happy to help you. Now, imagine finding out that they left. Would that affect how you feel about the business, and how often you shop there? Very possibly.
This perception of high employee turnover Increasingly, customers are responding to unfair treatment of workers with boycotts and avoidance. If customers come to see your high employee turnover rate as a result of unfair treatment of your staff, it could have real consequences for your bottom line. As a result, it’s critical to prioritize employee retention in your business strategy.
Low employee morale
Along with the added pressure of increasing workload, current employees can quickly feel low when the people around them are constantly changing. A high turnover rate can also lead new hires to feel pressure to get on top of their new responsibilities faster than they might be comfortable with.
Think of a new hire who is asked to conduct extensive research on companies similar to DocuSign in just a few hours without having been properly briefed on the rules and guidelines to follow. Their stress levels would be through the roof! It’s crucial to allocate responsibilities appropriately and thoughtfully to avoid low employee morale.
Does employee turnover impart a negative view on management?
As mentioned above, high employee turnover can have many negative effects. In addition to these, another main impact is that it can impart a negative view on management.
Poor leadership can force people out the door, so high turnover can be indicative of poor management. A leader who does not take their team’s opinion on board, overworks their employees, or generally treats their colleagues poorly will certainly drive employee turnover up.
Rumors or assumptions can easily start flying around the office or communication channels about poor company culture and how management is unable to keep its employees motivated and happy.
This can result in a lack of trust in management, which can be detrimental to the relationships between the manager and those they manage.
Two main types of employee turnover
The two main types of employee turnover are voluntary and involuntary. As indicated by the name, voluntary turnover is when an employee chooses to leave, whereas involuntary turnover is when an employee is asked to leave.
Voluntary turnover
Some of the common reasons for voluntary turnover include:
- A better career opportunity
- Job relocation
- Personal reasons (plan to study, travel, health issues, etc.)
- (Early) retirement
- Career dissatisfaction
Involuntary turnover
On the other hand, some reasons for voluntary turnover include:
- Temporary or permanent termination
- Workforce reduction or downsizing
- Company lay-offs
Now that we’ve covered what employee turnover is, along with its impacts, let’s look at what everyone wants to know. How do you prevent high employee turnover?
How to prevent employee turnover
Though some employee turnover is unavoidable, here are a few strategies you can use to minimize it.
Proper hiring process
Having a proper hiring process ensures that you hire the right employee who will be able to fulfill the requirements of the role. An employee who is well suited for the role will find it easier to carry out their tasks and will be easier to train and manage.
For instance, as a company dealing with affiliate marketing, you wouldn’t want to hire an individual whose lack of experience in the field means that a niche question on the benefits of affiliate vs dropshipping, for example, would leave them stumped. They would require much more training and likely take considerably longer to get used to their role compared to a better-suited and more experienced candidate.
Free to use image sourced from Unsplash.
Organized onboarding
Just as you should have a proper hiring process, an organized onboarding process is also very important. It’s not enough to select the right person for a position, you also must make sure that they have all the necessary resources and help they need to get started as smoothly as possible.
Employee-focused management
We have already looked at why good management is important in relation to employee turnover. Employee-focused management concentrates on the employee rather than the technical aspects of the jobs they are carrying out. This type of leadership has been shown to improve employee satisfaction and overall morale.
Helping employees achieve success
Finally, showing genuine interest and empathy towards your employees, and helping them achieve success will ensure they stick around. By helping them develop their skills and achieve promotions, you will not only foster a positive environment, but your employees will naturally want to perform well and act in the company’s best interest.
Takeaway
Getting the right people to be onboarded on your business is not a walk in the park, but with the right strategies, you can minimize employee turnover. While focusing on matters such as ensuring enterprise-grade security for your company is important, ensuring a turnover rate that is as low as possible should also be a priority for the success of your business.
