Churn. Turnover. It goes by a lot of names but too much coming and going within a workforce brings a lot of cost and headaches. To keep the butter analogy going for a little while longer, some churn is good. When making butter just the right amount makes the best product. Too little and you just have bland cream. Too much and it starts to become old cheese. So, when it comes to workforce, what is the good and bad of churn?
New employees means new ideas. Fresh blood into the organization is the stimulus for growth.
Controlled disruption. Teams become too homogenous, as do their ideas, if left alone for too long.
Precision surgery. Employees leave but sometimes they need to be moved out. Bad employees are poison in an organization. Move them out before the poison spreads.
Cost. This is without the number 1 issue. It costs a lot to hire, train and even off-board employees. Organizations can spend 6 to 9 months of an employee’s salary locating and training a replacement for them.
Loss of knowledge. Nobody is irreplaceable but losing key knowledge is painful and costly. Always make sure that knowledge is shared in the organization (and preferably documented)
Herd mentality. Once one person leaves, others will follow. Either the leaver is the impetus for others to take the leap or, in the absence of knowing the reason, it spreads fear.
Some employee churn is inevitable and it is a part of doing business. Depending on the industry, and the nature of the work, the rates will vary. Voluntary turnover is when the employee chooses to leave and Total turnover is the higher value which takes into account companies downsizing or restructuring. In 2016, the average voluntary turnover was 12.6% while total turnover was 17.8% Not surprisingly, hospitality comes in at the top of the charts with a total of 28% total turnover but what was shocking to me was that banking and finance was at over 18%! Imagine the cost of hiring and training of financial service employees and you can see that this is a number that should be addressed and reduced. So, the question is:
How to Reduce Employee Turnover –
- Improve the selection of candidates. If you don’t follow good selection and hiring practices, inevitably bad selections will be made. This will result in employees being unproductive and a bad fit for others in the organization. It is better to take the time to get it right in the first place.
- Improve the onboarding process. Once the ideal candidate is found, the time and effort needs to be given to ensuring that they are effectively integrated into the organization. 20% of employee turnover happens within the first 45 days. Ensuring that job descriptions, and therefore expectations, are clear goes a long way to setting the stage for a good integration process. Collecting feedback from new employees and other team members that they are interacting with is importantly in the early days.
- Train managers in management. Management is a skill and a management position should not be the reward for “time served” or seen as a natural progression through an organization. Effective managers are key to the success of any team and any company. Bad managers are a sure fire way to accelerate the rate of employee turnover.
- Don’t make it all about the office. It’s important to ensure that the culture of the business is to care about work life balance. This also ties into ensuring the results matter more than attendance. Employees who are changing the theme on their browser at 8pm are not more valuable than those who completed their tasks and left the office at 5pm. “Pulling long hours” does not equate to success for anyone. I would argue, it’s actually quite the opposite.
- Recognize good work. Increased salary is not the top reason that people leave. As in personal relationships, lack of recognition for results and effort made, creates dissatisfaction in the relationship. Be sure to recognize good work and communicate this face to face and with the employee’s peers. Peer recognition is more personal and more important than from top level managers. It will go a long way!
- Give opportunity for growth. Having a clear path towards personal growth creates a feeling of purpose and security. Investing in employee’s opportunities to master new skills and hone existing ones is a win-win. They feel valued, they become more productive and feel that the company is one that has a future.
The Bottom Line –
The rate of turnover says a lot about a company and is a predictor of future success. Taking care of employees from selection to onboarding and, at some point, to leaving is important. When someone leaves, be sure to have effective exit interviews. Be sure to communicate the key points to the people who are still in the company. A caring culture makes money for any company. Those who do it well will score highly in all metrics, not just the bottom line.